2015 (4) TMI 603 - AT - Central Excise

Valuation of goods - sale of goods through depot - Demand of differential duty - extended period of limitation - Penalty u/s 11AC - Bar of limitation - Held that - motor vehicle in question is first cleared from the factory to a depot of the appellant and subsequently it is transferred to another depot from where the motor vehicle is sold. - valuation in case of goods sold at depot, shall be governed by the provision of above Rule 7. On careful reading of the said rule we are of the view that price prevailing at that depot from where the goods is sold shall apply. Contention of the appellant is not acceptable that at the time of initial clearance of motor vehicle to first depot, goods are intended to be sold from the first depot irrespective whether the motor vehicle first cleared to particular depot and subsequent transferred to another depot. The fact remains that the goods are sold from the subsequent depot, and not from first depot therefore in terms of Rule 7 a depot from where the goods is actually sold, the price prevailing at that depot at the time of clearance of the goods from factory shall be the correct transaction value for charging the excise duty. - Accordingly, in terms of Rule 7, in case goods not sold from the factory but transferred to the depot the price prevailing at depot at the time of removal of the goods from the factory shall apply as transaction value. - Decided against the assessee. Extended period of limitation - Held that - the demand for the period prior to audit observation raised on January 2001 can be raised up to 5 years as there was clear suppression during that period. Hence, the demand of duty for the period up to January 2001 is correct and legal. In the show cause notice dated 19.7.2005, the demand was raised for the period from 1.7.2000 to 30.9.2004. In this regard, we observe that when the fact of the issue came to the notice of the Department in January, 2001, subsequent to that it cannot be said that there was suppression on the part of the appellant - though demand of duty for period involved in these appeals (except for the period February, 2001 to June 2004) is sustainable on merit, however demand of duty pertaining to the period February 2001 to June 2004 is hereby dropped being time bar. - Decided partly in favour of assessee.

Issues Involved:
1. Determination of the correct assessable value for excise duty under Rule 7 of the Central Excise Valuation Rules, 2000.
2. Applicability of extended period of limitation under Section 11A of the Central Excise Act, 1944.
3. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Determination of the Correct Assessable Value for Excise Duty:
The primary issue was whether the correct assessable value for excise duty should be based on the price prevailing at the first depot where the goods were initially cleared or the subsequent depot from where the goods were actually sold. The appellant argued that the price prevailing at the first depot should be considered the correct transaction value under Rule 7 of the Central Excise Valuation Rules, 2000. The appellant relied on several judgments to support their contention.

The Tribunal, however, held that the price prevailing at the depot from where the goods are actually sold should be the correct assessable value. The Tribunal emphasized that Rule 7 specifies that the value shall be the normal transaction value of goods sold from the place where the goods are actually sold after their clearance from the factory. Therefore, the price prevailing at the subsequent depot from where the goods are sold is the correct transaction value for charging excise duty.

2. Applicability of Extended Period of Limitation under Section 11A:
The appellant contended that the first show cause notice dated 19.7.2005, covering the period July 2000 to September 2004, was time-barred as there was no suppression of facts on their part. They argued that the issue was raised by the audit party, and they had clarified the query in 2001, making the show cause notice issued in 2005 untimely.

The Tribunal found that there was suppression of facts by the appellant as the movement of vehicles from one depot to another and subsequent sales were not disclosed to the Department. This fact was detected by the audit officers, justifying the invocation of the extended period of limitation for the period up to January 2001. However, for the period from February 2001 to June 2004, the Tribunal held that there was no suppression of facts since the Department was aware of the issue from January 2001. Therefore, the demand for this period was time-barred and dropped.

3. Imposition of Penalty under Section 11AC:
The appellant argued that the penalty under Section 11AC was wrongly imposed as there was no suppression of facts for the periods covered by the subsequent show cause notices, which were issued within the normal period of one year.

The Tribunal agreed with the appellant, stating that since the modus operandi of the appellant was known to the Department from January 2001, there was no suppression of facts for the periods covered by the subsequent show cause notices. Consequently, the penalty imposed under Section 11AC for the period from July 2004 to March 2013 was not justified and was therefore dropped.

Conclusion:
The Tribunal concluded that while the demand of duty for the periods involved in the appeals (except for February 2001 to June 2004) was sustainable on merit, the demand for the period from February 2001 to June 2004 was time-barred and therefore dropped. Additionally, the penalty imposed under Section 11AC for the period from July 2004 to March 2013 was also dropped. The adjudicating authority was directed to re-quantify the duty, interest, and penalty in accordance with the Tribunal's order and recover the same from the appellant. The appeals were disposed of accordingly.

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