2010 (11) TMI 8 - SC - Central Excise

Valuation - consideration of landed cost of inputs - allegation of undervaluation -receipt of inputs under-valued landed cost by not including the element of landed cost of inputs incurred on account of Sales Tax, Octroi, Freight, Insurance, loading, unloading and handling charges. - receipt of price compensation in terms of inputs at reduced landed cost - Held that - The Certificate issued by Chartered Accountant, points out freight charges incurred by M/s. Aurangabad EL for getting material from Bajaj to M/s. Aurangabad EL, as well as loading and unloading charges, consumables overheads and profit. If such payment was made, then the whole premises on which show cause notice issued pales into insignificance - the certificate and other papers filed before the tribunal may be after the appeals were heard and reserved for judgment - matter remanded

Summary

Issues:
Valuation of Magneto Assemblies, Short payment of duty, Allegations of undervaluation, Barred by limitation under Section 11A(1) of the Act, Appeal against Order-in-Original No.04/CEX/2002, Remand by the Tribunal, Excessive penalties imposed, Non-submission of details during investigation, Certificate issued by Chartered Accountant, Remand for fresh disposal.

Valuation of Magneto Assemblies:
The main issue in the civil appeals was the valuation of Magneto Assemblies cleared by the appellants to another party and the consequent short payment of duty due to the alleged undervaluation. The Adjudicating Commissioner found that the inputs supplied to the appellants were undervalued, leading to the under-valuation of the Magneto Assemblies supplied, resulting in duty evasion. The Commissioner held that certain costs incurred by the supplier were not included in the landed cost of the inputs, contributing to the undervaluation.

Allegations of Undervaluation:
The show cause notice alleged that the appellants undervalued the Magneto Assemblies supplied to the other party by not considering the total landed cost of the inputs. The appellants contended that they had not undervalued their final products and had cleared them in wholesale trade in accordance with the law. They argued that the show cause notice and demands raised were time-barred under Section 11A(1) of the Act. The co-noticee also objected to the notice, claiming lack of proof connecting them to the alleged undervaluation.

Appeal Against Order-in-Original:
The appellants, along with other co-noticees, challenged the Order-in-Original passed by the Adjudicating Commissioner. The Commissioner had confirmed a demand for differential duty and imposed penalties under various sections of the Act and Rules. The appellants appealed to the Tribunal, which remanded the matter for re-computation of excise duty and reduced the penalties imposed.

Remand by the Tribunal:
The Tribunal remanded the matter to the Adjudicating Commissioner for re-computation of excise duty in light of a previous court decision. The Tribunal also reduced the penalties imposed on the appellants but confirmed the penalties on other co-noticees. The appellants then appealed to the Supreme Court.

Certificate Issued by Chartered Accountant:
During the Supreme Court proceedings, the appellants presented a Certificate issued by a Chartered Accountant supporting their defense. The Certificate detailed expenses incurred by the appellants, including freight charges, loading and unloading charges, overheads, and profit. The Supreme Court, recognizing the importance of the Certificate, remanded the matter back to the Tribunal to consider its implications on the case.

Conclusion:
The Supreme Court allowed the appeals, set aside the Tribunal's order, and remanded the matter back to the Tribunal for further consideration. The Court directed the Tribunal to examine the Certificate issued by the Chartered Accountant to determine if the expenses were actually incurred by the appellants. Both parties were permitted to present their arguments afresh, and each party was directed to bear their own costs in the proceedings.