2022 (2) TMI 893 - AT - Central Excise

Seeking for recovery of the short paid duty amount - clearances made to its other units - Department has held that the valuation of goods cleared from the appellant s unit at B2 to its other manufacturing units should be done under Section 4(1)(b) ibid read with Rule 4 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - extended period of limitation - HELD THAT - It is an admitted fact on record that during the disputed period, the appellant had sold the excisable goods manufactured by it to the independent buyers and also stock transferred the same to its other manufacturing units for use/utilization in the further manufacture of value added products. The appellant in this case, had not disputed the fact that all the units belonging to it are interconnected/related and managed by one corporate entity. Thus, under such circumstances, the adjudicating authority finds that the valuation provisions contained in Section 4(1)(b) ibid read with Rule 4 ibid should be applicable for determination of the duty liability. However, on perusal of the impugned order, we find that the adjudicating authority has not specified as to why recourse to Rule 4 is required - there is no discussion as to whether all other parameters prescribed in Rule 4 ibid have also been considered. Hence, in absence of proper substantiation based on the material facts of the case, it is neither proper for the adjudicating authority to come to a conclusion and at the same time not possible to determine the true value of the impugned goods for ascertainment of the correct duty liability. The period of dispute involved in this case is from April, 2006 to March, 2007. By invoking the proviso appended to Section 11A ibid, the department had issued the show cause notice to the appellant, seeking for recovery of the adjudged demands. Insofar as recovery of short/non-levied or non-payment of duty is concerned, the said statute mandates that the Central Excise officer shall issue the show cause notice within one year from the relevant date on the person, requiring him to show cause as to why the duty amount shall not be recovered. The period of one year is prescribed for effecting recovery in the normal circumstances - the appellant had informed the department regarding the modus operandi adopted by it in sending the disputed goods to its sister s units and also reasonably believed that the valuation provisions contained in Rule 8 ibid should be available for such transactions. Thus, under such circumstances, the rigor itemized in the proviso clause under Section 11A should not be available to the department and accordingly, the demand, if any, should only be confined to the normal period of one year. In the present case, since the period of dispute is from 2006 to 2008 and the show cause notice was issued on 15-3-2010, we are of the considered view that confirmation of the entire adjudged demands are barred by limitation of time as per the aforesaid statutory provisions and as such, the impugned proceedings are not maintainable on the ground of limitation alone. Further, we find that the principle or doctrine of revenue neutrality is applicable in the case in hand inasmuch as the higher duty amount payable by the appellant under Rule 4 ibid would be available to the sister s unit as Cenvat credit. Furthermore, it is noticed from the available records that the department was in doubt with regard to applicability of the proper valuation rules to the facts of the present case. Extended period of limitation - HELD THAT - It is noticed from the available records that the department was in doubt with regard to applicability of the proper valuation rules to the facts of the present case. This is evidenced from the show cause notice, where the proposals were made to confirm the duty demand by considering the provisions of Rule 8 ibid; whereas, the impugned order has confirmed the demand for contravention of the provisions of Rule 4 ibid. Hence, under such circumstances also, it cannot be said that there is element of mens rea on the part of the appellant in defrauding the Government revenue and thus, the extended period of limitation, was not available to the department for initiation of the show cause proceedings. In the case of NIRLON LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI 2015 (5) TMI 101 - SUPREME COURT , the Hon ble Apex Court have ruled that something done with bona fide belief, without involvement of any mala fide intention to defraud the Government revenue, the proviso to Section 11A(1) ibid cannot be invoked. Further, it has also been held that when the entire exercise was revenue neutral, the appellant could not have achieved any purpose to evade the duty. Thus, in absence fulfilment of the ingredients mentioned in the proviso clause to Section 11A ibid, confirmation of the adjudged demands in the impugned order will not stand for judicial scrutiny. There are no merits in the impugned order insofar as it has confirmed the adjudged demands by invoking the extended period of limitation contained in the proviso appended to Section 11A ibid - appeal allowed - decided in favor of appellant.

Summary

Issues:
Valuation of goods for duty liability determination under Section 4(1)(b) read with Rule 4 of Central Excise Valuation Rules, 2000.
Time limitation for recovery of short paid duty amount under Section 11A of Central Excise Act, 1944.

Valuation of Goods Issue:
The appeal challenged an order confirming Central Excise duty demand, interest, and penalty on the appellant for short paid duty during the disputed period. The appellant contended that the assessable value should be based on prices at which other units purchased identical goods from independent manufacturers. They argued against the application of Rule 4 for valuation and claimed revenue neutrality due to Cenvat credit availability. The tribunal noted the lack of proper justification in the impugned order for invoking Rule 4 and the absence of detailed discussion on valuation parameters and price differences. Due to insufficient substantiation, the tribunal found it inappropriate to determine the correct duty liability without clarity on valuation aspects.

Time Limitation Issue:
Regarding the time limitation for recovery of short paid duty, the department issued the show cause notice beyond one year from the relevant date, invoking the proviso under Section 11A for fraud or suppression of facts. However, the tribunal observed that the appellant had disclosed relevant information to the audit wing, indicating compliance with cost sheet guidelines and audit requirements. The tribunal concluded that the proviso clause should not apply as there was no intentional suppression of facts by the appellant, thereby limiting the recovery period to one year. Citing case laws, the tribunal emphasized that the extended limitation period cannot be invoked without evidence of fraudulent intent or suppression. Consequently, the tribunal set aside the impugned order, allowing the appeal on the ground of limitation.

This detailed analysis of the judgment highlights the issues of valuation of goods for duty liability determination and the time limitation for recovery of short paid duty under the Central Excise Act, 1944. The tribunal's decision focused on the lack of proper justification for valuation methods and the absence of intentional suppression of facts by the appellant, leading to the appeal being allowed based on the limitation aspect.