2009 (7) TMI 293 - AT - Central Excise

Valuation Stock transfer to another unit assessable value whether to be determined under Rule 6(b)(i) or 6(b)(ii) - revenue assessed goods based on price of other units in vicinity of appellants not feasible to determine assessable value under Rule 6(b)(ii) - while determining the value of the goods under Rule 6(b)(ii), the profit to be included is the notional profit which the assessee would have earned in normal course and not the actual profit and the notional profit has to be added even if during the particular year there is loss. In this regard as per the Board Circular No. 258/92/96-CX., dated 30-10-96 the profit before tax as percentage of cost of production taken from the previous year s audited balance sheet is to be adopted. No-misstatement or suppression of facts, hence larger period not invocable - provisions of Sections 11AB and 11AC are not applicable as there is no short levy, non-levy, willful misstatement - held that while determining the assessable value of goods being cleared for captive consumption, assessable value to be based on value of comparable goods making adjustments, as per Rule 6(b)(i) Sub-clause (ii) can be invoked only if value cannot be determined under sub-clause (i) - while applying Rule 6(b)(i), it is the general factory gate price under Section 4(1)(a) to be adopted such price more representative price than contract price to buyer - while holding that in this case, the assessable value is to be determined under Rule 6(b)(ii) of CEVR, 1975, read with the Board s Circular No. 258/92/96-CX., dated 30-10-96, set aside the impugned order and remand the matter to the original adjudicating authority for re-quantification of the duty demand

Issues Involved:

1. Determination of assessable value under Rule 6(b)(i) or Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 (CEVR).
2. Method of determining the assessable value if Rule 6(b)(i) is applicable.
3. Applicability of extended limitation period under proviso to Section 11A(1) of the Central Excise Act, 1944.
4. Applicability of Sections 11AB and 11AC of the Central Excise Act, 1944.

Detailed Analysis:

1. Determination of Assessable Value Under Rule 6(b)(i) or Rule 6(b)(ii):

The appellants, M/s. Somaiya Organics (India) Ltd., were discharging duty liability on the basis of cost of production under Rule 6(b)(ii) of CEVR for clearances of Denatured Ethyl Alcohol (SDS) to their sister unit at Barabanki. The Department argued that the appellant should have paid duty based on the value of comparable goods produced by other manufacturers under Rule 6(b)(i). The Tribunal concluded that Rule 6(b)(i) was not applicable as the appellant's SDS was produced from molasses procured at controlled prices, unlike other manufacturers who used free sale molasses. Therefore, the assessable value should be determined under Rule 6(b)(ii), based on the cost of production plus profit.

2. Method of Determining Assessable Value if Rule 6(b)(i) is Applicable:

The Department's method of adopting the highest price of comparable goods from other manufacturers for the entire year was found incorrect. The Tribunal emphasized that the price must be the nearest ascertainable equivalent of the normal price, which should be conservative and representative. The Tribunal also noted that adjustments for differences in material characteristics and input costs must be made under Rule 6(b)(i). Since such adjustments were not feasible due to lack of data, Rule 6(b)(ii) was deemed more appropriate.

3. Applicability of Extended Limitation Period Under Proviso to Section 11A(1):

The Tribunal rejected the Department's invocation of the extended limitation period, noting that the appellant had consistently declared prices based on cost of production and paid differential duty whenever required. The RT-12 returns were regularly assessed without objections from the Department. Hence, there was no misstatement or suppression of facts by the appellant, making the extended limitation period inapplicable.

4. Applicability of Sections 11AB and 11AC:

Since the elements of fraud, willful misstatement, or suppression of facts were absent, the provisions of Sections 11AB and 11AC were not applicable. The Tribunal held that any differential duty payable after re-quantification would be recoverable only for the normal limitation period.

Conclusion:

The Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for re-quantification of the duty demand under Rule 6(b)(ii) of CEVR, read with the Board's Circular No. 258/92/96-CX., dated 30-10-96. Any differential duty payable would be recoverable only for the normal limitation period, and the provisions of Sections 11AB and 11AC would not apply.

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