2018 (4) TMI 954 - AT - Central Excise

Scope of SCN - Adjustment of shortage and excesses - Held that - admittedly the SCN was for denial of adjustment of shortage and excess and never questioned the valuation aspects and as such the original adjudicating authority has gone beyond the SCN which is not permissible. Adjustment - Held that - Reference can be made to the Tribunal s decision in the case of Hindustan Zinc Ltd. v. Commissioner of Central Excise Jaipur 2015 (11) TMI 953 - CESTAT NEW DELHI (LB) wherein there was originally difference of opinion between two Members as regards the adjustment of excess and short paid duty which dispute was resolved by third Member. By majority order it was held that adjusting of excess paid duty against short payment cannot be denied even if the assessee s sister concern have taken the CENVAT Credit of the excess duty paid by the assessee - the majority decision has to be considered as Larger Bench decision and a binding precedent. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Adjustment of excess and short paid duty
2. Validity of the order passed by the Commissioner (Appeals)
3. Provisionality of assessment and valuation aspects

Analysis:

Adjustment of Excess and Short Paid Duty:
The case revolved around the adjustment of excess and short paid duty by the appellant. The Revenue initiated proceedings based on a show-cause notice for raising a short paid demand for a specific period. The Commissioner (Appeals) accepted the assessee's stand that the duty short paid should be adjusted against the excess paid duty since the assessments were provisional. The Commissioner observed that the valuation had to be done in accordance with Rule 8 by adopting the costing method contained in CAS-4 guidelines. The Tribunal, after considering various decisions, including the case of Hindustan Zinc Ltd., held that adjusting excess paid duty against short payment was permissible, even if the assessee's sister concern had taken CENVAT Credit of the excess duty paid. The Tribunal emphasized the provisional nature of assessments in such cases, citing relevant legal precedents.

Validity of the Order Passed by the Commissioner (Appeals):
The Tribunal noted that the original adjudicating authority had exceeded the scope of the show-cause notice by delving into valuation aspects that were not raised in the notice. The Tribunal agreed with the Commissioner (Appeals) that such actions were impermissible. The Commissioner's decision to treat the assessments as provisional and allow adjustments between excess and short paid duty was upheld by the Tribunal based on established legal principles and precedents.

Provisionality of Assessment and Valuation Aspects:
The Tribunal emphasized the provisional nature of assessments where the final value was to be determined based on actual costs contained in the finalized balance sheet. Various legal decisions were cited to support the notion that adjustments of short/excess paid duty against demands determined based on annual costing had to be allowed, even if no provisional assessment was initially conducted by the assessee. The Tribunal highlighted the importance of treating assessments as provisional in cases where pricing variations and cost adjustments were involved. The Tribunal rejected the Revenue's appeal, affirming the Commissioner (Appeals) decision based on the legal principles and precedents discussed.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision regarding the adjustment of excess and short paid duty, emphasizing the provisional nature of assessments and the need to follow established legal precedents in such matters.