2017 (3) TMI 1127 - AT - Central Excise

Valuation - Glass Fibre Reinforced Plastic (GRP) Pipes and fittings - composite contract - inclusion of freight in assessable value - adoption of deductive value - clearance to own site - Held that - in case of Composite contract where the Appellant arrived at the assessable value in terms of Rule 8 of Central Excise Valuation Rules the freight element is not includible in assessable value and the demands are not sustainable - Further in case of composite contracts where the assessable value of the goods was arrived at in terms of deduction method the freight element shall be included in the assessable value. However in this case since the goods were cleared to own site of the Appellants if the assessable value so arrived is more than the value arrived at in terms of Rule 8 of Valuation Rules the excess demand shall not be made. Where the goods were cleared to independent buyers but were subjected to the inspection at the Appellant s factory premises - Held that - the value of the goods was fixed and the freight amount was also agreed between the Appellant and the buyers. Also the sales were complete in terms of sales Tax provisions. In such case when the sale took place at the factory gate and the freight was separately charged as agreed between both the parties the freight charges would not form part of the assessable value - Further in case where the goods were sold to independent buyers and the freight charges were separately recovered as agreed the freight element shall not be included in the assessable value and no duty demand can be made from the Appellant. Extended period of limitation - Held that - there has been no contumacious conduct on the part of the Appellant or no suppression of facts. The issue involved is of interpretation of Rule 8 of Central Excise Valuation Rules and Section 4 of the Central Excise act also the issue involved has been subject matter of many litigations the demands made by invoking extended periods are not sustainable. Penalty - Held that - On the same analogy as mentioned above the Appellant is also not liable for penalty under Section 11AC - As regard personal penalty of 5 Lakhs on Mr. S.W. Parnerkar employee of the Appellant company we find that he is merely an employee of the Appellant company. Obviously when the mala fide is not proved against the appellant company there is no reason to penalize the employee of the company. Appeal allowed by way of remand for re-quantification of demands if any arise.

Summary

Issues involved:
1. Inclusion of freight in assessable value for pipes supplied under composite and non-composite contracts.
2. Method of valuation for pipes delivered to customer premises.
3. Applicability of Central Excise Valuation Rules and inclusion of transportation costs in assessable value.
4. Time-barred demands and penalty imposition.

Issue 1: Inclusion of freight in assessable value for pipes supplied under composite and non-composite contracts:
The Appellant challenged the inclusion of transportation costs in assessable value for pipes supplied under composite contracts. The Appellant followed deduction method and paid duty on the remaining amount as the value of pipes. In non-composite contracts, duty was paid on the sale value without inclusive of freight. The Tribunal held that in cases where the Appellant cleared pipes for their own site under composite contracts, the valuation was done as per Rule 8 of Central Excise Valuation Rules. The freight element was not included in the assessable value as per Rule 8. However, in cases where the Appellant did not adopt Rule 8 for valuation, the freight element could not be claimed as a deduction. The Tribunal directed the re-quantification of demands if the assessable value exceeded the value arrived at under Rule 8.

Issue 2: Method of valuation for pipes delivered to customer premises:
The Appellant faced demands on freight charges for delivering pipes to customer premises. The Tribunal noted that when sales occurred at the factory gate and freight was separately charged as agreed, the freight charges would not form part of the assessable value. The Tribunal relied on judgments to support this view. It was held that the freight element should not be included in the assessable value for sales to independent buyers where freight charges were separately recovered.

Issue 3: Applicability of Central Excise Valuation Rules and inclusion of transportation costs in assessable value:
The Revenue contended that in composite contracts, the sale value at the site should include the freight element. However, the Tribunal disagreed, stating that the assessable value determined under Rule 8 of Central Excise Valuation Rules did not warrant inclusion of freight costs. The Tribunal emphasized that Rule 7 did not apply in the absence of depot sales or sales from specific premises.

Issue 4: Time-barred demands and penalty imposition:
The Appellant argued that the demands were time-barred due to no suppression or mis-declaration. The Tribunal agreed, stating that the demands made by invoking extended periods were not sustainable. Consequently, the Appellant was not liable for penalties. The personal penalty on an employee was also set aside due to lack of proof of mala fide intent.

The Tribunal disposed of the appeals by remanding them to the adjudicating authority for re-quantification of demands, except for the appeal of the employee, which was allowed. The judgment highlighted the interpretation of Central Excise Valuation Rules and Section 4 of the Central Excise Act, emphasizing the non-inclusion of freight charges in the assessable value under specific circumstances.