2023 (11) TMI 963 - AT - Central Excise

Valuation of goods - captive consumption - determination of transfer price, which is much lower than value that should have been determined as per Rule 8 9 of Central Excise (Determination of Price of Excisable Goods) Valuation Rules, 2000 and CAS-4 - Extended period of limitation as per proviso to Section 11A(1) of the Central Excise Act - demand on duty imposing equivalent penalty - HELD THAT - Appellant have already paid an amount of Rs.85,25,918/- towards central excise duty and Rs.37,843/- towards education cess. From this chart it is quite evident that appellant has admitted and paid the entire differential duty liability for the year 2003-04 and 2005-06. There is a short payment only in the year 2004-05. It is also noted that the appellant sister concern was taking the CENVAT Credit of the differential duty paid by them on the basis of the supplementary invoice. Computation of period of limitation - HELD THAT - As per the procedure followed by the appellant they were paying the differential duty on the basis of the Cost Accountant Certificate issued on the basis of finalized/ audited financial/ cost records, the relevant date for computation of period of limitation under section 11A of the Central excise Act, 1944 should be as per clause (iv) of Explanation 1 (b) of the said section which reads in case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof. Accordingly the show cause notice has to be treated as one being issued within the normal period of limitation for making the demand. Levy of penalty - HELD THAT - It is observed that the appellant was following the procedure as laid down by making the payment of duty on the basis of the cost of production determined on the basis of the finalized accounting records of the previous year and subsequently paying the differential duty on the basis Cost Accountant certificate issued on the basis of the finalized accounting records of current year. When this is prescribed and also is an accepted procedure for payment of duty on the goods consumed captively, there are no merits in the findings recorded by the Commissioner for imposing penalty under Section 11AC read with Rule 25. The penalties under section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 set aside Appropriation of duty paid Rs 56,55,637/- Rs 72,186/- by the Appellant for the period 2003-04, 2005-06 respectively, towards the demand made in the show cause notice and confirmed by the impugned order - demand of differential duty for the year 2004-05 is modified to Rs 66,13,705/- (Rs 65,48,222/- (C Ex Duty) Rs 65,482/- (Edu Cess). Amount of Rs 27,98,055/- paid by the appellant for this period is appropriate against this amount upheld - differential duty for the year 2004-05 to the extent of this amount not paid by the Appellant is upheld - demand for interest under Section 11AB is upheld. Appeal allowed in part.

Summary

Issues Involved:
1. Validity of the Show Cause Notice.
2. Determination of the correct assessable value as per CAS-4 standards.
3. Applicability of extended period of limitation.
4. Imposition of penalty under Section 11AC.
5. Demand for interest under Section 11AB.

Summary:

1. Validity of the Show Cause Notice:
The Tribunal initially dismissed the appeal, finding the Show Cause Notice (SCN) vague for not specifically alleging that the appellant valued their goods below CAS-4 standards. However, the Supreme Court remanded the matter, stating that the SCN did reference a breach of cost accounting standards and that the appellant understood the notice's purport, thus requiring the Tribunal to reconsider the appeal on its merits.

2. Determination of the Correct Assessable Value:
The appellant was found to have cleared goods to its sister concern at a value lower than the cost determined as per CAS-4. The SCN was based on documents showing a discrepancy between the cost certified by the Cost Accountant and the value declared by the appellant. The Tribunal noted that while the appellant provided revised costing sheets excluding interest and finance charges, these were not consistent with the original records. The Tribunal upheld the revised assessable values for the years 2003-04 and 2004-05, reducing the cost of production by excluding interest and finance charges.

3. Applicability of Extended Period of Limitation:
The Tribunal held that the relevant date for computing the limitation period should be the date of adjustment of duty after final assessment, treating the SCN as issued within the normal period of limitation. This was based on the appellant's practice of paying differential duty based on finalized accounting records.

4. Imposition of Penalty under Section 11AC:
The Tribunal found no substantial reason for invoking the extended period or imposing a penalty under Section 11AC. It noted that the appellant followed the prescribed procedure for duty payment and set aside the penalty, finding no intent to evade duty.

5. Demand for Interest under Section 11AB:
The Tribunal upheld the demand for interest under Section 11AB, referencing the Supreme Court's decision in Steel Authority of India Limited, which clarified that interest is payable from the first day of the month succeeding the month in which duty ought to have been paid.

Conclusion:
The appeal was partly allowed, modifying the impugned order by:
- Setting aside penalties under Section 11AC.
- Appropriating duty already paid for the years 2003-04 and 2005-06.
- Modifying the differential duty demand for 2004-05.
- Upholding the demand for interest under Section 11AB.