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2019 (8) TMI 126 - AT - Central ExciseExtended period of limitation - Valuation - stock transfer - related party transaction - Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - non-inclusion of certain cost components to arrive at the cost of production, as specified in the Cost Accounting Standard - 4 (CAS-4) - Department took the view that appellants are indulged in a deliberate attempt to evade payment of excise duty by undervaluing the said goods; that duty is required to be levied at relevant rate on the assessable value to be arrived at after including all cost components under CAS-4 - area based exemption availed - Difference of opinion - reference to Third Member. HELD THAT - The appellants have been asked to produce all documents with regard to manufacture of goods as well as discharge of excise duty. There is no allegation that appellants did not produce the documents as required by the department. So also, CERA Audit has been conducted which is by Office of the Accountant General (C RA) and the officers of AG takes part in such conduct of audit. In spite of these repeated audits, the department did not raise any objection or query to the appellant as to why they have adopted cost of production on the basis of cost details given by their Senior Manager. Only in 2010, the department has raised this query. Immediately on being pointed out, appellants appointed a Cost Accountant and the costing details of accountant was furnished to the department. The demand in these cases have been raised on the basis of such costing details furnished by Cost Accountant appointed by appellant. It is very clear that the department was fully aware that appellant was discharging duty on the basis of cost of production as per the details of the Senior Manager (Costing). When all the documents were put forward before the department, it cannot be said that the costing certificate issued by the Senior Manager (Costing) of the appellant was an act of suppression or misstatement on the part of appellant with an intention to evade payment of duty. Further when the department made enquiries in 2010, the appellant has sufficiently cooperated and appointed a Cost Accountant on their side and obtained a cost certificate which was furnished to the department. It is well settled law that when the facts were within the knowledge of the department, the allegation that appellants suppressed facts cannot sustain. For the omission on the part of the audit officers to find out the mistake in the method of valuation adopted by appellant cannot be a reason to saddle the appellant with intention to evade payment of duty. The demand is held to be barred by limitation - Third Member, Hon'ble Smt. Sulekha Beevi C.S., Member (Judicial), agreeing with the view taken by the Hon'ble Member (Technical) - demand set aside.
Issues Involved:
1. Correct valuation of goods under Rule 8 of the Central Excise Valuation Rules, 2000. 2. Inclusion of cost components as per Cost Accounting Standard - 4 (CAS-4). 3. Invocation of extended period of limitation under Section 11A(1) of the Central Excise Act. 4. Allegation of suppression of facts and intent to evade duty. 5. Validity of audits conducted by the Department and their impact on the limitation period. Issue-wise Detailed Analysis: 1. Correct Valuation of Goods under Rule 8 of the Central Excise Valuation Rules, 2000: The appellants were engaged in the manufacture of Quartz Analog Watches and parts, and stock transferred these to their units at Dehradun, Baddi, and Roorkee. The Department alleged that the appellants did not follow the correct valuation for these clearances as per Rule 8, which mandates that the value shall be 110% of the cost of production. 2. Inclusion of Cost Components as per Cost Accounting Standard - 4 (CAS-4): The Department contended that the appellants did not include certain cost components to arrive at the cost of production as specified in CAS-4. The appellants used arbitrary means for costing and omitted essential elements, leading to undervaluation. 3. Invocation of Extended Period of Limitation under Section 11A(1) of the Central Excise Act: The appellants argued that the extended period of limitation could not be invoked as the Department had conducted multiple audits and was aware of the valuation methods used. The Department, however, maintained that there was a deliberate attempt to evade duty by undervaluing the goods. 4. Allegation of Suppression of Facts and Intent to Evade Duty: The Department alleged that the appellants willfully suppressed facts by not following CAS-4 norms and using estimates instead of actual costs. The appellants countered this by stating that they had been filing monthly returns and that the audits conducted did not raise any objections regarding their valuation methods. 5. Validity of Audits Conducted by the Department and Their Impact on the Limitation Period: The appellants highlighted that several audits were conducted (by both the Department and CERA) during the disputed period, and no discrepancies were pointed out. They argued that this indicated no suppression of facts. The Department argued that the audits might have missed the discrepancies due to the trust placed in the appellant's brand. Judgment: - The Tribunal first addressed the plea of limitation, noting that the appellants had been subjected to multiple audits, which should have revealed any valuation discrepancies. The Tribunal found that the audits conducted should have brought out any procedural and valuation discrepancies, and thus, there was no justification for invoking the extended period of limitation. - The Tribunal held that the proceedings were hit by limitation as there was no suppression of facts with intent to evade duty. The impugned orders were set aside, and the appeals were allowed with consequential benefits. - However, there was a dissenting opinion by the Member (Judicial), who argued that the larger period of limitation was rightly invoked due to the incorrect valuation and non-compliance with CAS-4 norms by an incompetent person. This was seen as a deliberate act to evade duty. - The matter was referred to a Third Member due to the difference in opinion. The Third Member agreed with the Member (Technical) that the demand was barred by limitation, emphasizing that the Department was aware of the facts due to the audits conducted. Final Order: The demand was held to be barred by limitation and accordingly set aside. The appeals were allowed with consequential benefits as per law.
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