2005 (11) TMI 127 - AT - Central Excise

Summary

Issues: Valuation of goods sold by an EOU in the domestic market, application for waiver of pre-deposit of duty and penalties, stay of operation of the order of the Commissioner of Central Excise (Appeals)

In this judgment by the Appellate Tribunal CESTAT, MUMBAI, the issue at hand revolves around the valuation of goods sold by an EOU in the domestic market. The applicant, a manufacturer of HDPE/FP yarn and ropes under the 100% EOU Scheme, sought waiver of pre-deposit of duty and penalties as well as a stay of the Commissioner of Central Excise (Appeals) order. The dispute arose when the department rejected the value of yarn sold to a sister concern, citing their relationship as a reason to question the transaction value. The Commissioner determined the value using the cost construction method under Customs Valuation Rules, leading to a demand for differential duty and penalties.

The Tribunal considered the guidelines provided by the Board in Circular No. 23/84-CX.-6 to address valuation disputes involving goods sold by an EOU in the domestic market. These guidelines suggest that the export value of similar goods can serve as the basis for assessing goods cleared for domestic sale. In this case, the applicant had exported yarn to Norway and UAE at a lower price compared to the domestic sale price. The Tribunal found no valid reason to reject the export value, especially when it was higher than the domestic sale price. Consequently, the Tribunal concluded that the applicant had established a strong prima facie case for waiving the duty and penalties imposed by the lower authority. As a result, the Tribunal dispensed with the pre-deposit condition and stayed the recovery of duty and penalties during the appeal process.

The judgment highlights the importance of considering export values when determining the valuation of goods sold domestically by an EOU. It emphasizes the need to align domestic sale prices with export values to ensure fair assessment and avoid arbitrary valuation methods. The decision provides clarity on the application of Customs Valuation Rules in such scenarios and underscores the significance of following established guidelines to promote consistency and fairness in valuation disputes.