2023 (6) TMI 643 - AT - Central Excise

Valuation - goods cleared from factory to depot on stock transfer basis and eventually sold therefrom - no prevailing depot price on the date of clearance from factory for the purposes of application of Rule 7 of the valuation Rules and neither was there any ex-factory selling price - violation of Rule 7 and 9 of Valuation Rules - HELD THAT - The Appellant has cleared the goods from factory to depot on stock transfer basis. Since there was no prevailing depot price on the date of clearance from factory, they could not adopt the depot price for the purposes of payment of duty as provided under Rule 7 of the valuation Rules, 2000. The next best option available to the assesse was to adopt the exfactory selling price, if any, available. But, there was no ex-factory selling price available on the date of clearance from the factory to depot. We observe that the adjudicating authority also accepts in the impugned order that no price available as provided in Rule 7 of the Valuation Rules. Since no other value available on the date of clearance from the factory to depot, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide. The department contested this value and demanded duty on the basis of the ultimate selling price of the goods from the depot. The Appellant stated that there is no provision in the Valuation Rules which permits chasing the selling price of the said goods from the depot and pay duty on the basis of the ultimate selling price from the depot. When there is no other price available at the time of clearance of the goods from the factory to depot on stock transfer basis, the only way available is to determine the assessable value based on the best judgment method. In this case, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide - when there is no other price available, the adoption of import parity price as published by Platts by the Appellant cannot be faulted. The department has adopted the ultimate selling price of the goods from the depot. It is observed that there is no provision in the Valuation Rules which permits chasing the selling price of the said goods from the depot and pay duty on the basis of the ultimate selling price from the depot. The demand confirmed in the impugned order on the basis of the ultimate selling price of the goods from the depot is not sustainable - Appeal allowed.

Issues Involved:
1. Valuation of goods cleared from factory to depot on stock transfer basis.
2. Applicability of Rule 7 and Rule 9 of the Central Excise Valuation Rules.
3. Use of import parity price for duty payment.
4. Limitation period for issuing a show cause notice.
5. Allegation of willful suppression or misstatements of facts.

Summary:

Valuation of Goods Cleared from Factory to Depot:
The Appellant commissioned its Petrochemical Complex in 2001 and transferred finished goods to a depot in early 2002. The issue is the valuation of these goods for duty purposes. Since there was no prevailing depot price or ex-factory selling price at the time of clearance, the Appellant used the import parity price published by Platts for duty payment.

Applicability of Rule 7 and Rule 9:
A show cause notice alleged violations of Rule 7 and 9, demanding differential duty based on the ultimate sale price from the depot. The adjudicating authority confirmed the demand, which was upheld by the Appellate Commissioner. The Appellant argued that since there was no sale from the depot around the clearance date, valuation under Rule 7 or 9 was not possible, making the demand unsustainable.

Use of Import Parity Price:
The Appellant contended that under Section 4(1)(b) of the Central Excise Act, 1944, and Rule 7 of the Valuation Rules, duty should be based on the prevailing or nearest depot price. They argued that the ultimate selling price from the depot is irrelevant for determining assessable value, citing multiple tribunal decisions supporting this view. The Tribunal observed that in the absence of any other price, the Appellant's use of the import parity price as published by Platts was justified.

Limitation Period for Issuing a Show Cause Notice:
The Appellant argued that part of the demand for February 2002 was time-barred, as the show cause notice was issued beyond the one-year limit prescribed under Section 11A.

Allegation of Willful Suppression or Misstatements:
The Appellant contended that the show cause notice did not establish any willful suppression or misstatements of facts to evade tax, making the invocation of the extended limitation period and the imposition of penalties under Section 11AC unsustainable.

Conclusion:
The Tribunal held that the ultimate selling price from the depot is irrelevant for determining assessable value under Rule 7. The Appellant's use of the import parity price was appropriate given the lack of other prices. The demand based on the ultimate selling price was set aside, and the appeal was allowed.

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