2002 (4) TMI 171 - AT - Central Excise

Demand - Limitation - Suppression of facts - Adjudication - Valuation (Central Excise) - Clandestine removal - Remission of duty

Summary

Issues Involved:
1. Differential duty on goods transferred to sister units.
2. Duty on rejected goods not accounted for.
3. Irregular availment of Modvat credit.
4. Time-bar for differential duty demand.
5. Valuation of specific Vacuum Interrupter Tubes and Vacuum Contactor units.
6. Alleged clandestine removal of finished goods.

Issue-wise Detailed Analysis:

1. Differential Duty on Goods Transferred to Sister Units:
The appellants were found to have removed goods to their sister units at lower prices compared to sales to independent buyers. The Commissioner determined that the value for duty payment should be based on prices for comparable goods sold to independent buyers, as per Rule 4(1)(b) of the Central Excise (Valuation) Rules, 1975. Consequently, a differential duty of Rs. 42,08,620/- was confirmed.

2. Duty on Rejected Goods Not Accounted For:
The appellants did not account for the production and disposal of rejected Vacuum Interrupter Tubes (VIT) in their RG 1 Register. They claimed the rejected goods were broken and the copper content sold as scrap. The Commissioner found that the appellants did not follow the procedure for remission of duty under Rule 49(1) of the Central Excise Rules, 1944, and confirmed a duty demand of Rs. 41,31,260/- for alleged clandestine removal of these goods.

3. Irregular Availment of Modvat Credit:
The appellants availed Modvat credit on the strength of Bills of Entry in the names of other units without proper certification. The Commissioner, however, held that the Modvat credit was admissible and dropped the demand of Rs. 16,79,759.05 on this charge.

4. Time-bar for Differential Duty Demand:
The appellants argued that the demand for differential duty was time-barred as they had regularly filed RT 12 returns and had not suppressed any facts. The Commissioner found that the appellants had not filed the required price declarations and had suppressed relevant facts, justifying the invocation of the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944. The Tribunal upheld this finding.

5. Valuation of Specific Vacuum Interrupter Tubes and Vacuum Contactor Units:
The Commissioner adopted higher assessable values for various types of Vacuum Interrupter Tubes and Vacuum Contactor units based on sales to independent buyers. The appellants contested the values for certain types, arguing that the prices were not for the largest quantity or that the buyers were not OEMs. The Tribunal found that the value of comparable goods sold to independent buyers was correctly adopted for most items, but remanded the valuation of the contactor units (VCU 220V and VCU 110V) back to the original authority for fresh consideration.

6. Alleged Clandestine Removal of Finished Goods:
The appellants contended that the rejected tubes were broken and sold as scrap, and therefore not liable for duty. The Commissioner found no independent corroboration of the destruction of the goods and confirmed the duty demand. The Tribunal, however, concluded that the goods were destroyed at the production stage and had not attained the status of finished goods, thus not liable for duty. The demand of Rs. 41,31,260/- and the penalty of Rs. 10 lakhs were set aside.

Conclusion:
The Tribunal upheld the differential duty demand for goods transferred to sister units and the invocation of the extended period for the demand. The valuation of the contactor units was remanded for fresh consideration. The demand and penalty for the alleged clandestine removal of rejected goods were set aside. The appellants were directed to be afforded an opportunity for further submissions and personal hearing on de novo consideration.