2019 (4) TMI 583 - AT - Central Excise

Valuation - goods cleared from factory to the depot - Rule 7 of the Central Excise (Valuation) Rules, 2000 - period April 2005 to November 2006 - suppression of facts or not - Held that - The allegation of suppression raised in the show-cause notice is based on the audit objection and no specific grounds have been alleged for raising the ground of suppression. The demands raised based only on audit objection cannot be presumed ipsofacto to have been made on the basis of suppression. From the records, it is also seen that the appellant has taken all reasonable care by obtaining a legal opinion for guidance of the practice to be adopted, at the time of opening the new depot. The substantial part of the demand amounting to ₹ 3,21,715/- falls within the extended period of limitation and will be liable to be held as hit by time bar. For the remaining demand amounting to ₹ 21,403/- falling within the normal period of limitation, the same stands conceded by the appellant and the same is upheld - appeal allowed in part.

Issues involved:
Valuation of goods cleared to the depot for subsequent sale under Rule 7 of the Central Excise (Valuation) Rules, 2000; Allegation of suppression based on audit objection without specific grounds; Time bar for demanding differential duty.

Analysis:

1. Valuation of goods under Rule 7 of the Central Excise (Valuation) Rules:
The appeal challenged the Order-in-Appeal regarding the valuation of goods cleared to the Hyderabad Depot. The Department alleged that the valuation adopted by the appellant did not comply with Rule 7 of the Valuation Rules. The appellant contended that they followed Rule 7 strictly and paid the duty accordingly, supported by a legal opinion obtained before establishing the depot. The Department, however, raised concerns about the valuation method adopted by the appellant, leading to a demand for differential duty. The Tribunal noted that both parties agreed on the necessity of determining the value of goods cleared to the depot as per Rule 7. The appellant's argument was supported by the fact that they had taken reasonable care by seeking legal guidance when setting up the depot.

2. Allegation of suppression without specific grounds:
The Department invoked the extended period of limitation in the show-cause notice, alleging suppression. However, the Tribunal observed that the allegation of suppression was solely based on audit objections without specific grounds cited for such claim. The Tribunal referred to previous cases where demands raised solely on audit objections were not automatically considered as suppression. This lack of specific grounds for alleging suppression weakened the Department's case in the absence of concrete evidence supporting the claim.

3. Time bar for demanding differential duty:
A significant portion of the demand for differential duty, amounting to a substantial sum, was found to fall within the extended period of limitation. The Tribunal held that this portion of the demand was liable to be considered time-barred. On the other hand, a smaller amount of the demand fell within the normal period of limitation, which the appellant conceded. Consequently, the Tribunal upheld the demand falling within the normal time limit while setting aside the remaining amount on the grounds of being time-barred. The issue of interpretation led the Tribunal to set aside penalties, partially allowing the appeal based on the detailed analysis of the time bar and valuation aspects.

In conclusion, the Tribunal's detailed analysis of the issues surrounding the valuation of goods under Rule 7, the allegation of suppression without specific grounds, and the time bar for demanding differential duty led to a partial allowance of the appeal, upholding the demand falling within the normal time limit and setting aside the remaining amount on the grounds of time bar.

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