2017 (8) TMI 1274 - AT - Central Excise

Valuation - production of various counts of yarn, and cleared to sister units - Section 4 (1) (b) read with Central Excise (Valuation) Rules, 2000 - Time limitation - revenue neutrality - Held that - the appellant was following the cost of production as certified by a Cost Accountant. The department arrives at a different value of cost of production. Thus, the value adopted by the appellant is not baseless and on this score also, no mens rea can be attributed to the appellant. Time limitation - Held that - Against the audit objection raised, which was conducted in May, 2005, the appellant had replied with reasons / details. In spite of this, the SCN is seen issued in March 2007 on the very same ground invoking extended period alleging suppression of facts, which in our view, is not acceptable - there cannot be any intention to evade payment of duty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Valuation of goods for excise duty payment, applicability of Central Excise Valuation Rules, 2000, short payment of duty, issuance of Show Cause Notice, confirmation of duty demand by original authority, imposition of penalty, appeal against duty demand, arguments on mens rea, cost of production dispute, limitation on demand, revenue neutrality, suppression of facts, eligibility of duty paid as credit, intention to evade duty.

Analysis:

Valuation of Goods and Central Excise Valuation Rules:
The case involved the appellants, manufacturers of cotton woven fabric and cotton yarn, who cleared yarn to their sister unit. The valuation for excise duty payment was disputed, leading to a short payment of duty. The Central Excise Valuation Rules, 2000, specifically Rule 9, required the appellants to adopt a specific percentage of the cost price for valuation.

Show Cause Notice and Duty Demand:
The appellants were issued a Show Cause Notice for the alleged short payment of duty, which was confirmed by the original authority along with interest and penalty. The Commissioner (Appeals) upheld the duty demand, prompting the appeal by the appellants.

Arguments and Defense:
The appellants contended that the disputed valuation was only for certain counts of yarn in specific months, and no mens rea could be attributed to them. They argued that they followed the cost of production certified by a Cost Accountant, and the value adopted was not baseless. The appellants also highlighted the delay in issuing the Show Cause Notice and emphasized the revenue neutrality due to the availability of duty paid as credit at the recipient unit.

Limitation and Revenue Neutrality:
The main arguments focused on limitation and revenue neutrality. The appellants asserted that the demand was time-barred and not sustainable due to the delay in issuing the Show Cause Notice. They emphasized that any duty paid was eligible as credit at the sister unit, indicating no intention to evade duty.

Judgment and Conclusion:
After hearing both sides, the Tribunal found in favor of the appellants. The Tribunal held that the demand was time-barred and not sustainable, setting aside the impugned order. The appeal was allowed with consequential reliefs, if any, based on the discussions and evidence presented during the proceedings. The judgment highlighted the importance of considering limitation, revenue neutrality, and the absence of malafide intention to evade duty in similar legal precedents.