2018 (12) TMI 430 - AT - Central Excise

Valuation - clearances of unbranded Pan Masala to three separate units of the appellant situated elsewhere - area based exemption also availed - Rule 8 of the Central Excise Valuation Rules, 2000 - Held that - The basis for arriving at the cost of production has been prescribed in CAS-4 Standards formulates by the Institute of Cost Accountants. Perusal of the record indicates that the estimate of cost of production by the appellant is not supported by any Certificate from Cost Accountant. The department has proceeded to redetermine the cost of production under their own methodology, but it is seen that cost of production arrived at by the department is also not as per CAS-4 Standard - thus, neither of the assessments is made as per the prescribed standard. The allegation of the department is that the appellant has inflated the assessable value, paid more duty than required and availed extra amount by way of refund available to them under Notification No.32/99 - extended period of limitation - Held that - There is a record of price list having been filed under the then Rule 173C of the Central Excise Rule, 1994 on 28th June, 2001. Further, it is on record that the cost of production has also been intimated to the Jurisdictional Superintendent on 01.03.2002 alongwith cost sheet. In view of the above, the departmental authorities were very much aware of the fact that unbranded Pan Masala was being cleared to sister concerns - there is no justification on the part of Revenue Authorities to invoke the suppression clause against the appellant on the basis of estimate of cost of production not supported by necessary certificate from an independent Cost Accountant - the entire demand is not sustainable as time barred. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over Area Based Exemption Notification for Pan Masala manufacturing units.
- Valuation of clearances to sister units under Central Excise Valuation Rules.
- Allegation of over-valuation by the department leading to excess refund.
- Applicability of Section 11A for demand of duty.
- Finality of refund orders and time-bar for recovery.
- Revenue neutrality in clearances to sister units.
- Justification for penalty under Section 11AC.
- Allegation of suppression by the department.
- Compliance with CAS-4 Standards for cost of production.

Analysis:

1. Area Based Exemption Dispute:
The appeal concerns the appellant, a Pan Masala manufacturer availing Area Based Exemption under Notification No.32/99 for the period June 2001 to March 2004. Clearances were made from Unit-I and Unit-II to sister units in different locations, raising issues regarding valuation under Central Excise Valuation Rules.

2. Valuation of Clearances:
The dispute revolves around the computation of assessable value based on the cost of production, with the appellant adopting a specific cost per Kg. The department alleged over-valuation, leading to excess refund claims. The valuation for clearances to sister units is crucial, and the methodology for determining the cost of production is under scrutiny.

3. Applicability of Section 11A:
Arguments were raised regarding the applicability of Section 11A for demanding duty in the context of refunds granted under the Area Based Exemption Notification. The appellant cited relevant case laws to support their position, emphasizing the finality of refund orders and the limitation on initiating recovery proceedings.

4. Revenue Neutrality and Suppression Allegation:
The appellant contended that differential duty paid on clearances to sister units results in revenue neutrality as downstream units avail cenvat credit. The department refuted this, alleging suppression of material facts by the appellant, which was contested based on declarations and intimation provided to the authorities regarding cost of production.

5. Compliance with CAS-4 Standards:
The analysis highlighted discrepancies in the cost of production assessment by both the appellant and the department, indicating non-compliance with CAS-4 Standards formulated by the Institute of Cost Accountants. The absence of a certificate from a Cost Accountant raised concerns about the accuracy of the valuation methodology.

6. Conclusion:
The Tribunal found the department's invocation of the suppression clause unjustified, given the appellant's compliance with providing necessary information and declarations. The extended time limit under Section 11A was deemed baseless, rendering the demand for duty unsustainable and time-barred. Consequently, the impugned order was set aside, and the appeal was allowed, emphasizing the importance of compliance with valuation rules and standards in excise matters.