2019 (4) TMI 1681 - AT - Central Excise

Extended period of limitation - Valuation - related party transaction - clearance of finished products partly to their sister concern and partly to un-related buyer - Department was of the view that the value required to be adopted by the respondent for the clearances made to their sister concern was required to be done in terms of Section 4(1)(b) of Central Excise Act, 1944 read with provisions of Central Excise Valuation (determination of price of excisable goods) Rules, 2000 - Extended period of Limitation - HELD THAT - The respondents have filed ER returns in which the clearance and value have been disclosed. All the transactions are accounted in the books; and reflected in financial statements. All records were produced to internal audit (CA 2000) and AG Audit (CERA). For raising an allegation of wilful suppression of fact, there should be some positive act by which the respondent has suppressed fact with an intention to evade payment of duty. When they have obeyed instructions of department and paid the duty as per method of valuation directed by the department, it cannot be said that they are guilty of suppression of facts. The department has not been established any ingredient for invocation of extended period. Time limitation - Held that - It is to be seen that the clearances were made to their sister concern. The department seems to have been confused by sister concern and related undertaking. When the clearances are made to sister concern, the respondent unit would be eligible for credit and entire situation is revenue neutral one. On the score also the respondent cannot be held to be guilty of suppression of facts with intention to evade payment of duty - there is no ground to interfere with the discussions and conclusion made by the Commissioner (Appeals). Appeal dismissed - decided against Revenue.

Issues Involved:
1. Valuation of goods cleared to sister units versus un-related buyers.
2. Applicability of Rule 8 and Rule 9 of the Central Excise Valuation Rules, 2000.
3. Invocation of extended period for demand due to alleged suppression of facts.
4. Correctness of the Commissioner (Appeals) decision on merits and limitation.

Detailed Analysis:

1. Valuation of Goods Cleared to Sister Units versus Un-Related Buyers:
The respondents were engaged in manufacturing products and clearing them partly to their sister concern and partly to un-related buyers. The department noticed that the value adopted for goods cleared to sister units was lesser than that for un-related buyers. The department argued that the value should be determined as per Section 4(1)(b) of the Central Excise Act, 1944, read with the Central Excise Valuation Rules, 2000. Specifically, the value should be determined by adopting the value nearest to the time of removal for clearances made to un-related buyers. The original authority confirmed the demand for differential duty of ?21,73,192/- along with interest and imposed penalties. However, the Commissioner (Appeals) set aside the demand on both merits and limitation grounds, leading the department to appeal to the Tribunal.

2. Applicability of Rule 8 and Rule 9 of the Central Excise Valuation Rules, 2000:
The department contended that Rule 8 of the Valuation Rules applies when excisable goods are not sold but are captively consumed, requiring the value to be 110% of the cost of production. Rule 9 applies when goods are sold only to related persons, and if the related person uses the goods in production, Rule 8 should be followed. The department argued that the Commissioner (Appeals) incorrectly relied on the Board’s Circular dated 01.07.2002 and that Rule 8 or Rule 9 should not apply as the goods were cleared to both related and un-related buyers. The adjudicating authority’s decision to resort to Rule 4 read with residual Rule 11 was deemed correct by the department.

3. Invocation of Extended Period for Demand Due to Alleged Suppression of Facts:
The department claimed that the respondent suppressed the fact of clearing goods at a lesser value, which was only discovered during an audit. The Commissioner (Appeals) found that the facts were known to the department through a letter dated 24.09.2009 from the Range Officer, advising the respondent to pay differential duty. The department argued that this advice was specific to Crude Naphthalene and not the disputed finished products, thus justifying the extended period invocation.

4. Correctness of the Commissioner (Appeals) Decision on Merits and Limitation:
The respondent argued that the clearances were made to another unit of the same manufacturer and not to related parties. They contended that the valuation should be as per Rule 8 for captive consumption and Rule 9 for transfers to sister units, as clarified by the Board’s Circular. The Commissioner (Appeals) agreed, noting that Rule 11 is not applicable when Rule 8 or Rule 9 can determine the value. The Commissioner (Appeals) also found no suppression of facts, as the respondent followed instructions from the Range Officer and disclosed all transactions in their records and returns.

Conclusion:
The Tribunal upheld the Commissioner (Appeals) decision, finding no grounds for interference. The department’s appeal was dismissed, affirming that the extended period invocation was unjustified and the valuation method adopted by the respondent was in line with the Board’s Circular and legal provisions. The operative part of the order was pronounced in court upon conclusion of the hearing.

← Previous Next →