2017 (9) TMI 1173 - AT - Central Excise

Valuation - whether the assessable value is to be calculated as done by the appellants (unit at Pondicherry) or at the higher rate cleared by the Pallavaram Unit as spares? - Held that - the show cause notice is issued against Pondicherry unit and not against the Pallavaram unit. Moreover, the alleged sales at Pallavaram is admittedly only 2% of the clearances made from Pondicherry unit and the balance 98% is captively consumed. The case of department is that for this balance 98% also the price of the sale of 2% should be adopted which in our opinion does not make any sense - the submission of the Appellant that the Pallavaram Unit while captively consuming in production 98% of the pumps supplied by the Appellant had sold the impugned items as replacement spares meet certain emergency requirements and had paid duty in respect of such removals on their selling price should have been positively taken into consideration by the Learned Adjudicating Authority, which has not been done - appeal dismissed - decided against Revenue.

Summary

Issues:
Assessable value calculation based on price declarations filed by Pallavaram unit vs. appellants (unit at Pondicherry).

Analysis:
The case involved the appellants engaged in manufacturing plastic molding products under Chapter 85 of the Central Excise Tariff Act, 1985. The dispute centered around the assessable value calculation for part Nos. S.G.A. 3100026, S.G.A.3100027, and SGA 31101163, cleared to their Pallavaram Unit, Chennai. The appellants filed price declarations under Section 4(1)(b) of the Central Excise Act, 1944, based on cost construction as per Rule 6(b)(ii) of the Valuation Rules 1975. The department contended that comparable prices available for these products should be adopted for valuation, leading to duty demand confirmation by the original authority. The Commissioner (Appeals) later set aside the demand, prompting this appeal.

The main argument revolved around the difference in selling prices between the 2% of goods sold as spares by the Pallavaram Unit at a higher rate and the declared value by the appellants. The department insisted on adopting the higher prices as the assessable value, alleging undervaluation. However, the Commissioner (Appeals) disagreed, emphasizing that the appellants could not have foreseen the sale of a portion of the goods as spares when clearing them to the Pallavaram Unit. The Commissioner also highlighted that only a small quantity (2%) was sold as replacement spares, while the majority (98%) was captively consumed by the Pallavaram Unit for production.

Upon review, the Tribunal concurred with the Commissioner (Appeals), stating that no mens rea could be attributed to the appellants regarding the subsequent sale of goods as spares by the Pallavaram Unit. The Tribunal noted that the department's argument to adopt the spares' selling price for all clearances made no sense, especially considering that only a small percentage was sold as spares. Ultimately, the Tribunal dismissed the appeal, upholding the Commissioner's decision.