2004 (4) TMI 150 - AT - Central Excise

Valuation of compound rubber for Central Excise duty - Differential duty - Captive consumption - penalty -application of extended period for duty demand - HELD THAT - We find that in this case, the appellants have filed cost account certificate based on the instructions available at the relevant time. They could not include the extra amount in valuation of the products used by them on the basis of Board Circular dated 30-10-96 as it was not available at the relevant time. Secondly, whatever duty they were paying at the manufacturing unit of intermediate goods, the same has been taken as credit by other unit where these goods were being taken for manufacture of finished products. Therefore, following ratio of the Tribunal decision in case of P.T.C. Industries Ltd. 2003 (7) TMI 198 - CESTAT, NEW DELHI , we find that there is revenue neutrality in this case. Commissioner has not given any evidence that the failure on the part of the appellants was with an intention to evade the payment of duty. We do not find any merit in the order of the Commissioner which is set aside and the appeal is allowed.

Summary

Issues Involved: Appeal against Order-in-Original regarding valuation of compound rubber for Central Excise duty, imposition of penalty, and application of extended period for duty demand.

Valuation of Compound Rubber: The appellant, M/s. MRF Ltd., manufactured compound rubber for captive consumption and clearance to other units. The Cost Audit Group alleged undervaluation, leading to duty demand and penalties. The appellant argued that the show cause notice issued was time-barred, as it covered a period from 10/95 to 9/96, and they had not suppressed any facts to evade duty. They contended that the valuation was based on cost construction method under relevant rules at that time, and any discrepancies were due to bona fide belief. The appellant also highlighted revenue neutrality under the Modvat Scheme, where duty paid in one unit is credited in another, thus no intent to evade duty was present.

Application of Extended Period: The Revenue invoked the extended period citing deliberate undervaluation and withholding of vital information by the appellant. The Commissioner justified the extended period based on the appellant's alleged submission of incorrect particulars and suppression of facts. However, the Tribunal found that the appellant had followed the available instructions for valuation and there was no evidence of intentional evasion of duty. The Commissioner's order was set aside, and the appeal was allowed.

This judgment by the Appellate Tribunal CESTAT, Bangalore, in the case of M/s. MRF Ltd., addressed issues related to the valuation of compound rubber for Central Excise duty, imposition of penalties, and the application of the extended period for duty demand. The Tribunal ruled in favor of the appellant, emphasizing compliance with valuation rules, lack of intent to evade duty, and the revenue-neutral nature of transactions under the Modvat Scheme.