2018 (11) TMI 615 - AT - Central Excise

Valuation - demand of differential duty on the ground that the transaction value declared by the appellant on sale of their work-in-progress goods is incorrect as the inventory value shown in the balance sheet was higher - Held that - In rejecting the transaction value of the goods sold, no alternate method of valuation nor any relevant provision under which the valuation has been carried out is disclosed in the Notice - there is no justification in rejecting the transaction value - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Valuation of work-in-progress goods at the time of sale
- Allegation of undervaluation and differential duty demand
- Application of extended period of limitation

Valuation of work-in-progress goods at the time of sale:
The case involved the appellant, engaged in manufacturing excisable goods, who sold their manufacturing unit to another company and surrendered their Central Excise Registration. The department alleged undervaluation of work-in-progress goods at the time of sale, leading to the issuance of demand notices for recovery of the alleged differential duty. The appellant contended that they sold the goods against proper excise invoices with no additional consideration received. The Tribunal noted that the department did not provide an alternate method of valuation or disclose any relevant provision under which the valuation was carried out. The Tribunal found no justification in rejecting the transaction value declared by the appellant, as there was no evidence of receiving any excess amount beyond the transaction value charged to customers. Consequently, the Tribunal set aside the impugned orders and allowed the appeals.

Allegation of undervaluation and differential duty demand:
The department issued demand notices alleging undervaluation of goods sold at the time of the unit sale, resulting in the recovery of differential duty. The appellant argued that the rejection of transaction value without basis was unsustainable in law. The Tribunal observed that the differential duty was demanded solely on the ground of incorrect transaction value declared by the appellant. However, the Tribunal found the Revenue's approach in revising the assessment without providing an alternate valuation method or disclosing relevant provisions to be lacking merit. As there was no evidence of receiving excess amounts beyond the declared transaction value, the Tribunal set aside the demands and allowed the appeals.

Application of extended period of limitation:
The department invoked the extended period of limitation for demanding the alleged differential duty. The appellant contended that the confirmation of differential duty using the extended period was bad in law due to the lack of basis for rejecting the transaction value. The Tribunal agreed with the appellant, noting that the department failed to justify the rejection of transaction value and did not provide any alternate valuation method. Consequently, the Tribunal set aside the orders confirming the demands and allowed the appeals with any consequential relief as per law.

This judgment highlights the importance of proper valuation methods, justification for rejecting declared values, and the need for providing legal basis for demanding differential duty, especially when invoking the extended period of limitation.