2017 (3) TMI 650 - AT - Central Excise

100% EOU - Valuation - ingots cleared in domestic tariff area - rejection of declared value on the ground that in case of Copper ingots the London Metal Exchange (LME) price is higher than what is declared by the appellant and in case of brass ingots, the price is less than the import value of brass scrap from which such ingots were manufactured - Held that - There is no indication in the original order that such scrap based ingots are listed in LME and are compared for determining the price. Apparently, a comparison cannot be made between the ingots manufactured from ore and the ingots manufactured from scrap. Both will vary in quality and value - no attempt has been made by the Revenue to examine the contemporaneous price of similarly situated market in India, so that a comparison could have been made for examining the correctness of transaction value adopted by the appellant. The whole proceedings for demanding differential duty was solely on the ground that LME price of copper ingot as well as tariff value for import of brass scrap which were much higher and accordingly, the transaction value is held to be not correct - appeal allowed - decided in favor of appellant.

Summary

Issues:
Valuation of copper and brass ingots for excise duty purposes based on LME prices and tariff value of imported scrap.

Analysis:
The appeal challenged the rejection of transaction value for copper and brass ingots by the Revenue, leading to the re-fixation of value for excise duty. The appellant argued that the comparison to LME prices and tariff value for scrap was inappropriate, as the metal manufactured was recycled, and the tariff value for scrap is only for customs duty determination. The Revenue contended that the transaction value cannot be lower than the price paid for imported scrap, citing Section 14 for redetermination based on 'consideration payable', not just the amount paid.

The Tribunal found no evidence of manipulated transactions by the appellant, emphasizing that the LME prices cannot be directly compared to domestic sales. It noted the difference in quality and value between ingots manufactured from ore and those from scrap, questioning the basis for comparison. Regarding brass ingots, the original order used the tariff value for customs duty to calculate the domestic market price, adding 20% without legal support. The Tribunal clarified that the tariff value does not equate to the raw material cost and that the transaction value in the domestic market, being market-driven, cannot be disregarded based on higher prices in LME or imported scrap values.

The Tribunal referred to Supreme Court decisions emphasizing the need for contemporaneous import details and evidence to support claims of undervaluation. It criticized the Revenue for not examining similar market prices in India to validate the appellant's transaction value. The Tribunal concluded that the rejection of transaction value based on higher LME prices and tariff values was legally unsupportable, setting aside the impugned order and allowing the appeal.