2017 (3) TMI 409 - AT - Central Excise

Valuation - enhancement of assessable value - matter on adjudication - whether the assessee can be called upon to pay duty when the assessment has not been finalized and the matter is still on adjudication? - Held that - the Commissioner had no jurisdiction to call upon the assessee for adoption of any other prices, till such time, assessable value through said pricelist was finalized by the Divisional Assistant Commissioner. So far as undervaluation charges are concerned, the Jurisdictional Commissioner did not have jurisdiction to demand duty till such time the price lists were finalized and if aggrieved Appeal was not filed before Commissioner (Appeals) and such appeal was not decided by Commissioner (Appeals). So far as the allegation of short levy on production arrived at on the basis of Gas consumption is concerned, we find that the ruling by Hon ble Supreme Court in the case of Commissioner of Central Excise, Meerut-I Versus R.A. Castings Pvt. Ltd. 2010 (9) TMI 669 - ALLAHABAD HIGH COURT , is squarely applicable in the present case wherein it was ruled that on the basis of consumption of energy required for manufacture of unit quantity of goods quantum of manufacture of goods cannot be arrived at and such conclusion of manufacture shall be treated as presumptive - the confirmation of demand on the basis of consumption of Gas does not survive. Demand set aside - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Allegation of undervaluation of goods.
2. Demand based on consumption of natural gas for manufacturing.
3. Misclassification of goods.
4. Imposition of penalties on various individuals.

Issue-wise Detailed Analysis:

1. Allegation of Undervaluation of Goods:
The appellants were accused of undervaluing their products, specifically S.S. Flats, S.S. Waste & Scrap, and other items, resulting in a demand for differential duty. The basis for the undervaluation claim was that M/s Rathi Ispat Limited (RIL) allegedly undervalued their final products, which were then used as inputs by M/s Rathi Udyog Limited (RUL). The Original Authority confirmed the demand of ?23,70,56,484/- based on this allegation. However, the appellants contended that the pricelists were filed and not finalized by the Divisional Assistant Commissioner, making the demand unsustainable. The Tribunal agreed, stating that the Commissioner had no jurisdiction to demand duty until the pricelists were finalized and any appeal decided by the Commissioner (Appeals).

2. Demand Based on Consumption of Natural Gas:
The demand of ?15,99,61,757/- was based on the consumption of natural gas, with the assumption that 56.66 Cubic Meter of gas was required to manufacture 1 Ton of Steel. The appellants argued that this calculation was presumptive and lacked evidence of raw material procurement, sales, and buyers. The Tribunal referred to the ruling in Commissioner of Central Excise, Meerut-I Versus R.A. Castings Pvt. Ltd., where it was held that production cannot be determined solely based on energy consumption. Therefore, the demand based on gas consumption was deemed unsustainable.

3. Misclassification of Goods:
The Department alleged that RIL misclassified Stainless Steel Billets as Other Alloy Steel (OAS), affecting the classification at RUL. The appellants argued that the chemical examiner's report did not mention carbon content, which was crucial for classification under Note 1(e) of Chapter 72. The Tribunal found no evidence that RUL was aware of or involved in the alleged misclassification by RIL. Furthermore, the transactions between RIL and RUL were revenue-neutral, as any duty paid by RIL could be credited by RUL.

4. Imposition of Penalties on Various Individuals:
Penalties were imposed on M/s Rathi Udyog Limited and its key personnel, including Shri P.C. Rathi, Shri Pradeep Rathi, and Shri M.L. Agarwal, under Rule 209-A of Central Excise Rules, 1944. The appellants contended that individual roles were not discussed, and penalties were based on their positions rather than evidence of wrongdoing. The Tribunal concluded that since the demands for undervaluation and gas consumption did not survive, the penalties also did not stand.

Conclusion:
The Tribunal set aside the impugned Order-in-Original and allowed all the appeals, ruling that both the undervaluation charges and the demand based on gas consumption were unsustainable. Consequently, the penalties imposed on the appellants were also annulled.