2024 (7) TMI 379 - AT - Central Excise

Undervaluation of goods - FOS and Sucralose when cleared to their related parties as well as to M/s Surya Herbals by not following CAS-4 valuation method as provided under Rule 8 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 - HELD THAT - The Larger Bench of the Tribunal in the case of ISPAT INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., RAIGAD 2007 (2) TMI 5 - CESTAT, MUMBAI-LB considered the issue of application of Rule 4 vis-a-vis Rule 8 and held that Rule 8 would apply only in case where it s entire production of a particular commodity is captively consumed - the Larger Bench has held that the provisions of Rule 8 will not apply in a case where some parts of the production are sold to independent buyers. So also in a situation where both Rule 4 and Rule 8 would apply, by sequential order, Rule 4 would take precedence over Rule, 8 for determination to the consistent with Section 4 (8) Central Excise Act, 1944. It also requires to be stated that though it is alleged by department that appellant has undervalued the good by not adopting Rule 8, there is no evidence in the nature of cost comparison or details of comparable market price put towards to show that the goods have been undervalued. After appreciating the facts, and following the decisions above we hold that the demand of duty cannot sustain and requires to be set aside. The impugned order is set aside - The appeal is allowed.

Summary

Issues:
- Application of Rule 8 of Central Excise Valuation Rules, 2008
- Legality of demand, interest, and penalties

Analysis:
- The appellant was engaged in manufacturing excisable goods and was accused of undervaluing products when cleared to related parties and M/s Surya Herbals. The department alleged contravention of Central Excise Act provisions and Valuation Rules, leading to a show cause notice for duty evasion during 2006-2010.
- The appellant contested the charges, arguing that Rule 8 applies only when the entire production is captively consumed, citing the Ispat Industries Ltd case. They emphasized selling to independent buyers met transaction value conditions for central excise duty calculation.
- The department maintained its position during arguments, leading to the Tribunal's consideration of the assessable value determination under Rule 8 and the legality of imposed demands, interest, and penalties.
- The Tribunal referred to the Ispat Industries Ltd case, stating that Rule 8 applies when the entire production is captively consumed. Sequential application of Rules 4 and 8 favored Rule 4, ensuring consistency with the Central Excise Act.
- Citing the Shiv Shakti Ingots Ltd case, where Rule 8 couldn't apply due to partial sales to independent buyers, the Tribunal found the department lacked evidence of undervaluation. Consequently, the duty demand was deemed unsustainable, leading to setting aside the impugned order and allowing the appeal with consequential reliefs.