2010 (11) TMI 7 - SC - Central Excise

Valuation - aluminum casting - The view of the adjudicating authority was that the price charged in the Central Excise invoices by Anurang for their finished goods was not the sole consideration for sale, since the proportionate landed cost charges were not included by Bajaj which is additional consideration under Rule 5 of the Central Excise (Valuation) Rules, 1975. Hence, expenses incurred by Bajaj, in addition to the price, were required to be loaded in the assessable value for payment of Central Excise Duty. - demand was issued by invoking extended period of limitation - Held that - provision the extended period of limitation as provided by the proviso to Section 11A(1) of the Act, can only be invoked when there is a conscious act of either fraud, collusion, wilful mis-statement, suppression of fact, or contravention of the provisions of the Act or any of the rules made thereunder on the part of the person chargeable with duty or his agent, with the intent to evade payment of duty. - since both the assessees are situated under the jurisdiction of the same division and as such it cannot be reasonable to conclude that the revenue was not aware of the transactions. Since this is not what is envisaged under the proviso to Section 11A(1) of the Act, we cannot agree with the reasoning and the conclusion reached by the Tribunal. - matter remanded back to tribunal

Issues Involved:
1. Valuation of aluminum castings.
2. Alleged under-valuation of inputs.
3. Mutual business interests and reduced production costs.
4. Revenue neutrality.
5. Extended period of limitation under Section 11A of the Customs Act, 1962.
6. Tribunal's interpretation and findings.

Issue-wise Detailed Analysis:

1. Valuation of Aluminum Castings:
The appellant contested the valuation of aluminum castings manufactured by Anurang Engineering Co. Ltd. (Anurang), which was based on the purchase price of aluminum ingots supplied by Bajaj Auto Ltd. (Bajaj). The Commissioner of Customs and Central Excise issued a show cause notice alleging that Anurang received inputs at an under-valued cost, excluding expenses like sales tax, octroi, freight, insurance, and handling charges. This resulted in a reduced landed cost and lower excise duty. The adjudicating authority concluded that the price charged by Anurang was not the sole consideration for sale, as Bajaj did not include additional expenses, thus aiding each other in mutual business interests to minimize production costs and discharge lower excise duty.

2. Alleged Under-valuation of Inputs:
The show cause notice alleged that Bajaj supplied inputs to Anurang at a depressed price, influenced by the supply arrangement, which resulted in Anurang paying lower excise duty. The adjudicating authority found that the prices charged by Anurang were depressed and colored as negotiated prices. Bajaj provided inputs at a lower cost and supplied drawings/designs free of cost, incurring part of the production cost of the finished goods, leading to a conclusion that Anurang contravened Rule 5 of the Central Excise (Valuation) Rules, 1975.

3. Mutual Business Interests and Reduced Production Costs:
The adjudicating authority observed that Bajaj and Anurang were aiding each other to keep production costs at a minimum, resulting in lower excise duty payments. The Tribunal, however, noted that the Commissioner's observations were contradictory, as the ingots were sold at negotiated prices, and any duty paid by Anurang was taken as credit by Bajaj, leading to a revenue-neutral situation. The Tribunal found that the entire case was based on assumptions and presumptions, and the burden to prove under-valuation was not discharged by the revenue.

4. Revenue Neutrality:
The Tribunal held that since any duty paid by Anurang was taken as credit by Bajaj, it led to a revenue-neutral situation, negating any intention to evade payment of duty. The Tribunal concluded that the confirmation of duty against Anurang was not sustainable, as the case was based on assumptions without sufficient evidence.

5. Extended Period of Limitation under Section 11A of the Customs Act, 1962:
The Tribunal concluded that the demand was barred by limitation, as the notice was issued beyond the prescribed period, and both units were under the same jurisdiction. The Supreme Court, however, found that the Tribunal overlooked the language of Section 11A, which allows an extended period of five years in cases of fraud, collusion, wilful mis-statement, or suppression of facts. The Court emphasized that the initial burden is on the department to prove these conditions, but the burden shifts to the assessee once the department produces material evidence.

6. Tribunal's Interpretation and Findings:
The Supreme Court found that the Tribunal did not properly consider the ingredients of Section 11A or the construction placed by the Court on this Section. The Tribunal's reasoning that the revenue was aware of the transactions due to the same jurisdiction was not sufficient to conclude that the extended period of limitation could not be invoked. The Court set aside the Tribunal's order and remanded the matter for reconsideration of whether the conditions for invoking the extended period were met and for re-examination of disputed facts.

Conclusion:
The Supreme Court allowed the appeal, set aside the Tribunal's order, and remanded the matter for fresh consideration of all issues by the Tribunal. Both parties were given liberty to present additional material in support of their cases. The Court did not express any opinion on the merits of the claims and directed parties to bear their own costs.

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