2017 (4) TMI 383 - AT - Central Excise

Valuation - pesticides and insecticides - clearnce of products to their depots situated at various parts of the country on stock transfer basis - demand of ₹ 15,10,815.00 has arisen on account of application of Rule 8 of Central Excise Valuation Rules, 2000, which mandates that duty of Central Excise is to be charged at 115% on cost of production, where goods are cleared for captive consumption - Held that - Rule 8 of Valuation Rules is applicable only when entire production is captively consumed by the manufacturer. In the present case, the assessee is also selling the goods to independent buyers at similar or lower prices. Therefore, the application of Rule 8 of Central Excisable Valuation Rules, 2000 is not correct. In this regard, the assessee has given copies of some sale invoices as a proof that they sold the goods to independent buyers also - the duty demand of ₹ 15,10,815.00 along with interest and equivalent penalty is not sustainable and the same is hereby dropped - demand set aside. The demand of ₹ 2,12,180/-, where department says that assessee paid the duty on invoice price which was less than the revised MRP - Held that - If MRP has been revised and the same was correctly reflected in the invoice, the said demand cannot be sustained. This fact is required to be verified by the original adjudicating authority. Therefore, the matter is remanded to the original adjudicating authority - matter on remand. Demand of ₹ 13,20,636/-, where department s charge is that goods were sold from the depots at higher price(s) and duty is leviable on such differential higher price - Held that - goods have been sold from the depot and not from the factory gate; when it is so, the transaction value at the time of sale from the depot is to be taken as assessable value for charging the duty of Central Excise - When sales have taken place only from the assessee s depots located at various parts of the country, transaction value as per section 4 of Central Excise Act, 1994 is the price at which said goods are sold from the depots and duty accordingly is to be charged on the said price. Consequently there is no scope to interfere with the impugned order in this regard - demand upheld. Appeal disposed off - decided partly in favor and partly against assessee - part matter on remand.

Summary

Issues:
- Undervaluation of products leading to evasion of Central Excise duty
- Application of Central Excise Valuation Rules, 2000
- Assessment based on MRP and depot prices
- Alleged incorrect MRP assessment
- Sales from depots and assessable value

Undervaluation of Products:
The appellant, engaged in manufacturing pesticides and insecticides, was alleged to have undervalued products leading to Central Excise duty evasion. The dispute arose from the difference between the value of goods cleared from depots and the declared value for duty assessment. Additionally, clearances at reduced MRP and sales to a sister unit at lower values were contested. The Order-in-Original confirmed a demand of ?30,43,631 along with interest and penalty, which was upheld in the Order-in-Appeal, prompting the appeal to the Tribunal.

Application of Central Excise Valuation Rules, 2000:
The demand under Rule 8 of the Central Excise Valuation Rules, 2000, requiring duty to be charged at 115% of the cost of production for goods cleared for captive consumption, was challenged. The appellant argued that as they also sold goods to independent buyers at similar or lower prices, Rule 8 did not apply. Citing a precedent, the Tribunal held that Rule 8 is applicable only if the entire production is for captive consumption, leading to the dropping of the demand of ?15,10,815 along with interest and penalty.

Assessment Based on MRP and Depot Prices:
A part of the demand, amounting to ?2,12,180, was based on the allegation that duty was paid on an invoice price lower than the revised MRP. The appellant contended that duty was paid based on the correct MRP, reflected accurately in the invoices. The Tribunal remanded this issue to the original authority for verification, emphasizing the need to confirm if the revised MRP was correctly reflected in the invoices.

Alleged Incorrect MRP Assessment:
Regarding the alleged incorrect MRP assessment, the Tribunal found that the duty demand of ?2,12,180 could not be sustained without verifying if the revised MRP was accurately reflected in the invoices. The matter was remanded to the original adjudicating authority for further examination.

Sales from Depots and Assessable Value:
The last part of the demand, ?13,20,636, was related to goods sold from depots at higher prices, leading to a levy on the differential price. The Tribunal clarified that the assessable value for duty assessment in such cases is the transaction value at the time of sale from the depot, not including post-removal expenses. As the goods were sold directly from the depots, the transaction value at the time of sale was deemed the assessable value, aligning with Section 4 of the Central Excise Act, 1944. The Tribunal upheld the impugned order in this regard, stating there was no scope for interference.

In conclusion, the Tribunal partly allowed the appeal, modifying the impugned order based on the discussions and findings, emphasizing the specific outcomes for each issue raised during the proceedings.