2005 (11) TMI 10 - AT - Central Excise

Central Excise Valuation Sale price on depot Across the board rebate (ABR) allowed on actual sale price (assessable value) on depot

Summary

Issues:
- Duty demand and penalty imposed on SAIL by the Commissioner of Central Excise for goods cleared from the Bhilai factory during October 1998 to March 2000.
- Differential duty demands raised due to higher prices of some consignments sold from depots and incorrect exclusion of Across-the-Board Rebate (ABR) from assessable value.
- Appellant's defense against objections raised in show cause notices.
- Interpretation of assessable value for consignments cleared to depots.
- Passing on of ABR to buyers and valuation of goods based on net price.

Analysis:

The appeal before the Appellate Tribunal CESTAT, New Delhi, involved a duty demand of over Rs. 25 crores and a penalty of Rs. 1.25 crores imposed on SAIL by the Commissioner of Central Excise for goods cleared from the Bhilai factory between October 1998 and March 2000. The duty demand was related to consignments first moved to the assessee's depots and then sold to independent buyers from there. The appellant paid duty based on the prevailing sale price at the depot at the time of clearance of each consignment.

Subsequently, 13 show cause notices were issued, raising differential duty demands due to consignments being sold at higher prices from depots and the incorrect exclusion of Across-the-Board Rebate (ABR) from assessable value. The appellant contended that the objections raised in the notices were factually and legally unsustainable. However, the Commissioner overruled these objections, confirming the demands and imposing penalties.

During the appeal, the appellant argued that the assessable value for consignments cleared to depots should be based on the sale price at the depot at the time of removal from the factory, citing legal precedents and circulars supporting this position. The Tribunal agreed with this contention, emphasizing that valuation should be based on the sale price prevailing at the place of removal. The Tribunal distinguished a previous case related to transfer of goods between depots, which was not applicable in the present scenario.

Regarding the ABR issue, the appellant demonstrated that the rebate had been passed on to buyers through credit notes and invoices. The appellant's valuation of goods was in line with the net realization at the depot stage, indicating that the differential duty demanded was not justified. Consequently, the Tribunal held that the duty demand was unsustainable and vacated it, setting aside the penalty as well. The appeal was allowed in favor of the appellant.