2017 (8) TMI 1218 - AT - Central Excise

Valuation - whether the cost of production of captively consumed goods for which CAS-4 standards had been notified vide CBEC Circular No. 629/8/2003 dt. 13.2.2003 can be applied in pending matters for earlier periods also as held in the case of National Aluminium Co. Ltd. 2005 (3) TMI 186 - CESTAT, NEW DELHI ? - Held that - Admittedly, the overhaul of the Section 4 of the Central Excise Act and that of the Valuation Rules was effected in 2000 as a response to the large number of disputes that had been festering in respect of valuation of final products and valuation of captive consumption of goods etc. The Board s circular dt. 13.2.2003 has issued the advisory to follow CAS-4 standards for determining the assessable value in respect of captive consumption goods. Ostensibly, this has been done with an intent to ensure that cost is determined in line with universally acceptable standards of costing expressing CAS-4 standards. In such a situation, in respect of disputes on valuation of captive consumption goods, which have been pending even after 2000, the adoption of a more scientific and transparent method of costing would indeed do no harm to either parties since the said standard greatly reduces the scope for dispute - in respect of disputes on valuation of captive consumption goods, which have been pending even after 2000, the adoption of a more scientific and transparent method of costing would indeed do no harm to either parties since the said standard greatly reduces the scope for dispute. On the peculiar facts of this case and taking note of the circumstances by which the appellant paid excess duty on three products which all revolves around the application of CAS-4 cost construction method which was under much dispute and confusion during the relevant period, we are of the view that the plea of the appellant for adjustment of the excess paid duty towards the demand requires to be allowed. Penalty - Held that - there can be no allegation of suppression of facts, fraud or collusion that could be held against the assessee, especially considering that they are seeking resolution of the dispute by adoption of CAS-4 costing introduced by the department in 2003 - imposition of penalty of ₹ 20 lakhs imposed under Rule 173Q (1) of the CER 1944 cannot then sustain - penalty set aside. Appeal partly allowed and part matter on remand.

Summary

Issues involved:
- Valuation of goods under Central Excise Act
- Application of CAS-4 standards for determining cost of production
- Discrepancy in assessable value of products
- Adjustment of excess duty paid
- Imposition of penalty under Rule 173Q of CER 1944

Analysis:
1. Valuation of goods: The case involved the classification and valuation of goods under the Central Excise Act. The original authority accepted the classification under CETH 3808.10 but found discrepancies in the valuation of goods. The appellant contended that the cost of production should be determined based on CAS-4 standards, which were introduced in 2003. The Tribunal held that the appellant could benefit from the subsequent beneficial circular on CAS-4 standards for pending disputes, as it reduces the scope for valuation disputes.

2. Application of CAS-4 standards: The core issue was whether CAS-4 standards for determining the cost of production of captively consumed goods could be applied in pending matters for earlier periods. The Tribunal found that the introduction of CAS-4 standards in 2003 aimed to bring uniformity and transparency in costing methods. It held that the appellant could apply CAS-4 standards for the disputed clearances, leading to a reduction in duty liability.

3. Discrepancy in assessable value: The appellant had paid excess duty on products other than Karate due to higher assessable values adopted by the department. The Tribunal allowed the adjustment of excess duty paid, considering the confusion surrounding the application of CAS-4 standards during the relevant period.

4. Adjustment of excess duty paid: The Tribunal directed the adjustment of excess duty paid by the appellant on certain products against the demand arising from the disputed clearances. It noted similar instances in past judgments where adjustments were granted, considering the circumstances under which excess duty was paid.

5. Imposition of penalty: The Tribunal found no suppression of facts, fraud, or collusion by the appellant in discharging duty liability. As the dispute arose due to different cost construction methods and the appellant sought resolution through CAS-4 standards, the penalty imposed under Rule 173Q of CER 1944 was set aside.

6. Conclusion: The Tribunal partly allowed the appeal by setting aside penalties and remanding the matter for de novo adjudication based on the directions provided. The department's appeal was dismissed as it lacked merit following the dismissal of a similar appeal by the Hon'ble Supreme Court. The judgments were disposed of accordingly.