2001 (1) TMI 702 - AT - Central Excise

Issues Involved:
1. Valuation of rolling ingots.
2. Applicability of Rule 6(b)(i) versus Rule 6(b)(ii) for determining assessable value.
3. Principle of cost accountancy in determining the cost of production.
4. Revenue neutrality and intent to evade duty.
5. Limitation period for issuing the show cause notice.

Detailed Analysis:

1. Valuation of Rolling Ingots:
The appellants were engaged in the manufacture of aluminium rolling ingots and transferred their entire production to a sister unit for further manufacturing. The dispute centered on the valuation of these rolling ingots. The appellants had been clearing the rolling ingots on payment of duty based on the assessable value determined as per Rule 6(b)(i) using the price of comparable goods, specifically the commercial grade ingots and flat ingots from another manufacturer, M/s. BALCO. The Revenue contended that the correct assessable value should be determined under Rule 6(b)(ii) on a cost construction basis, leading to a demand for differential duty.

2. Applicability of Rule 6(b)(i) versus Rule 6(b)(ii):
The appellants argued that Rule 6(b)(ii) is residuary and applicable only if Rule 6(b)(i) is inapplicable. They contended that their rolling ingots were comparable to the flat ingots of M/s. BALCO, as evidenced by technical literature and market parlance. They further argued that the Commissioner's rejection of comparability based on differences in purity was incorrect, as adjustments had been made for these differences. The Tribunal found that the practice of using comparable goods for valuation was disclosed to the Revenue, and there was no suppression of facts.

3. Principle of Cost Accountancy in Determining the Cost of Production:
The appellants challenged the method used by the Revenue to determine the cost of production, arguing that it was fundamentally incorrect and not in line with established principles of cost accountancy. They contended that fixed overheads should be divided by normal capacity rather than actual production to avoid large distortions in cost computation. The Tribunal did not pass an order on the merits of this argument due to the decision on the limitation issue.

4. Revenue Neutrality and Intent to Evade Duty:
The appellants argued that the duty paid was available as Modvat credit to their sister unit, making the exercise revenue-neutral. They cited Tribunal decisions supporting the absence of intent to evade duty in such scenarios. The Tribunal noted that the entire facts were in the knowledge of the department, and there was no intention to evade payment of duty.

5. Limitation Period for Issuing the Show Cause Notice:
The show cause notice was issued on 6-3-2000 for clearances made between 1-7-1996 and 31-1-1998. The appellants argued that the extended period of limitation under the proviso to Section 11A was inapplicable as there was no suppression or misstatement of facts. They had disclosed their valuation method to the department through various correspondences and price declarations. The Tribunal found that the Revenue was aware of the valuation practice and that the objection regarding the applicability of Rule 6(b)(ii) could have been raised earlier. Consequently, the demand was held to be barred by limitation, and the Tribunal set aside the demand, penalty, interest, and confiscation orders.

Conclusion:
The Tribunal allowed the appeal on the point of limitation, setting aside the demand for differential duty, penalty, interest, and confiscation orders. No orders were passed on the merits of the case.

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