2015 (10) TMI 881 - AT - Central Excise

Waiver of pre deposit - Penalty u/s 11AC - held that - billets were not sold by the Applicants but transferred from their depot to their convergent agent, who used them for manufacture of wire rods. Since the impugned goods were not sold, they paid the duty on the said billets by determining the value as per CAS-4. - convergent agent was eligible to take credit of the duty paid by the Applicants and therefore, this exercise is revenue neutral. It is also noticed that for the subsequent period, the Department is assessing the impugned goods under provisional assessment on the value declared by the Applicants. In view of facts and circumstances of the case stated as above, we are of the opinion that the Applicant has been made out a prima-facie case for total waiver of predeposit of dues adjudged. Accordingly, the requirement of predeposit of all dues adjudged is waived and its recovery is stayed during pendency of appeal. - Stay granted.

Summary

Issues:
Waiver of predeposit of duty and penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
The Applicants sought waiver of predeposit of duty amounting to &8377; 54.76 Crores and an equal penalty imposed under Section 11AC of the Central Excise Act, 1944. The dispute arose from two show-cause notices issued by the Department demanding duty for the period from June, 2007 to March, 2012. The Applicants, a manufacturer of Billets, transferred goods to their Depot at Indore on payment of duty, which were then sent to a convergent agent for manufacturing wire rods. The Department valued the goods based on the purchase price of the billets by the Applicant's Agrico Division from SAIL, Bokaro, under Rule 11 of the Central Excise Valuation Rules, 2000. The Applicants argued that the Department's valuation method was not in line with the Valuation Rules and Section 4 of the Act, as the convergent agent was eligible to claim credit, making the exercise revenue neutral. The Department, however, upheld its valuation.

The Tribunal noted that the billets were not sold but transferred to the convergent agent for further processing, and duty was paid by the Applicants based on CAS-4 method for captive consumption. The Revenue, on the other hand, valued the goods based on the purchase price of the billets by the Applicant's Agrico Division, invoking the "Best judgment principle." The Tribunal observed that CAS-4 method applies when goods are used for captive consumption, and in this case, the convergent agent could claim credit for duty paid. Additionally, the Department had been assessing the goods under provisional assessment based on the value declared by the Applicants for subsequent periods. Considering these facts, the Tribunal found a prima facie case for total waiver of predeposit of dues adjudged. Consequently, the requirement of predeposit of all dues was waived, and recovery stayed during the appeal's pendency. The Tribunal allowed the stay petitions in favor of the Applicants.

This judgment highlights the importance of proper valuation methods under the Central Excise Valuation Rules, especially when goods are transferred for further processing by a third party. It also underscores the principle of revenue neutrality and the applicability of provisional assessment based on declared values in certain circumstances.