2016 (8) TMI 1069 - AT - Central Excise

Invokation of extended period of limitation - appellant has wrongly arrived at the valuation of the pipes cleared by them on the cost construction method rather the appellant should have paid duty on the value of pipes as indicated in the contract - Held that - the audit report contains a specific reference to the contract and on that basis it has arrived at the conclusion that the value of gunniting needs to be included in the assessable value. We find that the DGCEI in the impugned show-cause notice has also primarily relied on the contract. It has sought to recover duty on the basis of value of the goods shown in the contract. In these circumstances, we find that the documents on the basis of which the demand has been raised, i.e., the contract, was produced before the audit and examined by them. Having failed to raise this issue at the material time it cannot be said that the appellants had suppressed or mis-declared anything to enable the revenue to invoke extended period of limitation. Hence, it is not open to Revenue to invoke extended period of limitation. - Decided in favour of appellant

Summary

Issues:
1. Valuation of pipes for excise duty.
2. Invocation of extended period of limitation.

Valuation of Pipes for Excise Duty:
The case involved a dispute over the valuation of MS pipes for excise duty purposes. The appellant, a sub-contractor, had supplied MS pipes for a project under a contract with a margin kept by the main contractor. An audit raised an objection regarding the valuation, specifically the inclusion of gunniting charges in the assessable value of the pipes. The show-cause notice alleged that the appellant wrongly arrived at the valuation using the cost construction method instead of the value indicated in the contract. The appellant argued that the contract was a composite one, and the value in the contract was an estimate for billing purposes, not the actual sale price. The appellant also contended that the objection raised was not about valuation but about the inclusion of gunniting charges. The Revenue relied on the contract value for valuation. The Tribunal found that the demand was solely based on the contract, which was examined during an audit, and no objection was raised at that time. Therefore, the Tribunal held that the Revenue could not invoke the extended period of limitation solely based on the contract value.

Invocation of Extended Period of Limitation:
The main issue addressed by the Tribunal was whether the extended period of limitation could be invoked in this case. The Revenue argued that the mere submission of price lists and conducting an audit did not preclude them from invoking the extended period. They cited a Bombay High Court decision in support. However, the Tribunal distinguished the cited case, emphasizing that the facts were different. The Tribunal analyzed the audit report and found that it specifically referenced the contract and the inclusion of gunniting charges, which was the basis for the demand. Since the contract was produced before the audit and no objection was raised at that time, the Tribunal concluded that the Revenue could not invoke the extended period of limitation. Therefore, the appeal was allowed on the grounds of limitation without delving into the merits of the case.

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