2005 (5) TMI 212 - AT - Central Excise

Issues Involved:

1. Demand for duty of Rs. 11,77,06,071/- on undervaluation of copper cathodes.
2. Demand for duty of Rs. 5,53,41,272/- and Rs. 92,50,248/- on wrongful availing of Rule 57F(4) procedure.
3. Consequential demand of Rs. 1,00,96,959/- on Piparia unit.
4. Penalties imposed on the appellant company and individuals.

Detailed Analysis:

1. Demand for duty of Rs. 11,77,06,071/- on undervaluation of copper cathodes:

The adjudicating authority confirmed a demand on the ground that the Chinchpada unit undervalued the clearances of copper cathodes to the Piparia unit. The authority held that the assessable value should be determined under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975, based on the cost of production, instead of Rule 6(b)(i), which is based on the price of comparable goods.

The Tribunal found that the impugned order wrongly invoked Rule 6(b)(ii) without first ruling out the applicability of Rule 6(b)(i). The appellants had submitted evidence, including price circulars from Hindustan Copper Ltd., showing that the declared assessable value was consistent with prevailing prices of comparable goods. The Tribunal noted that there was no material difference between the copper cathodes manufactured by the appellants and those by Hindustan Copper Ltd.

The Tribunal also found that the Commissioner misinterpreted the term "comparable goods" as "identical goods" and incorrectly applied the judgment of the M.P. High Court in Gwalior Rayon Mfg. (Wvg. Co.) v. Union of India. The Tribunal emphasized that "comparable goods" do not need to be identical and adjustments can be made for any material differences.

The Tribunal held that the cost of production determined by the Commissioner was incorrect and contrary to the Board's instructions. It also noted that the demand was time-barred as the appellants had filed the requisite price declarations and there was no suppression of facts or intention to evade duty. The Tribunal concluded that the larger period of limitation could not be invoked, as the duty paid at Chinchpada would have been available as Modvat credit at the Piparia unit.

2. Demand for duty of Rs. 5,53,41,272/- and Rs. 92,50,248/- on wrongful availing of Rule 57F(4) procedure:

The demand was confirmed on the grounds that the appellant wrongly availed the procedure of Rule 57F(4) for clearing spent anode, waste, and scrap without payment of duty. The Commissioner held that the appellant should have cleared these items on payment of duty as provided in Rule 57F(18).

The Tribunal referred to the Larger Bench decision in Wyeth Laboratories Ltd. v. Collector, which clarified that "waste" in Rule 57F(18) refers to inputs that are not feasible to be converted to a final product. The Tribunal found that the appellants correctly availed the job work procedure under Rule 57F(4).

The Tribunal also held that the demand was time-barred as the appellants had disclosed their use of Rule 57F(4) in their monthly RT-12 Returns, which included clearances and indicated payment of 10% as required. The Tribunal set aside these demands.

3. Consequential demand of Rs. 1,00,96,959/- on Piparia unit:

The demand on the Piparia unit was based on the premise that the Chinchpada unit was not entitled to clear 'waste and scrap' under Rule 57F(4). The Tribunal found that since the Chinchpada unit correctly followed Rule 57F(4), the demand on the Piparia unit was not sustainable.

The Tribunal also noted that the demand was barred by limitation as there was no fraud, wilful misstatement, or suppression, and any duty paid by the Chinchpada unit would have been available as credit to the Piparia unit. The Tribunal set aside the demand on the Piparia unit.

4. Penalties imposed on the appellant company and individuals:

The Tribunal set aside the penalties on the appellant company and individuals, reasoning that the demands had been quashed and neither the show cause notice nor the impugned order brought out their individual roles.

Conclusion:

The Tribunal set aside the impugned order and allowed the appeals, quashing the demands and penalties imposed on the appellants.

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