2018 (2) TMI 203 - AT - Central Excise

Extended period of limitation - Valuation - includibility - royalty, bank and LC opening charges - Rule 8 of Central Excise Valuation Rules, 2000 read with Section 4 (1) (b) of Central Excise Act, 1944 - Held that - it is evident that the matter had been flagged by the Range Superintendent as early as in November 2001 and again on November 2003 for which detailed replies had been submitted by the appellant. From the replies it emerges that appellant had been contesting addition of these two cost elements. This being so, it cannot be said that they were suppressing any vital information from the department or for that matter, that they were giving misstatement on the same. The department has lingered too long, after their doubts on the issue had cropped up. When the elements justifying invocation of extended period are not available in this case, the delay in issue of SCN proceedings are therefore hit by limitation and will have to be set aside - appeal allowed.

Summary

Issues:
Non-inclusion of royalty, bank and LC opening charges in determining assessable value of yarn for Central Excise duty liability. Applicability of Rule 8 of Central Excise Valuation Rules, 2000 and Section 4(1)(b) of Central Excise Act, 1944. Limitation period for proceedings.

Analysis:
The appeal pertains to the non-inclusion of royalty, bank, and LC opening charges while determining the assessable value of yarn for Central Excise duty liability. The duty liability in question amounts to ?4,61,679. The appellants, engaged in manufacturing yarn, had cleared polyester multiple folded yarn for further processing during June 2001 to June 2004. The department issued a show cause notice proposing the inclusion of royalty and other charges in the assessable value for duty determination. The original authority restricted the duty demand to ?80,377, along with interest and penalty. The appeal against this decision was rejected, upholding the entire demand of ?4,61,479 along with interest and penalty. The appellants challenged this decision by filing the current appeal.

During the hearing, the appellant argued that the proceedings were time-barred. They had provided necessary details to the department on various occasions, including price declarations and responses to queries regarding royalty payments and cost elements. Despite the information provided, a show cause notice was issued much later, demanding the duty amount. The appellant contended that the entire proceedings should be considered time-barred due to the delay in issuing the show cause notice.

On the other hand, the department argued that the extended period of limitation was justified as the appellant had not disclosed the non-inclusion of certain charges in the assessable value. However, the Tribunal found that the appellant had been in constant dialogue with the department regarding the disputed issues. The appellant had responded to queries from the department, contesting the addition of the disputed cost elements. The Tribunal concluded that the department had delayed issuing the show cause notice despite the appellant's responses, and therefore, the proceedings were hit by limitation. As a result, the Tribunal allowed the appeal, setting aside the delay in the show cause notice issuance.