2009 (11) TMI 367 - AT - Central Excise

Additional ground- The appellants are engaged in manufacture of air texturised yarn. The ground that the value cleared by them through 4 consignment agents was not determined as per the provisions of Section 4(1)(b) of Central Excise Act, 1944 read with Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 ( Valuation Rules for short). Penalty of equal amount has been imposed on the company and penalty of Rs. 10 lakhs on Shri Shrikant Mundra, Director of the Company and Rs. 1 lakh on Shri P.G. Sharma, authorized signatory of the company, have also been imposed. Held that- whatever was the duty they were paying at the factory gate in respect of the goods sold by the consignment agent, when the price of the factory gate was lower than the price charged by the consignment agent was totally without any intention to evade duty. The matter is remanded to the original adjudicating authority who shall decide the issues relating to the determination of assessable value and calculation of duty in terms of our observation in this order and also in the light of judicial pronouncements.

Issues:
1. Whether the process of manufacture of texturised yarn attracts duty under the Central Excise Act.
2. Whether the assessable value should be based on the price at the factory gate.
3. Whether the valuation for charging duty should be based on the date of sale prior to the date of removal.
4. Whether there was suppression of facts by the appellant.

Issue 1 - Process of Manufacture:
The appellants argued that the process of manufacturing air texturised yarn does not amount to "manufacture" under the Central Excise Act. They relied on a Tribunal decision but failed to provide substantial evidence supporting their claim. The Tribunal noted that the appellants sold the yarn as texturised yarn and had obtained registration for manufacturing air texturised yarn. The absence of test reports and conclusive evidence against the manufacturing process led the Tribunal to reject this claim.

Issue 2 - Assessable Value at Factory Gate:
The appellant contended that the price available at the factory gate should be considered for determining assessable value. The Tribunal observed that the valuation rules require the normal transaction value at the time of removal, but the method adopted by the Revenue was not adequately explained. The matter was remanded for further consideration, emphasizing the need to assess the claim of price availability at the factory gate.

Issue 3 - Valuation Based on Date of Sale:
The appellant argued that the valuation for charging duty should be based on the date of sale prior to the date of removal. Rule 7 of the Valuation Rules was cited, but the Tribunal found no explicit support for the appellant's interpretation. Various Tribunal decisions and a CBEC order were presented in support of the appellant's claim, which were not cited before the original adjudicating authority. The Tribunal directed the adjudicating authority to consider this claim during further proceedings.

Issue 4 - Suppression of Facts:
The appellant claimed that no suppression could be invoked as there was no legal requirement to intimate sales through consignment agents. However, the Tribunal noted that the appellants were aware of the sales through monthly returns from consignment agents. Despite changes in the law, the appellants continued to pay duty based on earlier practices, indicating a lack of bona fide belief. The Tribunal upheld the invocation of the extended period by the Department and rejected the claim of delay in issuing the show cause notice.

In conclusion, the matter was remanded to the original adjudicating authority for a detailed reconsideration of the issues related to assessable value, duty calculation, and suppression of facts in accordance with the Tribunal's observations and judicial pronouncements, providing the appellants with an opportunity to present their case.

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