2023 (10) TMI 734 - AT - Central Excise

Violation of principles of natural justice - opportunity to analyse or counter the findings of the Deputy Director (Cost) not provided - Valuation of goods removed to sister concerns - to be valued on the basis of cost plus 10%,in terms of Rule 8 of Central Excise (Valuation) Rules, 2000 or not - time limitation - revenue neutrality - HELD THAT - The report of the Deputy Director (Cost) was not provided to the appellants; the working papers on the basis of which the Deputy Director (Cost) has arrived at the figures are also not given; the same are not even explained in the show-cause notice - This is a serious case of violation of principles of natural justice as the appellants have been denied an opportunity to analyse or counter the findings of the Deputy Director (Cost). Further, ongoing through the show-cause notice, it is found that no reasonable justification has been given to invoke the Valuation Rules except for making a bland averment that the appellants are clearing goods to their sister concerns at a lower price. The variation in the quality and thickness of the goods supplied to the sister concerns has not been distinctly brought out; no chemical analysis of the products has been made. The prices of goods cleared to their sister concern are shown to have been less compared to their clearances of comparable goods to independent buyers, the Department has not made any case for taking recourse to CVR, 2000. In the present matter it has not been disputed by the Revenue that almost 60% of the goods manufactured by the appellant are sold to the buyers who are not related and the price is the sole consideration. It clearly shows that the value of the goods at the place and time of removal is available and that price should be adopted for the purpose of ascertaining the assessable value of the goods which are used captively by Unit-I and Unit-II of the appellants. The impugned order is not sustainable - the issue of limitation or revenue neutrality not examined as appeal survives on merits - appeal allowed.

Summary

Issues:
The issues involved in the judgment are valuation of goods under Central Excise (Valuation) Rules, 2000, application of Rule 8 for valuation, principles of natural justice, inclusion of job charges in assessable value, and revenue neutrality.

Valuation of Goods under Central Excise (Valuation) Rules, 2000:
The appellants were engaged in the manufacture of "HR Coils" and were selling to related and unrelated parties. The Revenue alleged that the appellants were clearing goods to their sister concerns at a lower price, leading to a demand for duty. The appellants argued that the price at which they cleared goods to independent buyers was comparable and no need to apply Valuation Rules. They also raised concerns about the lack of access to the Deputy Director's report and violation of natural justice principles. The Tribunal found that the Revenue failed to justify the invocation of Valuation Rules and set aside the impugned order based on the availability of clear prices for goods sold to unrelated parties.

Application of Rule 8 for Valuation:
The Tribunal noted that Rule 8 should be applied when excisable goods are not sold by the assessee. In this case, as almost 60% of goods were sold to unrelated buyers at a price based on sole consideration, Rule 8 was not applicable. The Tribunal referred to a similar case involving the appellant's sister concern where Rule 8 was not invoked, further supporting the decision to set aside the order.

Principles of Natural Justice:
The Tribunal highlighted a serious violation of natural justice as the appellants were not provided with the Deputy Director's report or the working papers used for calculations. This denial of opportunity to analyze or counter the findings was deemed a violation of principles of natural justice, leading to the decision to set aside the order.

Inclusion of Job Charges in Assessable Value:
The appellants argued that job charges should not be included in the assessable value, as these charges were earned while performing job work for other manufacturers. The Tribunal agreed with the appellants, stating that expenses or income unrelated to the goods in question should not impact the assessable value. The absence of a definitive explanation from the Department led to the acceptance of the appellant's argument regarding job charges.

Revenue Neutrality:
The Revenue contested the appellant's argument on revenue neutrality, citing previous cases. However, the Tribunal found that the argument was not acceptable based on the circumstances of the case and the lack of justification provided by the Revenue. The decision to set aside the order was primarily based on the merits of the case rather than issues of limitation or revenue neutrality.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal on the grounds of lack of justification for invoking Valuation Rules, violation of natural justice, incorrect inclusion of job charges in the assessable value, and the absence of a clear case for revenue neutrality. The decision was pronounced on 17/10/2023.