2023 (7) TMI 1016 - SC - Central Excise

100% EOU - Misdeclaration of export goods - Method of valuation - Rule 10-A or Rule 7 of CER - rejection of declared value - redetermination of value - under the guise of clearing Reject the prime quality goods were exported and sold into DTA to avail the benefit of Notification No.2/95-CE dated 04.01.1995 - demand alongwith penalty u/r 209A - Extended period of limitation - HELD THAT - In the present case the appellants sold the prime quality goods mis-declaring the same as Rejects to the related company UIL and availed the benefit of concessional rate of duty under Notification No.2/95-CE. There are finding of facts recorded by all the authorities below that the appellants mis-declared the goods and sold prime quality goods as rejects and availed the benefit of concessional rate of duty illegally and fraudulently and by misdeclaration the authorities were justified in invoking the extended period of limitation. Therefore, the submission on behalf of the appellants that the authorities were not justified in invoking the extended period of limitation has no substance. It is required to be noted that it was the appellants who got the approval to sell the goods, sold the goods may be at the relevant time the permission was to sell the goods shown as rejects . However, thereafter it was found that the permission to import was obtained fraudulently by mis-declaring the same as rejects though the goods were of prime quality. Therefore, thereafter the appellants cannot be permitted to say that though the permission was to import the goods declared as rejects, subsequently it was found to be prime quality, there was no approval under proviso to Section 3(1). The appellant cannot be permitted to take the benefit of his own wrong and/or fraud committed by it. Once there was an approval/permission to import the goods it is sufficient to attract proviso to Section 3(1) of the Act - the submission on behalf of the appellants that in absence of any approval and/or permission proviso to Section 3(1) shall not be applicable has also no substance and has to be rejected. Valuation of goods - HELD THAT - It is required to be noted that the appellants sold the goods of prime quality mis-declaring the same as rejects and the same was sold to the related company UIL. It has been found that the UIL sold the goods at a higher rate. Therefore, the valuation ordered to be done under Rule 7 on the basis of the same cannot be said to be arbitrary and/or illegal. Cogent reasons have been assigned by the Tribunal while considering the submission on valuation. Thus, no error has been committed by the Tribunal in rejecting the appeals preferred by the appellants - appeal dismissed.

Summary

Issues involved:
The issues involved in the judgment are the misdeclaration of goods as rejects, invocation of extended period of limitation, applicability of excise duty under Section 3(1) or proviso to Section 3(1) of the Central Excise Act, and valuation of goods sold.

Misdeclaration of goods as rejects:
The appellant, an Export Oriented Unit (EOU), cleared goods into the Domestic Tariff Area (DTA) as rejects under Notification No.2/95-CE, but it was later discovered that the goods were prime quality. Show cause notices were issued alleging that the goods sold were not rejects but prime quality goods. The Commissioner confirmed this finding and imposed duty demand and penalties on the appellant and related companies.

Invocation of extended period of limitation:
The Commissioner upheld the invocation of the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944. The appellant argued that the extended period was wrongly invoked as they had provided explanations earlier. However, the authorities justified the invocation due to misdeclaration of goods.

Applicability of excise duty under Section 3(1) or proviso to Section 3(1):
The appellant contended that even if the allegations were true, the duty leviable would be under Section 3(1) and not under the proviso to Section 3(1) of the Central Excise Act. They relied on previous court decisions to support their argument. The Revenue argued that once approval was granted to import goods, misdeclaration by the appellant cannot permit them to pay lower duty under Section 3(1).

Valuation of goods sold:
The appellant misdeclared prime quality goods as rejects and sold them to a related company at a higher rate. The Tribunal ordered revaluation under Rule 7 based on this higher rate, which the appellant challenged. The Tribunal's valuation was deemed justified as the goods were sold at an inflated price.

The Supreme Court upheld the Tribunal's decision, stating that the appellant misdeclared goods, availed benefits illegally, and cannot now claim lack of approval for prime quality goods. The court found no errors in the Tribunal's rejection of the appeals, concluding that they lacked merit and dismissing them accordingly.