2024 (10) TMI 504 - AT - Central Excise

Valuation of goods cleared to related entities - Seeking repudiation of the order of the first appellate authority in directing finalization of provisional assessment of M/s Dhariwal Industries Ltd on clearance of Dhariwal Compound S G - assessment of price of impugned goods being cleared to their related units - rule 8 of Central Excise Valuation (Determination of Value of Excisable Goods) Rules, 2000 - violation of principles of natural justice - HELD THAT - It is apparent from the impugned order that the first appellate authority concluded that the original authority was required to proceed in accordance with rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and with the circular of Central Board of Excise Customs (CBEC) supra. This was on a clear finding that transactions with unrelated persons did not exist for application in clearances to related person. It is seen from the order of the original authority that, despite having been furnished with costs sheet necessary for assessing the value as per rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, the original authority proceeded to determine otherwise for the year 2012-13. The principle of natural justice requires that any order to the detriment of an assessee must necessarily be preceded with a show cause notice to enable response to the reasons adduced for disallowance of their claim. The original authority had proceeded on the assumption that transactions with unrelated persons existed and, therefore, sufficient reason to discard the CAS-4 statement furnished by the assessee. Impliedly, a favourable finalization was presumed by the assessee. The interests of justice will be served by remanding the matter back to the original authority after upholding the setting aside of the order with the direction that the assessment be taken up for finalization after due notice to the assessee of non-entitlement for coverage under rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - appeal allowed by way of remand.

Summary

Issues:
1. Jurisdictional Commissioner seeking repudiation of the order of the first appellate authority in directing finalization of provisional assessment.
2. Application of rule 8 of Central Excise Valuation Rules in assessing the value of goods cleared to related entities.
3. Dispute regarding the appropriateness of resorting to rule 8 without establishing flow back of money or mutuality of interests between legal entities.

Analysis:
1. The appeal involved the jurisdictional Commissioner of Central Excise, Pune - IV challenging the order of the first appellate authority regarding the finalization of provisional assessment of a company's goods cleared to related entities. The Commissioner contended that the order of the Commissioner of Service Tax (Appeals) was not legal, as it upheld the use of rule 8 of Central Excise Valuation Rules without proper justification.

2. The respondent company had sought provisional assessment for their 'special compound' cleared to units in Vadodara and Bangalore. The goods were cleared at different values during specific periods, and the first appellate authority directed finalization based on CAS-4 statements. The appellant argued that the reliance on benchmark clearances lacked detailed analysis and that rule 8 should not have been applied without establishing the lack of mutual interests between entities.

3. The Tribunal noted that the original authority did not consider the cost sheet provided by the assessee and proceeded to determine the value differently. The first appellate authority set aside the original order, directing a reassessment in accordance with rule 8 and CBEC circular. The Tribunal upheld the remand, emphasizing the need for proper notice to the assessee before finalization of assessment, considering the absence of transactions with unrelated persons.

4. The Tribunal concluded that justice would be served by remanding the matter back to the original authority for reassessment, ensuring the assessee is duly informed of the reasons for disallowance under rule 8. The appeal was disposed of, and the miscellaneous application was also resolved during the proceedings.

In conclusion, the judgment addressed the issues raised by the jurisdictional Commissioner regarding the application of rule 8 in the finalization of provisional assessment, emphasizing the importance of due process and proper justification for assessment decisions.