2013 (11) TMI 585 - AT - Central Excise

Determination of Value of Goods Applicability of Rule 9,10A and 11 of Valuation Rules - Waiver of Pre-deposit Held that - Following CCE, Hyderabad vs. Innocorp Ltd. 2013 (9) TMI 382 - CESTAT BANGALORE - when there is no job work, the price cannot be determined on the basis of Rule 10A of Valuation Rules - the Commissioner has travelled beyond the show-cause notice while passing the order - The matter requires a detailed consideration of the agreement between the parties, the nature of transactions and the applicability of Rule 9 and Rule 10A of Valuation Rules, besides applicability of Rule 11 of Valuation Rules, which has been invoked in the show-cause notice - This can be done only at the time of final hearing - the appellant had approached the department and had sought clarification - The department had clarified that there is no need to adopt the price at which the goods are sold by International Flavours and Fragrances - appellant have made out a prima facie case - there shall be waiver of pre-deposit and stay against recovery of the duty and penalties and interest from both the appellants till the disposal Stay granted.

Summary

Issues:
1. Determination of value of vanilla flavor manufactured and sold by the appellant.
2. Applicability of Rule 10A of Valuation Rules.
3. Commissioner's authority in passing the order.
4. Prima facie case on merits for waiver of pre-deposit and stay against recovery.

Issue 1: Determination of value of vanilla flavor manufactured and sold by the appellant:
The appellant, engaged in the manufacture of vanilla powder flavor and other essences, disputed the value determination of vanilla flavor sold to International Flavours and Fragrances India Pvt. Ltd. The appellant argued that the value should not be based on the selling price to the customer as they are neither a job worker nor a related person. Referring to a letter seeking clarification on Rule 10A, the appellant contended that the department had previously confirmed that the price need not be based on the customer's selling price. Citing a relevant case, the appellant emphasized that without job work, Rule 10A should not apply. The Commissioner, however, supported the initial determination.

Issue 2: Applicability of Rule 10A of Valuation Rules:
The Tribunal acknowledged the need for detailed consideration of the agreement between the parties, transaction nature, and the application of Rule 9, Rule 10A, and Rule 11 of Valuation Rules. The Tribunal highlighted that a thorough examination of these aspects would be necessary during the final hearing. Notably, the Tribunal found that the appellant had sought clarification from the department, which confirmed that adopting the customer's selling price was unnecessary. Additionally, a decision cited by the appellant seemed prima facie relevant. Consequently, the Tribunal concluded that the appellant had established a prima facie case on merits, leading to a waiver of pre-deposit and a stay against recovery of duty, penalties, and interest during the appeal's pendency.

Issue 3: Commissioner's authority in passing the order:
The learned Advocate reiterated the points made by the Commissioner in the adjudication order, while the appellant's representative contested the Commissioner's decision, alleging that it exceeded the scope of the show-cause notice. The Tribunal considered both sides' submissions, emphasizing the importance of examining the agreement, transaction nature, and relevant valuation rules during the final hearing.

Issue 4: Prima facie case on merits for waiver of pre-deposit and stay against recovery:
After analyzing the submissions, the Tribunal found that the appellant had made a prima facie case on merits, justifying the waiver of pre-deposit and a stay against the recovery of duty, penalties, and interest during the appeal process. The Tribunal's decision aimed to ensure fairness and procedural correctness in the ongoing legal proceedings.

This detailed analysis of the judgment provides insights into the key issues addressed by the Appellate Tribunal CESTAT BANGALORE regarding the determination of value, the application of valuation rules, the Commissioner's authority, and the considerations for granting a waiver of pre-deposit and stay against recovery.