2017 (7) TMI 187 - AT - Central Excise

Valuation - goods cleared by EOU in DTA - Section 3(1) of the Central Excise Act, 1944 - related party - Held that - At this stage, whether a buyer or seller is related or not, the adjudicating authority is in a better position to examine and decide the modus operandi of the buyer and seller - the proviso to Section 3 of the Central Excise Act having made specific provisions that the goods manufactured by DTA shall be treated as if the goods were manufactured abroad. That shall also be relevant. Therefore learned adjudicating authority shall determine the value in accordance with Section 14 of the Customs Act, 1962 with the assistance of Customs Valuation Rules, 1988 - appeal allowed by way of remand.

Issues:
- Determination of the value of goods cleared by the appellant unit under the Central Excise Act, 1944.
- Applicability of the proviso to Section 3(1) of the Central Excise Act, 1944 to goods cleared by a 100% EOU.
- Treatment of domestic seller and EOU seller under the law.
- Application of Customs Valuation Rules, 1988 for determining the value of goods cleared by EOU in DTA.
- Examination of the relationship between buyer and seller in determining the value of goods cleared.
- Authority of the adjudicating authority to examine the modus operandi of buyer and seller.
- Adherence to Customs Valuation Rules, 1988 for proper valuation.
- Remanding both appeals to the adjudicating authority for a proper conclusion.

Analysis:

1. The judgment addresses the controversy surrounding the determination of the value of goods cleared by the appellant unit. It is noted that the concept of relative buyer was examined in one appeal while not in the other. Both appeals involve goods cleared by a 100% EOU, subject to the proviso to Section 3(1) of the Central Excise Act, 1944. The duty levied on such goods is a combination of customs duties and duties applicable to goods produced outside India if imported. The value of excisable goods cleared by EOU in DTA is to be determined according to the Customs Valuation Rules, 1988, regardless of other provisions.

2. The judgment clarifies that the proviso to Section 3(1) aims to ensure equal treatment for domestic and EOU sellers. The applicability of the Customs Act, 1962 in conjunction with the Customs Tariff Act, 1975 ensures that goods cleared by an EOU in DTA are treated similarly to goods imported into India concerning duty levies. While excise law applies to duty levies, the determination of goods' value follows the Customs Valuation Rules, 1988.

3. The adjudicating authority is tasked with examining the relationship between buyers and sellers to ascertain any influence on the value of goods cleared. Factors such as pricing differences among buyers and terms of clearance are crucial in determining if undervaluation occurred, leading to a duty payment shortfall. The authority is empowered to conduct a fact-finding mission to establish the influence of sales terms on clearance values.

4. Regarding valuation, the judgment emphasizes the relevance of treating goods manufactured by DTA as if produced abroad per the proviso to Section 3 of the Central Excise Act. The adjudicating authority must determine value in line with Section 14 of the Customs Act, 1962, using the Customs Valuation Rules, 1988. Proper fact-finding on transactional methods and pricing influences is essential for a sound conclusion. The authority can resort to the residuary valuation method if needed, guided by the Customs Valuation Rules, 1988.

5. Ultimately, both appeals are remanded to the adjudicating authority for a comprehensive review, ensuring a fair conclusion on levy matters while granting the appellant a reasonable hearing opportunity. The authority is directed to follow the guidelines provided and make a well-informed decision based on the facts presented.

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