2018 (1) TMI 262 - AT - Central Excise

Valuation - brass scrap - Whether in the facts and circumstances of the case, the charge of under valuation is sustainable against the respondent or not? - Held that - the respondent has suffered duty on the finished goods, the job charges are not disputed by the revenue and all the brass scrap sent to the job worker have been received by the respondent after conversion into the brass rods, in that circumstance, it is situation of revenue neutrality and there is no loss of revenue to the department. In that circumstance, the charge of undervaluation is not sustainable against the respondent. Extended period of limitation - Held that - the respondents were filing their RT 12 returns regularly and maintaining statutory records - the activity of selling brass scrap at a lower price than the value shown in the balance sheet was well known to the department - extended period not invocable. Appeal dismissed - decided against Revenue.

Issues:
1. Allegation of undervaluation of brass scrap by the respondent.
2. Sustainability of the charge of undervaluation against the respondent.
3. Consideration of balance sheet figures as assessable value.
4. Revenue neutrality in the case.
5. Invokability of the extended period of limitation.

Issue 1: Allegation of undervaluation of brass scrap by the respondent

The case involved the respondent, engaged in manufacturing various products, including brass scrap. The Revenue alleged undervaluation of brass scrap generated by the respondent. The value per kg of brass scrap in the balance sheet was found lower than the market price, leading to a show cause notice for recovery of duty, interest, and penalty. The Commissioner (Appeals) initially set aside the adjudication order, prompting the Revenue to appeal.

Issue 2: Sustainability of the charge of undervaluation against the respondent

The key question was whether the charge of undervaluation against the respondent was sustainable. The Revenue argued that the value shown in the balance sheet should be considered for duty calculation, emphasizing the lack of revenue neutrality due to suppressed clearance prices. In contrast, the respondent contended that duty was paid on the full value of goods, ensuring revenue neutrality, and that the extended period of limitation was inapplicable.

Issue 3: Consideration of balance sheet figures as assessable value

The Revenue sought to use the figures from the balance sheet as the assessable value for duty calculation. However, the respondent argued that the balance sheet value did not reflect the actual sale price, citing a Supreme Court precedent. The Tribunal analyzed the scenario using a detailed example to illustrate the duty implications based on different pricing scenarios.

Issue 4: Revenue neutrality in the case

The Tribunal examined whether there was revenue neutrality in the respondent's operations. It was established that despite variations in brass scrap pricing, the duty paid on the final product remained consistent, indicating no revenue loss to the department. The respondent's compliance with statutory requirements and audits further supported the claim of revenue neutrality.

Issue 5: Invokability of the extended period of limitation

The question of invoking the extended period of limitation arose in the context of the respondent's alleged suppression of lower-priced brass scrap clearance. The Tribunal concluded that the department was aware of this practice, rendering the extended period of limitation inapplicable. This, coupled with the finding of revenue neutrality, led to the dismissal of the Revenue's appeal.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHANDIGARH highlights the complexities surrounding the allegation of undervaluation, the concept of revenue neutrality, and the considerations regarding assessable value and the extended period of limitation in the case.

← Previous Next →