2005 (1) TMI 211 - AT - Central Excise

Valuation (Central Excise) - duty demand - enhanced value of motor vehicle components - Place of removal - Imposition of Penalty - HELD THAT - We find great significance in the expression goods cleared from factory for subsequent clearance from depot , which can only mean that where the goods sought to be valued under the amended provisions is after its removal from factory, cleared from a depot, such depot has to be chosen as place of removal. In the instant case, the goods were admittedly sold from the depots at Pune, Delhi and Calcutta. No part of the consignment was sold from the Chennai depot. We have applied the cited case law to the facts of this case. The Supreme Court's judgment in the case of Prabhat Zarda Factory Limited 2002 (11) TMI 95 - SC ORDER also supports the Revenue's view in this case. Thus, we endorse the view taken by the Commissioner insofar as the valuation of the goods is concerned. The Commissioner has also, partly accepted the assessee's plea of limitation. What remains to be considered is whether the penalties imposed by him are sustainable. Admittedly, the entire amount of duty, and more than that, was paid by the assessee before issuance of the show cause notice. It has been consistently held by the Apex Court that, where duty was paid prior to issuance of show cause notice, no penalty is liable to be imposed on the assessee u/s 11AC or under Rule 173Q. This Tribunal also has consistently taken this view. In the case of EID Parry Ltd. 2003 (6) TMI 82 - CESTAT, CHENNAI , a Larger Bench of this Tribunal has settled the issue against the Revenue. Accordingly, the penalties imposed by the Commissioner are not liable to be sustained. In the result, we uphold the demand of duty and set aside the penalties. The impugned order stands modified accordingly. The appeal is disposed of.

Summary

Issues:
The appeal challenges an order by the Commissioner of Central Excise demanding differential duty on enhanced value of motor vehicle components manufactured by the appellants in their Sholinghur factory.

Valuation of Goods:
The dispute arose from the valuation of goods cleared from the Sholinghur factory to various depots for sale. The appellants argued that the price prevailing at the Chennai depot at the time of removal from the factory should be the basis for valuation, citing relevant Tribunal decisions and a Supreme Court ruling. The department, however, considered the sale prices at Pune, Delhi, and Calcutta depots where the goods were ultimately sold. The Commissioner upheld the department's view, interpreting the amended provisions of Section 4 of the Central Excise Act.

Legal Interpretation:
The amended Section 4, effective from 28-9-1996, defines "place of removal" as any location from where excisable goods are sold after clearance from the factory. The proviso (ia) states that if goods are sold at different places, each price shall be deemed the normal price for valuation. The Commissioner's decision was based on this interpretation, considering the goods were actually sold from depots other than Chennai.

Penalties Imposed:
The Commissioner partially accepted the plea of limitation by the appellants but imposed penalties under Section 11AC and Rule 173Q. However, as the duty was paid before the show cause notice was issued, the penalties were deemed unwarranted based on legal precedents, including a Supreme Court judgment and a Tribunal decision.

Conclusion:
The CESTAT Chennai upheld the duty demand but set aside the penalties imposed by the Commissioner. The decision was based on the interpretation of the amended Section 4 and the legal precedent that penalties are not applicable if duty is paid before the issuance of a show cause notice.