2017 (2) TMI 895 - AT - Central Excise

Valuation - goods supplied free of cost to sister concern - Held that - after clearing the goods i.e. Soap to the sister concern, no further activity was done on the same and the said goods were not used in the production or manufacture of other articles, so the said goods cleared by the assessee-Appellants in fully manufactured and packed condition - When the goods have been cleared by the assessee-Appellants to be supplied free of cost with other products manufactured by their sister concern, then the valuation of the item in question will have to be made under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Extended period of limitation - Held that - the assessee-Appellants have suppressed the material facts from the Department by not disclosing in their monthly ER-1 Return that they are indulged in the institutional sale by clearing of the Toilet Soap manufactured in their factory for free distribution alongwith the other product u/s 4 of the Central Excise Act, 1944 - extended period rightly invoked. Appeal dismissed - decided against appellant-assessee.

Summary

Issues: Valuation of goods for captive consumption under Rule 8 of the Valuation Rules, 2000; Invocation of extended period of limitation for demand

Valuation of goods for captive consumption under Rule 8 of the Valuation Rules, 2000:
The appeal was filed against the order-in-appeal confirming a demand under the Central Excise Rules for transferring goods to a sister concern for captive consumption. The Tribunal observed that Rule 8 of the Valuation Rules, 2000 applies when excisable goods are not sold but used for consumption in production. As the goods were not sold but transferred for free consumption, Rule 8 was correctly applied for valuation. The Tribunal noted that Rule 8 is applicable when goods are used for captive consumption, and in this case, the goods were distributed as free samples along with other products. Therefore, the lower authorities correctly applied Rule 8 for valuation, leading to the dismissal of the appeal.

Invocation of extended period of limitation for demand:
The appellant contended that the demand was time-barred, arguing against the invocation of the extended period of limitation. However, it was found that the appellant had not disclosed the institutional sale in their monthly ER-1 Return, leading to the discovery of short payment of duty during a specific period. The Tribunal held that the extended period was rightly invoked as the appellant had suppressed material facts, resulting in duty short payment recoverable under Section 11A of the Central Excise Act, 1944. The Tribunal distinguished the cases cited by the appellant, stating they were not applicable to the current circumstances. Consequently, the demand was deemed not time-barred, and the appeal was dismissed, upholding the impugned order and the reasons provided therein.

In conclusion, the Tribunal upheld the application of Rule 8 of the Valuation Rules, 2000 for goods transferred for captive consumption and justified the invocation of the extended period of limitation for the demand due to the appellant's failure to disclose material facts. The appeal was dismissed, and the impugned order was upheld, emphasizing the correct application of valuation rules and the justified invocation of the extended period for demand recovery.