2017 (5) TMI 597 - AT - Central Excise

Non-application of law in its letter and spirit - valuation - removal on stock transfer basis to their depots / consignment sales agents (CSAs) across the country - place of removal - It appeared to the department that appellants were clearing polystyrene to certain depots/CSAs by adopting a price lower than the price prevailing at the depot on the day of clearances from the factory - Held that - the periods covered in this appeal have undergone different phases of law in respect of method of valuation to be followed and the concept of place of removal thereof - the adjudicating authority has not analysed the contentious issues with respect to changes in law that were effected on at least two occasions during the entire period of dispute. While the period of disputes starts from 09/1999, the adjudicating authority has considered the law only from 01-07-2000 when Section 4 of the Central Excise Act was substituted vide Finance Act, 2000 - Although there is some discussion on provision of law prior to 01-07-2000 in para-25 of the order, however, the authority has only made a passing reference thereof and has not analyzed the applicability thereof and to what extent, to the disputed period prior to 01-07-2000. There is legal infirmity in the impugned order due to non-application of law in its letter and spirit - matter remanded for de novo consideration by original authority who will threadbare examine the material facts and considering the pleadings of the appellant, both on fact and law shall test the evidence and apply relevant law, to pass appropriate order recording reason of its decision - appeal allowed by way of remand.

Issues Involved:
1. Method of computation of duty based on Rule 7 and transaction value.
2. Definition and applicability of "Place of Removal" between 1.7.2000 to 13.5.2003.
3. Inclusion of cost of transportation in the assessable value.
4. Treatment of differential value as cum-duty value.
5. Errors in computation of duty for specific periods.
6. Limitation period for issuing the first show cause notice.

Detailed Analysis:

1. Method of Computation of Duty Based on Rule 7 and Transaction Value:
The appellants argued that the method of computation adopted in the notice and Order-in-Original (OIO) was not based on the normal transaction value as required by Rule 7. Instead, the duty was demanded based on the sale price of the depot at the nearest point of time, which is contrary to the rule invoked. The Tribunal noted that the adjudicating authority did not adequately analyze the contentious issues with respect to changes in law that were effected during the period of dispute.

2. Definition and Applicability of "Place of Removal" Between 1.7.2000 to 13.5.2003:
The appellants contended that there was no definition of "Place of Removal" during this period, and therefore, duty cannot be demanded based on the sale price at the depot or the place of consignment. They cited judgments from the Apex Court and other tribunals to support their submission. The Tribunal acknowledged that the law regarding the "Place of Removal" had undergone amendments and that the adjudicating authority had not adequately considered these changes for the disputed period prior to 01-07-2000.

3. Inclusion of Cost of Transportation in the Assessable Value:
The appellants argued that the cost of transportation up to the place of removal cannot form part of the assessable value, citing relevant judgments. The Tribunal noted that this issue was not adequately addressed by the adjudicating authority in the impugned order.

4. Treatment of Differential Value as Cum-Duty Value:
The appellants claimed that the differential value on which duty was demanded was not treated as cum-duty value, and the demand was raised on the entire differential value. They relied on the judgment in CCE Vs Maruti Udyog Ltd. to support their claim. The Tribunal found merit in this contention and noted that the adjudicating authority did not adequately consider this aspect.

5. Errors in Computation of Duty for Specific Periods:
The appellants pointed out specific errors in the computation of duty for certain periods, such as the year 2000-01 and October 2008 to December 2008. They argued that these errors led to an inflated duty demand. The Tribunal noted that these errors were not adequately addressed by the adjudicating authority.

6. Limitation Period for Issuing the First Show Cause Notice:
The appellants argued that the first show cause notice was barred by limitation as the department had engaged in correspondence with them since 17-05-2000 but issued the notice only in April 2004. Consequently, they contended that the penalty under section 11AC should also be set aside. The Tribunal found legal infirmity in the impugned order due to non-application of law in its letter and spirit and noted that the adjudicating authority did not adequately consider the limitation issue.

Conclusion:
The Tribunal found that the adjudicating authority had not adequately analyzed the contentious issues and changes in law during the period of dispute. The impugned order was set aside, and the matter was remanded for de novo adjudication. The adjudicating authority was directed to thoroughly examine the material facts, consider the appellants' contentions, and apply the relevant law to pass a reasoned order. The appeal was disposed of with these directions.

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