2023 (1) TMI 640 - AT - Central Excise

100% EOU - Valuation - clearance of excisable goods to their sister concern units on payment of duty as DTA sale - related party transaction or not - present order has been passed without giving opportunity to file defence submission of SCN - violation of principles of natural justice - Time Limitation - HELD THAT - The Learned Commissioner has gone only on the basis that the buyer and seller are related in terms of Rule 2(2) of CVR, and proceeded to judge transactions in terms of valuation rule ibid. However, in terms of Rule 3 (3)(a) of CVR, where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the goods indicate that the relationship did not influence the price. Neither the show cause notice issuing authority nor the adjudicating authority have given reasons to hold that how the relation has indeed affected the price. The declared prices cannot be reviewed without any evidence to the effect that the relation between the appellant and the related buyer which has influenced the declared price or to the effect that there was a flow back of money between the appellant and related buyers. The proviso under Rule 3 (3)(b) provided that in applying the values used for comparison, due account shall be taken to demonstrate a difference in commercial levels, quantity levels, adjustments in accordance to provision of Rule 10 and cost incurred by the seller in sales in which he and the buyer are not related - In the present matter the grievance of the Appellants is also that difference in commercial levels, quantity levels was totally ignored by the Learned Commissioner - Further submission made by the appellants and judicial decisions relied upon by the appellant before him was not considered. The case needs to go back to the adjudicating authority for a proper examination of all the facts of the case, the submissions of the appellants including case laws in this regard and to pass a speaking and reasoned order as per law - Appeal allowed by way of remand.

Summary

Issues:
- Valuation of excisable goods cleared to related parties
- Opportunity to file defense submission
- Application of Customs Valuation Rules
- Comparison of transaction values
- Bar of limitation for partial demand

Valuation of excisable goods cleared to related parties:
The appellant, a 100% EOU, cleared excisable goods to sister concern units on payment of duty as DTA sale. The department alleged that the value of DTA clearances to related units was lower than to unrelated buyers, suggesting influence on pricing due to related party status. The department invoked Customs Act, 1962, and Customs Valuation Rules for valuation. The appellant contended that the transaction value was determined through negotiation, considering all business aspects, and closely approximated the value of identical goods under Valuation Rules, specifically referring to Rule 3(3)(b). The appellant argued that the department failed to consider all provisions of Rule 4 and improperly compared transaction values without accounting for quantity differences.

Opportunity to file defense submission:
The appellant argued that the order was passed without allowing the opportunity to submit defense against the show cause notice, emphasizing the need for separate assessments for each DTA sale transaction. They contended that the adjudication should have been based on individual findings rather than previous replies and submissions.

Application of Customs Valuation Rules:
The appellant highlighted the department's incorrect application of Customs Valuation Rules, specifically Rule 4(1)(a) for calculating differential duty and Rule 4(3) for comparing values of identical goods sold to related and non-related parties. They cited various judicial decisions in support of their submissions regarding valuation methodologies and compliance with the Rules.

Comparison of transaction values:
The appellant raised concerns about the department's comparison of transaction values without considering quantity differences between sales to related and independent buyers. They argued that the department's approach did not align with the requirements of Customs Valuation Rules, particularly Rule 4(3) regarding the consideration of the lowest value when multiple values are available.

Bar of limitation for partial demand:
The appellant contended that the partial demand was time-barred, as the department was aware of the clearances to sister concern units well before issuing the show cause notice. They argued that the demand exceeded the limitation period, citing relevant judicial decisions to support their claim.

The Appellate Tribunal, after considering the submissions and records, found that the adjudicating authority had not adequately justified how the relationship between the appellant and related buyers influenced the price, as required by Rule 3(3)(a) of Customs Valuation Rules. The Tribunal directed the case to be remanded for a proper examination of all facts, including the appellant's submissions and relevant case laws, emphasizing the need for a reasoned order in accordance with the law. The appeals were allowed by way of remand, providing the appellants with an opportunity for a fresh consideration of the issue.