2018 (12) TMI 424 - AT - Central Excise

Valuation - sponge iron transferred to Unit-II - applicability of Rule 8 of the Central Excise Valuation Rules, 2000 - clandestine removal - Held that - The final product i.e. sponge iron has been cleared from the Raniganj Unit to Burdwan Unit. Since such clearances do not involve any sale, but are in the nature of transfer, the valuation to be adopted for payment of duty is to be determined as per the Central Excise Valuation Rules, 2000. Identical issue decided in the case of ISPAT INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., RAIGAD 2007 (2) TMI 5 - CESTAT, MUMBAI , where it was held that the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to the independent buyers. The appellant has made clearances to independent buyers in addition to the Burdwan Unit. The values for clearances to Burdwan Unit are in line with the values adopted for independent buyers - there is no justification for demand of differential duty. Clandestine removal - shortage of sponge iron recorded at the time of stock verification - Held that - Looking at the nature of the finished products i.e. sponge iron, which is in loose granule form, carrying out weighment physically is also impractical. In any case no evidence has been brought on record to allege that the goods recorded as shortage were cleared clandestinely - Demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Valuation dispute for duty payment on sponge iron transferred to another unit
- Dispute regarding goods found short during stock verification

Valuation Dispute Analysis:
The appellant, engaged in manufacturing sponge iron, appealed against an Order-in-Appeal regarding the valuation for duty payment on sponge iron transferred to another unit. The dispute centered on whether the valuation should follow Rule 8 of the Central Excise Valuation Rules, 2000, as claimed by the Department, or be based on the values adopted for clearances to independent buyers. The appellant argued that the values for clearances to the other unit were consistent with those for independent buyers. Citing a decision by the Larger Bench of the Tribunal, the appellant contended that Rule 8 did not apply when part of the production was cleared to independent buyers. The Tribunal agreed with this interpretation and set aside the demand for differential duty, ruling in favor of the appellant.

Stock Shortage Dispute Analysis:
Another issue involved a shortage of sponge iron discovered during a stock verification process. The Central Excise Officers found a quantity of sponge iron short during a physical stock taking. The appellant contested this shortage, stating that the nature of the finished product, stored in loose form, made accurate physical verification challenging. The Manager initially admitted the shortage but later retracted the statement. The Department argued that the Manager's retraction should not be considered as it came after a significant time lapse. However, the Tribunal found no evidence to support the claim that the shortage resulted from clandestine clearance of goods. Consequently, the Tribunal set aside the demand for duty on the recorded shortage.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, setting aside the impugned order and allowing the appeal.