2024 (6) TMI 122 - AT - Central Excise

Method of Valuation - clearance of electrical motors captively used - to be valued in terms of Rule 8 of Central Excise (Valuation) Rules 2000 or in terms of Rule 4 of Central Excise (Valuation) Rules 2000 - suppression of facts or not - time limitation - cum-duty benefit. Method of valuation - HELD THAT - The appellant clears fine blanks and electric motors for washing machines as warranty replacements spares market and also uses for captive consumption. In view of the Larger Bench decision in the case of ISPAT INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX. RAIGAD 2007 (2) TMI 5 - CESTAT MUMBAI-LB it is a settled law that the appellant should have taken the value of the spares market for all the clearances of captive consumption as well as warranty replacements. Therefore as far as demand is concerned it has to be upheld and as admitted by the appellant demands are being upheld. Time limitation - cum-duty benefit - HELD THAT - There is substance in the claim of the appellant that the issue was not without any controversy and hence they cannot be alleged that facts were suppressed with intention to evade payment of duty. Moreover as seen from the records originally show-cause notice was issued without invoking suppression and this was for the period April 2007 to December 2007 and later show-cause notices alleging suppression on the same set of facts for the period prior to 2007 is not justified. In view of the fact that all the assemblies were made on payment of duty and disclosed in their monthly ER-1 returns and the clearances to the spares market was known to the Revenue the question of wilful suppression cannot be alleged. The benefit of cum-duty which is already a settled issue is also to be extended to the appellant. In view of the facts discussed above and in view of the decision of the Larger Bench demands in all the Show cause notices are upheld only to the extent of normal period. Penalty imposed under Section 11AC is set aside. The matter is remanded to the original authority to recompute the duty - Appeal disposed off by way of remand.

Summary

Issues involved: The issues involved in the judgment are the valuation of electric motors for washing machines cleared for captive use and warranty replacements, the applicability of Rule 8 of Central Excise (Valuation) Rules, 2000 versus Rule 4 of the same rules, the demand confirmation under proviso to Section 11A, imposition of penalty under Section 11AC, challenge on the ground of limitation and computation of duty, and the consideration of cum-duty benefit.

Valuation of Electric Motors: The appellant manufactured electric motors for washing machines, cleared for captive use and warranty replacements. The dispute centered around whether the valuation should be based on Rule 8 or Rule 4 of Central Excise (Valuation) Rules, 2000. The demand was confirmed under proviso to Section 11A, imposing penalty under Section 11AC and Rule 25. The appellant argued that the value should be based on the price at which they sold the goods to customers, either in service centers or as warranty replacements.

Challenge on Grounds of Limitation and Duty Computation: The appellant accepted the demand based on the valuation issue but challenged it on the grounds of limitation and duty computation. Show-cause notices were issued for redetermining the value of motors removed for captive consumption and warranty replacement. The appellant contended that the extended period of limitation invoked in some notices should be set aside, citing conflicting judgments and the need to consider the cum-duty benefit for captive consumption.

Consideration of Cum-Duty Benefit: The appellant argued that since there was no duty collected for captive consumption, the cum-duty benefit should be considered. They provided re-computed demands to reflect this consideration. The Authorized Representative for the Revenue supported the findings of the Commissioner.

Judgment and Decision: The Tribunal upheld the demand based on the valuation issue, in line with the Larger Bench decision. However, they found merit in the appellant's claim regarding the limitation issue, suppression of facts, and the cum-duty benefit. The demands in the show-cause notices were upheld only for the normal period, and the penalty under Section 11AC was set aside. The matter was remanded to the original authority for re-computation of duty based on the observations made.

Conclusion: The impugned order was modified as per the Tribunal's decision, and the appeals were disposed of accordingly.