2020 (8) TMI 451 - SC - Central Excise

Valuation of excisable goods - Amendment to Section 4 - change from Normal value to Transaction value - allegations that assessees in these cases allegedly undervalued the goods, sold them for a much higher price than what was reflected in the invoices and thereby they evaded the excise duty actually payable. - period of assessment was both prior to and after 01.07.2000 and in other cases, the period was after 01.07.2000 HELD THAT - The Adjudicating Authorities as well as CESTAT are also guilty of failure to do something in these batches of cases - Since the Adjudicating Authorities as well as the CESTAT failed to make various determination, the orders of remand passed by the Tribunal, though for completely different reasons, were justified - Hence the appeals are liable to be disposed of, confirming the orders of remand passed by CESTAT, with a clarification on the legal issues so that the Adjudicating Authorities know how to proceed. However, while carrying out the exercise of re adjudication, the Adjudicating Authorities should keep in mind the principles enumerated hereunder Cases where the period of assessment is prior to 01.07.2000 First ascertain the price at which such goods are ordinarily sold by the assessee to a buyer who is not related to him, in the course of wholesale trade, at the time and place of removal and also find out whether the price is the sole consideration for the sale. If the Adjudicating Authority is able to find this out, he may take such price as the normal price and treat the case as covered by Section 4(1)(a), applying, wherever permissible, the prescriptions contained in the proviso to clause (a) of sub -section (1) of Section 4. If Value is not ascertainable, then follow the Rules. The phrase for any other reason appearing in Section 4(1) (b) would include cases where the price charged in the course of wholesale trade is not discernible or where the same, though discernible, cannot be linked to delivery at the time and place of removal or where the price is not the sole consideration for the sale, even though the price charged in the course of wholesale trade for delivery at the time and place of removal are available. Cases where the period of assessment is after 01.07.2000 First ascertain the transaction value , with particular reference to the definition of the said expression contained in Section 4(3)(d). Apply the transaction value so ascertained, to cases where three conditions, namely (i) the goods are sold for delivery at the time and place of removal, (ii) the assessee and buyer are not related and (iii) the price is the sole consideration, are satisfied. This is because such cases will fall under Section 4(1)(a). If Value is not ascertainable or all the 3 conditions are not satisfied, then follow the Rules. Principles applicable in common (both pre and post amendment) The Adjudicating Authority may treat any amount received either in cash or otherwise, over and above the invoice value, as the value of excisable goods even in cases falling under Section 4(1)(a) (after the amendment), as the definition of transaction value under Section 4(3)(d) means the price actually paid or payable. The Adjudicating Authority shall keep in mind the fact that while the expression normal price was not defined in Section 4(1) before amendment, the expression transaction value is defined very exhaustively in Section 4(3)(d) and this definition is both inclusive as well as exhaustive.

Summary

Issues Involved:
1. Undervaluation of goods and evasion of Central Excise duty
2. Determination of the correct method for valuation of excisable goods
3. Application of pre and post 01.07.2000 valuation methods under Section 4 of the Central Excise Act, 1944
4. Re-adjudication by the Adjudicating Authorities

Detailed Analysis:

1. Undervaluation of Goods and Evasion of Central Excise Duty:
The core issue across all appeals was the allegation that various assessees had undervalued their goods, sold them at higher prices than reflected in the invoices, and consequently evaded Central Excise duty. The CESTAT confirmed the findings of undervaluation and evasion of duty in all cases, which was not challenged by the assessees, thereby attaining finality.

2. Determination of the Correct Method for Valuation of Excisable Goods:
The dispute revolved around the correct method for determining the value of excisable goods for charging duty, which necessitated a distinction between the periods before and after 01.07.2000 due to amendments in Section 4 of the Central Excise Act, 1944.

3. Application of Pre and Post 01.07.2000 Valuation Methods:
- Pre-01.07.2000 (Normal Price Method):
- Section 4(1)(a): Valuation was based on the "normal price," which is the price at which goods are ordinarily sold in wholesale trade, provided the buyer is not a related person and the price is the sole consideration.
- Section 4(1)(b): Applied when the normal price was not ascertainable, requiring valuation as per the Central Excise (Valuation) Rules, 1975.
- Post-01.07.2000 (Transaction Value Method):
- Section 4(1)(a): Valuation based on "transaction value," defined as the price actually paid or payable for the goods when sold, including any additional consideration.
- Section 4(1)(b): Applied when the conditions for transaction value were not met, necessitating valuation as per the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

4. Re-adjudication by the Adjudicating Authorities:
The Supreme Court confirmed the orders of remand by the CESTAT for re-adjudication with specific guidelines:
- For Pre-01.07.2000 Cases:
- Ascertain the normal price in the course of wholesale trade.
- If not ascertainable, apply the 1975 Valuation Rules.
- For Post-01.07.2000 Cases:
- Determine the transaction value as per Section 4(3)(d).
- Apply the transaction value if conditions under Section 4(1)(a) are met.
- If not, use the 2000 Valuation Rules.
- Common Principles:
- Any amount received over the invoice value should be included in the transaction value.
- Apply transaction value uniformly to all transactions of a particular dealer/customer if evidence shows additional consideration was paid.
- Conduct hearings and pass orders expeditiously.

Conclusion:
The appeals were disposed of by confirming the orders of remand for re-adjudication, with clear instructions on the principles to be followed by the Adjudicating Authorities. The authorities were directed to ascertain the correct valuation method based on the period of assessment and ensure compliance with the statutory provisions and rules applicable to each case.