2019 (3) TMI 511 - AT - Central Excise

Time limitation - Valuation - stock transfer - wrong assessable value adopted by the appellant - revenue neutrality - difference of opinion - Held that - As there are difference of opinion, the matter is referred to Hon ble President, to refer the matter to third member to determine i. Whether in the facts and circumstances of the case, the appeal filed by the appellant should be allowed on the ground of limitation as held by the Member (Judicial), or should be rejected as there is sufficient evidence to invoke extended period of limitation for demanding the Central Excise duty as held by the Member (Technical)? and ii. Whether the revenue neutrality can be invoked in the present case for determining the issue of limitation in the present case?

Summary

Issues involved:
1. Time bar on demand for undervaluation of goods.
2. Revenue neutrality as a defense against invoking extended period of limitation for demanding duty short paid.
3. Interpretation of valuation under Rule 8 of Central Excise (Determination of Price of Excisable Goods) Rule, 2002.
4. Justification for invoking extended period of limitation and penalty under Section 11AC.

Analysis:

Issue 1: Time bar on demand for undervaluation of goods
The appellant contested a demand alleging undervaluation of goods, arguing that a portion of the duty was time-barred due to the revenue being aware of stock transfers and the availability of credit to their Vadodara unit. The Tribunal found that the situation was revenue neutral, as the duty paid was available as credit to the Vadodara branch. Citing relevant case laws, the Tribunal held that demands beyond the limitation period could not be confirmed. The penalty was set aside due to the absence of mala fide intent.

Issue 2: Revenue neutrality and extended period of limitation
A Member (Technical) disagreed with the above decision, emphasizing that revenue neutrality cannot be a defense against invoking the extended period of limitation for demanding duty short paid. The Member referred to criteria for determining revenue neutrality and highlighted that the Tribunal's previous decisions did not consider a larger bench's criteria, rendering them per-in-curiam. The Member cited a Supreme Court case to support the view that revenue neutrality does not preclude invoking the extended limitation period.

Issue 3: Interpretation of valuation under Rule 8
The Member (Technical) further clarified that the appellant's valuation method did not comply with Rule 8 of the Central Excise Rules, resulting in short payment of duty by suppressing the correct value. The invocation of the extended period of limitation was deemed appropriate for demanding the duty short paid, and the penalty under Section 11AC was justified.

Conclusion:
While the Member (Judicial) allowed the appeal based on limitation and revenue neutrality, the Member (Technical) dismissed the appeal, emphasizing the importance of complying with valuation rules and justifying the invocation of the extended period of limitation. The matter was referred to the Hon'ble President for a third member's determination on the conflicting views regarding limitation and revenue neutrality in the case.