2017 (12) TMI 543 - AT - Central Excise

Valuation - depot sale - whether the assessment was to be done as per Section 4 or otherwise? - Held that - In respect of the clearances made through depots, the goods are stock transferred first to the warehouse and subsequently to the depot from where the goods are sold to the dealers. In such cases duty payable at the factory gate will be covered by Section 4 (1) (b) of the Central Excise Act read with Rule 7 of the Valuation Rules - the mandate given by Section 4 (1) (b) read with Rule 7 of the Valuation Rules, for taking contemporaneous depot prices cannot be extended to depot sale invoice which is nearly one month subsequent to the date of clearance. It is common knowledge that on the date of clearance from the factory only those depot invoice prices will be available to the assessee which have been issued prior to that date and it is four to consider the value on the basis of such invoices. The basis on which the demand has been raised by demanding differential duty is not legally sustainable. Duty already stands paid on the highest transaction value determinable for all depots as on the date of clearance from factory. This satisfies the mandate of Sec 4(1) (b) read with Rule 7 ibid - appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of goods for clearance to depots; Differential duty demand based on depot prices post-clearance.

In this case, the appellant, engaged in manufacturing motor cycles and scooters, transferred goods from the factory to a central warehouse and then to various depots for sale. The dispute arose when the department demanded differential duty based on depot prices post-clearance, citing a discrepancy between factory gate prices and depot prices. The appellant contended that duty should be determined at the factory gate based on prices prevalent at the depot at the time of clearance, as per Section 4(1)(b) read with Valuation Rules. The department justified the demand, highlighting the price difference between factory gate and depot prices. The Tribunal analyzed Rule 7 of the Valuation Rules, emphasizing that duty must be paid at the factory gate based on the normal transaction value at or about the time of clearance from the depot. The Tribunal noted that the department compared prices from depot invoices issued post-clearance, which is not in line with the legal provisions. Referring to a previous case, the Tribunal emphasized that only depot invoices issued on or before the date of clearance should be considered for valuation. Consequently, the Tribunal held that the demand for differential duty was not legally sustainable as duty had already been paid based on the highest transaction value determinable for all depots at the time of factory clearance. Therefore, the impugned order was set aside, and the appeal was allowed.