2000 (9) TMI 849 - Commissioner - Central Excise

Issues Involved:
1. Limitation under Section 35E(2) of the Central Excise Act.
2. Authority to issue show cause notice.
3. Merits of valuation under Rule 6b(i) and Rule 6b(ii) of the Central Excise (Valuation) Rules, 1975.
4. Valuation for 100% Export Oriented Units (EOU) under Customs Act provisions.

Detailed Analysis:

1. Limitation under Section 35E(2) of the Central Excise Act:
The respondents argued that the appeals were hit by limitation as the orders under Section 35E(2) were passed beyond the statutory limit of one year. The Commissioner's order for filing the review on 10-11-1998 was not considered the appropriate order under Section 35E(2) for the purpose of limitation. The respondents relied on the Supreme Court judgment in Rohit Pulp & Paper Mills Ltd., asserting that the Commissioner's order must explicitly address the correctness, legality, or propriety of the Assistant Commissioner's order. However, it was concluded that the Commissioner's order for review within the specified time limit of one year was valid, and thus, the appeals were not hit by limitation.

2. Authority to Issue Show Cause Notice:
The respondents pointed out that the show cause notice was issued by the Superintendent and not the Assistant Commissioner, who is the proper officer to issue such notices under Rule 9(2) for periods beyond six months as per the Central Board of Excise & Customs Circular. This procedural lapse was highlighted as a significant deficiency.

3. Merits of Valuation under Rule 6b(i) and Rule 6b(ii) of the Central Excise (Valuation) Rules, 1975:
For Appeal No. R/5/99, the respondents were accused of under-valuation based on market enquiry, but the show cause notice lacked evidence or details of the market enquiry. The proper officer failed to make necessary adjustments as required under Rule 6b(i). The Assistant Commissioner's attempt to compare prices with M/s. Sunil Plastics, Dhulia, was found invalid due to lack of comparability. Consequently, the valuation had to be done under Rule 6b(ii) based on the cost of production plus margin of profit, supported by a Chartered Accountant's certificate. The Assistant Commissioner's decision to discard the comparison with M/s. Sunil Plastics was upheld, and the valuation under Rule 6b(ii) was deemed correct.

4. Valuation for 100% Export Oriented Units (EOU) under Customs Act Provisions:
For Appeal No. R/9/99, the respondents, being a 100% EOU, argued that the valuation should be determined under Section 14 of the Customs Act read with Valuation Rules, 1988, rather than under Section 4 of the Central Excise Act. The show cause notice's approach to determine the value under Section 4 was incorrect. The appropriate valuation method involved using the cost of production and other expenses as per Rule 7A of the Customs (Valuation) Rules, 1988, supported by a Chartered Accountant's certificate. The Assistant Commissioner's decision to rely on the CA certificate for valuation was found to be proper.

Conclusion:
The appeals were dismissed on both procedural and substantive grounds. The Commissioner's orders for review were within the limitation period, and the Assistant Commissioner's reliance on the Chartered Accountant's certificate for valuation was upheld as correct in law. The procedural lapse in issuing the show cause notice by the Superintendent instead of the Assistant Commissioner was noted but did not alter the final decision. The valuation for both cases was correctly determined under the relevant rules, leading to the dismissal of the departmental appeals.

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