2019 (3) TMI 856 - AT - Central Excise

Method of Valuation - supply of goods to related as well as unrelated person - applicability of Rule 9 of the Central Excise Valuation Rules - penalty - Held that - As per the Show Cause Notice itself, the appellants were supplying their goods to various customers and not just to related persons. As per the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, Rule 9 would be applicable when the assessee sells the goods only to a related person - CBEC in the Circular dated 01.07.2002 has clarified that Rule 9 cannot be applied in such cases when goods are sold party to related persons and partly to independent buyers and that it covers only those cases where all the sales are to related persons only - it would be in the fitness of things that the matter is once again re-looked into by the adjudicating authority Penalty - Held that - Irrespective of the final outcome of such de novo adjudication, it is noted that the entire issue has emanated out of an interpretational dispute on the applicability or otherwise of Rule 9 of the Central Excise Valuation Rules. This being so,the imposition of penalties under Section 11AC of the Act is not warranted. Appeal allowed in part and part matter on remand.

Summary

Issues:
- Valuation of excisable goods sold to related and unrelated buyers
- Applicability of Rule 9 of the Central Excise Valuation Rules
- Imposition of penalty under Section 11AC of the Central Excise Act

Valuation of excisable goods sold to related and unrelated buyers:
The appellants were involved in the manufacture of Aluminium Powder and Aluminium paste, with differing cash discounts for buyers based on payment terms. The Department alleged that the appellants were favoring M/s. Sri Kaliswari Fire Works with a higher discount due to their association. The Original Authority confirmed duty demands and penalties, which were upheld by the Commissioner (Appeals). The appeals challenged these orders, arguing against the mutuality of interest and application of Rule 9 of the Central Excise Valuation Rules. The appellants contended that Rule 11 should be used for valuation as there were no specific provisions for goods sold to related and unrelated buyers.

Applicability of Rule 9 of the Central Excise Valuation Rules:
The appellants argued that Rule 9 should not apply as it pertains to sales exclusively to related persons. They cited a CBEC Circular stating that Rule 9 cannot be directly applied when goods are sold to both related and unrelated buyers. The Tribunal agreed with the appellants, emphasizing that Rule 9 is not applicable in cases where sales are made partly to related persons and partly to independent buyers. The matter was remanded for reevaluation by the adjudicating authority considering the appellants' submissions.

Imposition of penalty under Section 11AC of the Central Excise Act:
The Tribunal found that the dispute primarily revolved around the interpretation of Rule 9 of the Central Excise Valuation Rules. As a result, the imposition of penalties under Section 11AC was deemed unwarranted. The appeals were partly allowed, and a remand was ordered for reevaluation without penalties. The judgment highlighted the need for a fresh look at the matter based on the contentions raised by the appellants.

This detailed analysis of the judgment addresses the issues of valuation of excisable goods sold to related and unrelated buyers, the applicability of Rule 9 of the Central Excise Valuation Rules, and the decision regarding the imposition of penalties under Section 11AC of the Central Excise Act.