2018 (2) TMI 217 - AT - Central Excise

Re-opening of assessment under section 11A - Valuation - the revenue is demanding duty on the basis of transaction value whereas the Respondent has resorted to valuation of goods for the purpose of paying basic custom duty on the basis of FOB value of the like goods being exported by them. Held that - The Transaction value as per Rule 4 of the Customs Valuation Rules, 1988 is the price of imported goods actually paid or payable for the goods when sold for exports to India adjusted in accordance with Rule 9 of Custom Valuation Rules. However we find that no documents have been relied upon in the show cause notice that the price charged or paid was more than FOB Value. The Respondent has also pointed out that the whole of the details of clearance and prices was submitted by them to the department, however the same has not been relied upon and instead the basis of demand is MRP which nowhere finds favour as basis for demand under Valuation Rules. Further it is not forthcoming from the SCN that the dealer price on which the duty was demanded was the price that was charged by the Respondent from their customers or the customers price was equal to dealers price. Hence we are of the view that since the basis of demand itself is without any basis, the demand is not sustainable. In various judgments, Tribunal and the Apex Court has rejected the price by an EOU to DTA as transaction value and held that the FOB value of exports would be basis for valuation of goods cleared into DTA - thus, the demands against the respondent are not sustainable. Appeal dismissed - decided against appellant-Revenue.

Issues Involved:
1. Basis of valuation for goods cleared by 100% EOU in Domestic Tariff Area (DTA).
2. Application of Customs Valuation Rules, 1988.
3. Relevance of Maximum Retail Price (MRP) for valuation.
4. Validity of transaction value as assessable value.
5. Applicability of Circulars and previous Tribunal and Supreme Court judgments.
6. Burden of proof in re-opening of assessment under Section 11A.
7. Invocation of extended period for demand and imposition of penalty.

Issue-wise Detailed Analysis:

1. Basis of Valuation for Goods Cleared by 100% EOU in Domestic Tariff Area (DTA):
The core issue revolves around whether the valuation of goods cleared by a 100% Export Oriented Unit (EOU) into the Domestic Tariff Area (DTA) should be based on the Free on Board (FOB) value of like goods exported or the transaction value with unrelated buyers. The Respondent argued that the FOB value should be the basis, while the Revenue contended that the transaction value should be used.

2. Application of Customs Valuation Rules, 1988:
The Show Cause Notice (SCN) alleged that the Respondent violated Section 3 of the Central Excise Act read with Customs Valuation Rules, 1988 by not using the transaction value for determining the assessable value. The Tribunal noted that the Transaction value as per Rule 4 of the Customs Valuation Rules, 1988 is the price of imported goods actually paid or payable for the goods when sold for exports to India adjusted in accordance with Rule 9 of Custom Valuation Rules.

3. Relevance of Maximum Retail Price (MRP) for Valuation:
The Revenue's computation of duty demand was based on the MRP of the goods. The Tribunal found no legal provision supporting the use of MRP for the purpose of valuation under the Customs Valuation Rules. The adjudicating authority had also dismissed this basis for demand.

4. Validity of Transaction Value as Assessable Value:
The Tribunal referenced multiple judgments, including Morarjee Brembana Vs. CCE and CCE Vs. I.G. Petrochemicals, which held that the transaction value between EOU and DTA cannot be considered as the assessable value. The Tribunal affirmed that the price at which goods are sold by EOU in DTA is not a price in the course of international trade and thus cannot be adopted as the transaction value.

5. Applicability of Circulars and Previous Tribunal and Supreme Court Judgments:
The Tribunal cited several judgments and circulars, including Circular No. 268/85-CX-8 dated 29.09.1994, which supported the Respondent's method of using FOB value for valuation. The Tribunal's decisions in cases like Tata Coffee Ltd and Axiom Impex International Ltd further reinforced this approach.

6. Burden of Proof in Re-opening of Assessment under Section 11A:
The Tribunal emphasized that in cases of re-opening assessment under Section 11A, the burden lies on the Revenue to prove the correctness of the value adopted by them. The Revenue's attempt to determine the transaction value from MRP was deemed incorrect and baseless.

7. Invocation of Extended Period for Demand and Imposition of Penalty:
The Tribunal found no specific allegations of misrepresentation or suppression of facts by the Respondent, which are necessary for invoking the extended period for demand. Consequently, the penalty was also deemed unwarranted.

Conclusion:
The Tribunal upheld the Respondent's method of using FOB value for valuation and dismissed the Revenue's appeal. The demand based on MRP was found to be without legal basis, and the transaction value between EOU and DTA was not accepted as the assessable value. The Tribunal's decision was consistent with previous judgments and circulars, affirming the non-sustainability of the Revenue's demands. The appeal filed by the Revenue was rejected.

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