2018 (8) TMI 76 - AT - Central Excise

Valuation - Job-Work - inclusion of notional interest on advances in assessable value - Rule 6 of the Valuation Rules 2000 - demand of Interest and penalty - Extended period of Limitation. Held that - In terms of the said Rule 6, money value of additional consideration received in any form has to be added the transaction value to arrive at the assessable value. In terms of explanation 2 appended to the said rule, notional interest on advances will have to be added to the transaction value only if the advanced received has influenced the fixation of price/ transaction value in respect of the customer who has tendered such advance. The explanation also provides that the test for determination whether such advance has influenced fixation of price/ transaction value with in respect of such customer can be charging of lower price for the same good from him in comparison to other customers. In the present case, there is no dispute on the facts that Appellant was making use of the machinery supplied to it by sister concern without making any payment towards the purchase of machine for the period under dispute. Neither they had paid any interest in respect of the amounts to be paid as price for the purchase of the said machine. Though they had been using the machinery from 1.09.2001 the complete payment in respect of the same was made in thirteen installments upto 31.03.2005. It is also an admitted fact that appellant has not paid any interest to the sister concern against the delay in the payment of the amount towards the purchase of such machinery. Thus amount due to be paid against the said machinery was nothing but an interest free advance given by the sister concern to the appellant. Thus in terms of Rule 6, the notional interest due in respect of these advances need to be added to the transaction value for determination of the assessable value if it can be shown that the these interest free advances have influenced the transaction value in respect of the sister concern and the job charges charged from them were lower than the job charges in respect of other customer. Extended period of limitation - Held that - It is a fact on record that the matter came to light only when the unit was audited. Thereafter enquiries were made by the department from the appellant and the entire details were made available only after protracted communications - Extended period of limitation as provided under proviso to Section 11A (1) has been rightly invoked. Demand of Interest - Held that - Since taxes has not been paid when the demand of interest cannot be set aside. It is a settled law that interest is an absolute liability cannot be waived in any circumstances. Penalty - Held that - Since in the present case tax has been evaded by resorting to fraud, suppression, mis-statement etc. penalty under Section 11AC is justifiable and accordingly upheld - As it is already proved that the noticee had suppressed the facts, the consequences shall automatically follow. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Valuation of job charges influenced by interest-free advances.
2. Invocation of the extended period of limitation.
3. Imposition of interest and penalty under Section 11AC of the Central Excise Act.

Detailed Analysis:

1. Valuation of Job Charges Influenced by Interest-Free Advances:
The appellant, engaged in processing manmade fabrics, was found to have used machinery owned by their sister concern without paying for it initially and later purchased the machinery without paying interest on the delayed payments. The department noticed that job charges for the sister concern were lower than those for other customers. Consequently, a show cause notice was issued demanding duty by enhancing the value of job charges by the interest on outstanding amounts during the free usage period to the actual date of payment, under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

The tribunal upheld the department's view, stating that the notional interest on interest-free advances should be added to the transaction value if it influenced the job charges. The appellant failed to provide evidence that job charges for their sister concern were the same as those for other customers, thus supporting the department's claim.

2. Invocation of the Extended Period of Limitation:
The appellant argued against the invocation of the extended period of limitation, claiming no willful suppression of facts. However, the tribunal noted that the matter came to light only during an audit, and the appellant provided information after protracted communications. The tribunal cited several judgments, including the Supreme Court's decision in Madras Petro-Chem Ltd., which supported the invocation of the extended period when there is evidence of suppression or misstatement. The tribunal concluded that the extended period was rightly invoked.

3. Imposition of Interest and Penalty under Section 11AC:
The tribunal upheld the imposition of interest, stating that it is an absolute liability that cannot be waived. The penalty under Section 11AC was also upheld, as the appellant was found to have evaded tax through suppression and misstatement. The tribunal referenced the Supreme Court's decisions in U.O.I Vs Dharmendra Textile Processors and U.O.I Vs R S W M, which clarified that penalties are justified when there is evidence of suppression or misstatement.

Conclusion:
The appeal was dismissed, affirming the department's demand for duty, interest, and penalty. The tribunal emphasized the importance of transparency and compliance in financial dealings and upheld the legal provisions for determining the assessable value and invoking penalties in cases of tax evasion.