2019 (5) TMI 126 - AT - Central Excise

Valuation - clearance of goods based on a fixed refinery gate price at the time of clearance - Time of removal - HELD THAT - The assessee is manufacturing goods and clearing them from their factory to the depots. It is also not in dispute that they are subsequently, selling the goods from their depots. Therefore, the time of removal of goods is different from the time of sale of the goods and no sale price is available at the time of removal of the goods. Under such circumstances, in terms of Sec.4 read with Rule 7 of Central Excise Valuation Rules, 2000 the price to be applied at the time of clearance of goods, is the price nearest to the time of removal at which such goods have been sold. A plain reading of Sec.4 read with Rule 7 would show that clearance at a price nearest to the time of removal would mean the price which will be available to the assessee at the time of removal as being the price at which the goods were sold. It is impossible for the assessee to predict what will be the price after the removal of goods and when such transaction will take place - thus the price to be reckoned is price at which such goods have been sold at the time nearest to the time of removal. The appellant had clearly contravened the provisions of Sec.4 read with Rule 7 of Central Excise Valuation Rules, 2000 without any justification and evaded payment of Central Excise duty. The intention cannot be clearer than this. Impugned order upheld - appeal dismissed - decided against appellant.

Summary

Issues:
1. Dispute regarding excise duty on petroleum products.
2. Application of Central Excise Valuation Rules, 2000.
3. Issuance of show cause notice and imposition of penalties.

Analysis:

Issue 1: Dispute regarding excise duty on petroleum products
The case involved appeals filed by the assessee and the revenue against the same Order-in-Original. The dispute centered around the clearance and sale of Naphtha by the assessee, leading to a demand for payment of differential excise duty. The appellant contended that they had already paid the entire excise duty during the investigation, questioning the issuance of the show cause notice. The department argued that the duty payable was wrongly computed, emphasizing the application of Rule 7 of the Central Excise Valuation Rules, 2000.

Issue 2: Application of Central Excise Valuation Rules, 2000
The key contention was the interpretation of Rule 7 of the Central Excise Valuation Rules, 2000. The appellant cleared goods at fixed prices from the factory to depots and subsequently sold them at different prices, resulting in a differential duty scenario. The departmental representative argued that the rule mandates applying the price nearest to the time of removal for calculating excise duty, irrespective of whether it is prior or subsequent to the removal.

Issue 3: Issuance of show cause notice and imposition of penalties
The appellant argued that no show cause notice should have been issued as they had paid the duty before removal of goods, citing Sec.11A(2B) of the Central Excise Act. However, the tribunal found that the appellant had contravened the valuation rules without justification, indicating an intent to evade payment of duty. The tribunal held that the appellant's actions did not fall under the exceptions outlined in Sec.11A(2B), justifying the issuance of the show cause notice and imposition of penalties under Sec.11AC.

In conclusion, the tribunal upheld the impugned order, rejecting the appeals filed by both the revenue and the assessee. The judgment emphasized the importance of adhering to valuation rules in determining excise duty liabilities and highlighted the consequences of contravening such rules, leading to the imposition of penalties.