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2009 (3) TMI 391 - AT - Central ExciseValuation DTA clearance by EOU transaction value rejected as nature of goods misdeclared related persons department proceeding on basis of Rule 7 of Custom (Valuation) Rules 1988 - Department s submission is that goods are not rejects but are prime quality goods huge difference between the figures of rejects mentioned in the statutory records and the actual quantity of rejects - This is a clear evidence of inflating the figure of rejects for which the Appellants have not given any explanation. Goods are not rejects and hence not eligible for Notification no. 2/95-C.E. Held that transaction value rejectable without going into question of related person Further DTA sales cannot be treated on par with export sales to countries Hence value is to be determined under Rule 7 by deductive method - it is Rule 7 which has to be tried first instead of jumping straightway to Rule 8 and recourse can be taken to Rule 8 only when the value cannot be determined under Rule 7 or Rule 7A. We are also of the view that the Board s Circular No. 268/85-CX-6 dated 29-9-94 read with the earlier Circular No. 23/84-CX-8 dated 29-5-84 providing for determination of the assessable value in such cases by taking recourse to Rule 8 on the basis of the FOB price of the identical or similar goods is not in accordance with the provisions of sub-rule (2) of Rule 8 - Extended period under proviso to Section 11A(1) of the Central Excise Act 1944 is available to the Department in respect of both the show cause notices for the recovery of the short paid duty - While UTL are liable for penalty under Section 11AC of Central Excise Act other noticees are liable for penalty under Rule 209A of the erstwhile Central Excise Rules 1944/Rule 26 of the Central Excise Rules 2001-02; - Second SCN on same facts but for different priod SCN issued reportedly for later period only because of delay on part of assessee - We are of the view that extended period is applicable even for the second show cause notice.
Issues Involved:
1. Classification of goods as 'rejects' or prime quality. 2. Determination of assessable value. 3. Applicability of concessional duty rate under Notification No. 2/95-C.E. 4. Invocation of extended period for demand under Section 11A(1) of the Central Excise Act. 5. Imposition of penalties under Section 11AC of the Central Excise Act and Rule 209A of the Central Excise Rules. Detailed Analysis: 1. Classification of Goods as 'Rejects' or Prime Quality: The primary issue was whether the goods cleared by UTL into the Domestic Tariff Area (DTA) were genuinely 'rejects' or prime quality goods. The Tribunal upheld the Commissioner's finding that the goods were prime quality and not rejects. This conclusion was based on substantial evidence, including statements from various individuals and discrepancies in the records, which indicated that the goods were not stamped as 'rejects' and were sold at prices significantly higher than typical for rejects. 2. Determination of Assessable Value: The Tribunal held that the transaction value declared by UTL for the goods sold to UIL was not acceptable under Rule 10A of the Customs Valuation Rules due to the suspect nature of the declared value. The Tribunal directed that the assessable value should be determined by applying Rule 7 of the Customs Valuation Rules, which involves the deductive value method based on the price at which UIL sold the goods to independent buyers, after allowing necessary deductions for expenses, profits, and taxes. 3. Applicability of Concessional Duty Rate under Notification No. 2/95-C.E.: Since the goods were found to be prime quality and not rejects, they were not eligible for the concessional duty rate under Notification No. 2/95-C.E. The duty was to be charged at the full rate prescribed under the proviso to Section 3(1) of the Central Excise Act, which is equivalent to the aggregate of customs duties on like goods imported into India. 4. Invocation of Extended Period for Demand under Section 11A(1) of the Central Excise Act: The Tribunal upheld the invocation of the extended period for both show cause notices. The first show cause notice dated 13-8-02 was within the extended period due to the fraudulent nature of the transactions. The second show cause notice dated 22-7-03 was also within the extended period because the delay in issuing it was attributed to UTL's failure to provide necessary information in a timely manner. 5. Imposition of Penalties under Section 11AC of the Central Excise Act and Rule 209A of the Central Excise Rules: Given the fraudulent nature of the transactions, the Tribunal confirmed the imposition of penalties on UTL under Section 11AC of the Central Excise Act and on other noticees under Rule 209A of the erstwhile Central Excise Rules, 1944/Rule 26 of the Central Excise Rules, 2001-02. The quantum of penalties was to be re-determined based on the re-quantified duty demand. Conclusion: The Tribunal remanded the matter to the Commissioner for de novo adjudication to re-quantify the duty demand by determining the assessable value under Rule 7 of the Customs Valuation Rules and to re-determine the quantum of penalties in accordance with the re-quantified duty demand. The Tribunal's decision emphasized adherence to legal provisions and proper valuation methods, rejecting the declared transaction values due to the fraudulent misclassification of goods.
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