2023 (6) TMI 642 - AT - Central Excise

Demand of differential duty - goods cleared to the own unit - valuation is governed by Rule 8 of Central Excise Valuation Rules 2000 or on the basis of the transaction value at which the goods are sold to the independent buyers? - Suppression of facts or not - time limitation - revenue neutrality - HELD THAT - As regard the merit of the case, the issue has been decided against the appellant in as much as the larger bench in the case of ISPAT INDUSTRIES 2007 (2) TMI 5 - CESTAT, MUMBAI held that when partly goods are sold to independent buyer and partly to the assessee s own unit, the transaction value of the goods at which the goods is sold to independent buyer shall be taken as transaction value for the goods cleared to the related person by the assessee. However, the learned counsel has vehemently argued on limitation. Since the issue was not free from doubt and the matter was referred to larger bench and only then it attained finality. On the basis of the larger bench judgment the issue involved was of interpretation of valuation rules. Moreover, there is a force in the submission of the learned counsel that the recipient of goods in question are belonging to the same company and the duty payable by the appellant on such clearances is available as cenvat credit to the recipient unit hence, the entire exercise is revenue neutral. On this basis, it can be conveniently viewed that there cannot be any mala fide on the part of the appellant with intent to evade payment of duty. Therefore, in such circumstances the demand of extended period cannot be invoked - The demand for the extended period is set aside. Appeal allowed.

Summary

Issues involved:
The issue in the present case is the valuation of goods cleared to the appellant's own unit, whether governed by Rule 8 of Central Excise Valuation Rules 2000 or based on the transaction value at which the goods are sold to independent buyers.

Valuation Issue:
The appellant, engaged in manufacturing excisable goods, partly cleared goods to their own unit and partly sold in the open market. The department applied transaction value for goods sold to independent buyers, resulting in a demand for differential duty. The appellant opted for valuation under Rule 8. The appellant argued that the issue had attained finality against them as per a larger bench judgment, but contended the demand was not sustainable due to time bar. They highlighted that the goods cleared to their own unit were cenvatable for the recipient unit, making the exercise revenue neutral. The appellant's position was that there was no suppression of fact on their part.

Decision and Reasoning:
The Tribunal considered the submissions and records. It noted the larger bench judgment in the case of ISPAT INDUSTRIES, which held that for goods sold to independent buyers and the appellant's own unit, the transaction value for independent buyers should be used for goods cleared to the related person by the appellant. Despite this, the Tribunal found merit in the appellant's argument regarding limitation. The issue was referred to the larger bench and only then attained finality, indicating doubt in interpretation of valuation rules. Additionally, as the recipient of goods belonged to the same company, duty payable on clearances was available as cenvat credit to the recipient unit, making the entire exercise revenue neutral. Therefore, the Tribunal concluded that there was no mala fide intent to evade duty, and set aside the demand for the extended period.

Outcome:
As a result of the above considerations, the appeals were allowed, and the C.O. was disposed of. The decision was pronounced in open court on 12.06.2023.