2019 (5) TMI 955 - AT - Central Excise

Valuation - PVC pipes - determination of correct transaction value as per Section 4(1)(a) of the Central Excise Act, 1944 - supply under rate contract - mis-declaration of price - whether the price i.e. ₹ 122/- per meter at which the pipes were agreed and supplied to the MID, Jharkhand State govt is the correct transaction value or the price at which initially the pipes were supplied to dealers @ ₹ 52/- per meter, who in turn, subsequently sold the same to MID, Jharkhand State Govt. @ ₹ 122/- per meter, be the basis for computation of duty? HELD THAT - There is no dispute of the fact that a tender was floated by the MID, Jharkhand State Govt. for supply of PVC pipes and the respondent was the successful bidder. Many conditions have been prescribed in the tender which includes technical qualification of the bidder, time frame of supply of the pipes including the rate at which the pipes would be supplied. There is also no dispute of the fact that the pipes of requisite specification manufactured by the respondent at their Jalgaon factory and initially cleared to the dealers/distributors, who in turn, supplied it to the MID, Jharkhand State Govt. This Tribunal has already considered more or less similar facts and circumstances in Bright Drugs Industries Ltd. s case 2016 (7) TMI 298 - CESTAT NEW DELHI . In the said case, M/s Bright Drug Industries Ltd. was engaged in the manufacture of pharmaceuticals product and P P medicaments, entered into rate contract with the Maharashtra Govt. as also with some other govt. agencies for supply of medicaments on an agreed price in response to the tender floated by the said govt. agencies. Medicaments were required to be floated by the appellants. The transaction between the respondent and the dealers cannot be considered as true transaction value within the meaning and definition of transaction value prescribed under Section 4(3)(d) of Central Excise Act, 1944. Consequently, the price at which the goods were agreed to be supplied by the respondent to MID, Jharkhand State Govt. be the correct transaction value and duty is required to be paid on same. Extended period of Limitation - penalty - HELD THAT - The respondent had knowledge of the fact that true transaction value of the pipes is ₹ 122/- per meter, the fact which they on oath also disclosed before the Hon'ble Jharkhand High Court, hence, the safe inference that can be drawn that relevant facts though within the knowledge of the respondent but suppressed from the Department relating to the clearances made by the respondent to the MID, Jharkhand State Govt. Hence, extended period of limitation is rightly invoked and also penalty has been correctly imposed by the adjudicating authority. The order of the adjudicating authority is restored - Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Determination of the correct transaction value for the supply of PVC pipes.
2. Applicability of extended period of limitation and penalty for alleged suppression of facts.

Issue-wise Detailed Analysis:

1. Determination of the Correct Transaction Value for the Supply of PVC Pipes:
The primary issue in this case is whether the price of ?122 per meter at which the pipes were supplied to the Minor Irrigation Division (MID) of Jharkhand State should be considered the correct transaction value for excise duty purposes, or if the initial price of ?52 per meter, at which the pipes were supplied to the dealers, should be used.

The respondents argued that the supply to the dealers at ?52 per meter should be considered the transaction value, as the dealers subsequently sold the pipes to the Jharkhand Government at ?122 per meter. They contended that there were two independent transactions: one between the respondent and the dealers, and another between the dealers and the Jharkhand Government. They also argued that the price declared on oath before the Jharkhand High Court was excluding trade discounts, and the assessable value should be around ?48 per meter after allowing discounts.

The Tribunal, however, found that the transaction between the respondent and the dealers could not be considered a true transaction value. It was established that the pipes were supplied directly to the Jharkhand Government as per the rate contract, and the dealers acted merely as intermediaries. The Tribunal referred to a similar case (Bright Drugs Industries Ltd.) where it was held that the contracted price with the government should be the basis for duty calculation, not the intermediary price.

The Tribunal concluded that the price of ?122 per meter, at which the pipes were agreed to be supplied to the Jharkhand Government, should be considered the correct transaction value. The respondents' knowledge of the true transaction value and their declaration before the Jharkhand High Court further supported this conclusion.

2. Applicability of Extended Period of Limitation and Penalty for Alleged Suppression of Facts:
The Tribunal examined whether the extended period of limitation and penalty were justifiable. The respondents argued that there was no suppression of facts with intent to evade duty, as all relevant information was in the public domain and known to the department.

However, the Tribunal found that the respondents had knowledge of the true transaction value of ?122 per meter but suppressed this information from the department. The internal memos and the declaration before the Jharkhand High Court indicated that the respondents were aware of the correct transaction value but did not disclose it to the excise authorities.

Based on these findings, the Tribunal held that the extended period of limitation was rightly invoked, and the penalty imposed by the adjudicating authority was justified.

Conclusion:
The Tribunal set aside the impugned order of the Commissioner (Appeals) and restored the order of the adjudicating authority, confirming the demand for differential duty based on the transaction value of ?122 per meter. The appeal by the Revenue was allowed, and the penalty and interest were upheld.