2017 (11) TMI 1249 - AT - Central Excise

Valuation - It is alleged that the appellants did not discharge duty on some of the clearances based on the sale value of similar goods from the depot at or about the same time, when the goods were cleared from the factory - Rule 7 of Central Excise Valuation Rules, 2000 - Held that - in terms of Rule 7, the transaction value shall be based on goods sold from depot. Though, the appellants may have a circular fixing the price for a particular fortnight, in the absence of any sale, the nearest sale price is correctly adopted by the Revenue - differential duty, if any for normal period upheld. Extended period of limitation - penalty - Held that - Admittedly, the appellants followed uniform practice and in a few instances, which they claimed to constitute less than 1% of the transaction, a situation of short-levy, by strict enforcement of Rule 7 has arisen - Delay, if any, in submission of such documents cannot by itself sustain the reason for invoking willful suppression, fraud, collusion etc. - extended period and penalty cannot be invoked. Appeal allowed in part.

Summary

Issues:
Appeal against order dated 09.02.2009 of Commissioner (Appeals), Salem regarding Central Excise Duty liability on goods cleared through depots and subsequent sale to independent buyers, application of Rule 7 of Central Excise Valuation Rules, 2000, differential duty demand, penalty imposition, sustainability of demand for extended period, and imposition of penalties.

Analysis:
The appellants, engaged in manufacturing "Aluminium and articles thereof," faced a dispute concerning the Central Excise Duty on a small portion of their clearances. The department alleged that duty was not discharged properly on some clearances based on the sale value of similar goods from the depot at or around the same time of clearance from the factory. The lower authorities confirmed a differential duty and imposed penalties under section 25 of the Central Excise Rules, 2002.

The appellants argued that they followed a standard practice of realizing prices based on the London Metal Exchange Rate for both factory gate sales and depot sales. They contended that the Revenue only selected instances where the depot price was lower, despite circulars ensuring uniform pricing. The appellants emphasized that there was no violation of Rule 7 as they followed the provisions diligently.

The appellants objected to the demand for an extended period, attributing any delays in providing invoices for depot sales to be the reason behind the demands. They argued that in most cases, there was no variation in applying depot sale prices to factory gate clearances. They maintained that the demand for an extended period lacked merit, citing the absence of willful suppression or intent to evade duty payment on a minor portion of their transactions.

The Authorized Representative supported the lower authorities' findings, stating that valuation should be based on actual sales of identical goods from the depot around the time of factory clearances. He asserted that the lower authorities adhered to Rule 7 of the Valuation Rules strictly.

The Tribunal acknowledged the applicability of Rule 7 in the case and upheld the Revenue's practice of considering the nearest sale price in the absence of actual sales from the depot. However, the Tribunal found merit in the appellants' claim regarding the sustainability of demands for an extended period and the imposition of penalties. It ruled in favor of the appellants, stating that the demand for an extended period and penalties were not sustainable, as the appellants followed a uniform pricing system and any discrepancies were minimal, not indicative of willful suppression. The impugned orders were set aside, and the appeals were allowed on those grounds.