2005 (7) TMI 195 - AT - Central Excise

Summary

Issues:
- Appeal against Order-in-Original passed by the Commissioner of Customs and Central Excise, Hyderabad.
- Correct valuation of goods under Central Excise (Valuation) Rules, 1975.
- Suppression of facts by the appellants.
- Invocation of proviso 1 to Section 11 of the Central Excise Act.
- Imposition of penalties under various sections.
- Revenue neutrality and intention to evade duty.
- Applicability of case laws in determining intention to evade payment.

Analysis:
- The appeal was filed against the Order-in-Original passed by the Commissioner of Customs and Central Excise, Hyderabad, involving the correct valuation of goods under the Central Excise (Valuation) Rules, 1975. The appellants, M/s. Deccan Enterprises Pvt. Ltd. (DEPL), received raw materials from M/s. Deccan Industrial Products Pvt. Ltd. (DIPPL) for manufacturing products for Indian Railways. DEPL took Modvat credit on the raw materials but paid duty only on the value equal to the Modvat credit, not in accordance with Section 4 of the Central Excise Act.

- The appellants argued that they did not suppress any facts from the department, citing an agreement with DIPPL specifying the valuation based on Modvat credit. They contended that the department did not object to the agreement initially and only raised concerns later. The appellants emphasized that the duty paid by them was availed as Modvat credit by DIPPL, leading to revenue neutrality and no intention to evade duty. They referred to various case laws supporting their stance.

- The Tribunal observed that the appellants had made their intention clear by paying duty based on Modvat credit and that the department was aware of the agreement with DIPPL. Considering the revenue neutrality and the fact that any duty paid by the appellants would be available as Modvat credit to DIPPL, the Tribunal concluded that there was no intention to evade payment of Central Excise duty. As a result, the demand was deemed time-barred, and the duty demand was set aside, leading to the dismissal of penalties as well. The Order-in-Original was set aside, and the appeals were allowed with consequential relief.

- The Tribunal's decision highlighted the importance of adherence to Central Excise laws in valuing goods and the significance of demonstrating clear intentions in duty payment. The case underscored the concept of revenue neutrality and the impact of Modvat credit on duty payment, ultimately leading to the dismissal of penalties based on the lack of intent to evade duty.