2018 (10) TMI 387 - AT - Central Excise

Method of Valuation - Transaction value or MRP based valuation - clearing ball bearing to their institutional buyers - sale of manufactured products to various actual users as well as to the retail sellers located in Jaipur and outside. Held that - The appellant assessee have been clearing ball bearing to their institutional buyers as well as to their retail sellers on payment of duty on the basis of transactional value and not on the basis of MRP value given on the packing of such clearances. It is also the matter of record that the notifications issued time to time under section 4A of the Central Excise Act, 1944 do not cover the ball bearings falling under Chapter 84.82 specifically for adopting Maximum Retail Price for determination of assessable value for payment of Central Excise duty. The department is of the view that bearings are part of automobiles and therefore, the notification namely 11/2006 etc. as amended covers ball bearings for MRP based assessment as being a part of automobiles - We are of the view that the bearings as such, are not part or components of the automobile vehicles though the ball bearings to form a part of other parts of automobile vehicles It has been intention of the legislature ab initio not to consider that ball bearings as parts of automobile vehicles - also, the department has not brought on record any evidence to prove that as appellant assessee has sold any of his consignments of ball bearings to any manufacturer of automobile or any service station of automobiles. The department has stretched the provisions of law unnecessarily to include small quantities of ball bearings cleared on retail sale under the provisions of section 4A without substantiating such claim with some concrete evidences - thus, ball bearings are not included under relevant notifications issued under section 4A of the Central Excise Act, 1944 and therefore, same cannot be considered for assessment on the basis of MRP value. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Applicability of MRP-based assessment for ball bearings.
2. Classification of ball bearings under Central Excise Tariff.
3. Legitimacy of extended period demand under Section 11A(4) of the Central Excise Act.
4. Consistency in assessment practices.
5. Discrimination between imported and indigenous ball bearings.
6. Invocation of extended period of limitation.

Detailed Analysis:

1. Applicability of MRP-based Assessment for Ball Bearings:
The primary issue was whether the appellant should have used the Maximum Retail Price (MRP) for assessing the value of ball bearings sold to retail sellers, as per Notification No. 11/2006 CE (NT) dated 29.5.2006. The Revenue contended that ball bearings, being used in automobiles, should be assessed on MRP value. However, the appellant argued that ball bearings have multiple uses and are not exclusively automobile parts. The tribunal concluded that ball bearings are not specifically covered under the notifications for MRP-based assessment. The relevant notifications applied to "parts, components, and assemblies of automobiles," and ball bearings do not fall under this category.

2. Classification of Ball Bearings under Central Excise Tariff:
The appellant maintained that ball bearings are classified under Chapter Heading 84.82 and not as automobile parts. The tribunal referred to Section Note 2 of Section XVII, which explicitly excludes ball bearings from being classified as parts and accessories of vehicles. This legislative intent was clear that ball bearings are not considered automobile parts. The tribunal agreed with the appellant's classification under Chapter 84.82, thus negating the applicability of MRP-based assessment.

3. Legitimacy of Extended Period Demand under Section 11A(4) of the Central Excise Act:
The department issued a demand for ?3,51,125/- under the extended period provision of Section 11A(4), alleging mis-declaration by the appellant. The appellant argued that there was no suppression or mis-declaration since the department was aware of their assessment practices through regular audits. The tribunal found merit in the appellant's argument, noting that the department had not raised any objections during previous audits. Therefore, invoking the extended period was deemed legally untenable.

4. Consistency in Assessment Practices:
The appellant argued that their practice of paying duty based on transaction value had been consistent and accepted by the department over the years. The tribunal emphasized that established assessment practices should not be changed without cogent reasons, citing the Supreme Court's decision in Collector vs. Tata Iron and Steel Co. Ltd. The tribunal found no justification for the department's sudden shift to MRP-based assessment.

5. Discrimination between Imported and Indigenous Ball Bearings:
The appellant contended that imported ball bearings were assessed on transaction value, not MRP, and sought similar treatment for indigenous goods. The tribunal noted this argument but primarily focused on the classification and applicability of notifications for its decision.

6. Invocation of Extended Period of Limitation:
The appellant argued that the demand was barred by limitation as there was no suppression or intent to evade duty. The tribunal agreed, noting that the department had conducted audits and was aware of the assessment practices without raising objections. Judicial precedents cited by the appellant supported this view, leading to the conclusion that the extended period could not be invoked.

Conclusion:
The tribunal set aside the order-in-appeal, ruling that ball bearings are not covered under the relevant notifications for MRP-based assessment. The demand raised by the department was found to be legally untenable, both on classification grounds and due to the improper invocation of the extended period. The appeals were allowed with consequential benefits to the appellants.

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