2019 (3) TMI 851 - AT - Central Excise

Method of Valuation - related party transaction or not - appellants have been clearing said wires to their sister concern / group companies, which are further using the same in the manufacture of free stressed concrete sleepers - time limitation - Held that - There is no evidence on record about whole of the HTS wires being manufactured by the appellant to be cleared to anyone else other than their sister concern. In absence thereof, it stands clear that Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules is applicable. In pursuance thereto, the appellant is liable to pay the Central Excise duty at the rate of 110 % of the cost of production of its final product. The appellant is entitled for the requisite adjustments of the higher payments made by him. However, since the documents highlighting the same were not before the original adjudicating authority, we deem it to be a fit case to be remanded back for the re-quantification. Original Adjudicating Authority is required to look into the documents i.e. requisite CAs-4, as produced by the appellant today before this Tribunal for the purpose of re-quantifying the observed short payment on part of the appellants, if still it exists or not, however, applying Rule 8 of the said Valuation Rules. Time Limitation - Held that - The normal period for issuing the show cause notice is that of one year, so entire period has rather been taken by the Department itself. In view of said observation, the argument of Department i.e. the delay is on part of the appellant to provide information, is not sustainable - In the present case, as it is already observed from the documents, though submitted today, that the appellant rather had been paying duties at higher values during the disputed period the allegation as that of intent to evade duty cannot be attributed. The demand for both the show cause notices, if any, is held to have been confined to the normal period of demand. For the limited purpose, the matters are remanded back to the original adjudicating authority. Appeal allowed by way of remand.

Summary

Issues:
- Central Excise duty short payment
- Application of Rule 8 of Central Excise Valuation Rules
- Revenue neutrality claim
- Extended period for issuing show cause notices

Central Excise duty short payment:
The appellants, engaged in the manufacture of HTS wires, were found to have cleared wires to sister concern/group companies without paying the correct Central Excise duty. The Department issued show cause notices for short payment, which were confirmed in the Order-in-Originals and subsequent appeals. The appellants argued that they cooperated with the Department, paid duty at higher rates, and there was no intent to evade payment. The Department contended that repeated requests for details were delayed by the appellants. The Tribunal observed that Rule 8 of Central Excise Valuation Rules applied, and the appellants were liable to pay duty at 110% of the cost of production. However, excess duty payments made by the appellants were not considered. The Tribunal remanded the case for re-quantification based on documents provided.

Application of Rule 8 of Central Excise Valuation Rules:
The Tribunal found that Rule 8 applied, requiring the appellants to pay Central Excise duty at 110% of the cost of production. The appellants did not dispute this liability but argued that excess payments made should be considered. Citing a precedent, the Tribunal held that duty already paid during the relevant period must be adjusted. As the necessary documents were not before the original adjudicating authority, the case was remanded for re-quantification.

Revenue neutrality claim:
The appellants claimed revenue neutrality, stating they paid duty at higher rates and cooperated with the Department. The Department argued that invoking the extended period was justified due to delays in providing information. The Tribunal found that the Department's delay in issuing the show cause notice negated the argument of appellant's delay. It held that the demand was confined to the normal period, as there was no intent to evade duty. The matters were remanded back to the original adjudicating authority.

Extended period for issuing show cause notices:
The Department claimed entitlement to the extended period for delays caused by the appellants in providing information. However, the Tribunal noted that the Department's own delay in issuing the show cause notice invalidated this argument. It held that the demand was within the normal period, as there was no intent to evade duty. The matters were remanded for re-quantification by the original adjudicating authority. Both appeals were allowed by way of remand.