2008 (2) TMI 667 - AT - Customs

Appellate Tribunal rules in favor of EOU in duty demand appeal, emphasizes adherence to valuation rules

TEL EXPORTS Versus COMMISSIONER OF C. EX., CHENNAI

TEL EXPORTS Versus COMMISSIONER OF C. EX., CHENNAI - 2008 (225) E.L.T. 359 (Tri. - Chennai) Issues:1. Differential duty on parts of turbo charger supplied to sister concern.2. Allegation of suppression of facts and invocation of larger period for demand.3. Application of Customs Valuation Rules, 1988 for determining assessable value.4. Dispute regarding valuation method under Rule 7 and Rule 7A of CVR.5. Cenvat credit availability and revenue neutrality argument.6. Validity of Show Cause Notices and limitation period for demand.The judgment by the Appellate Tribunal CESTAT, CHENNAI involved appeals filed by an EOU, M/s. Tel Exports, regarding the demand of differential duty on parts of turbo chargers supplied to its sister concern, M/s. Turbo Energy Limited during specific periods. The Commissioner upheld the demands based on the alleged adoption of lower values for duty payment. The main issue raised was the invocation of a larger period for demand on grounds of suppression of facts, despite the appellants having informed the department of their valuation method in 2001. The appellants argued that the demands were time-barred based on known facts. The Tribunal agreed that demands prior to November 2004 were indeed barred by limitation, while those for subsequent periods were valid.The Tribunal analyzed the application of Customs Valuation Rules, 1988 (CVR) in determining the assessable value of the goods. It was noted that Rule 7 of CVR, which involves deducting various elements from the sale price, should have been considered before resorting to Rule 7A. The appellants' request for valuation under Rule 7 was ignored without proper justification by the Commissioner. Therefore, the Tribunal remanded the case for a fresh decision to determine the assessable value in accordance with the appropriate rule of CVR, as requested by the appellants.Regarding the argument of Cenvat credit availability and revenue neutrality, the appellants contended that any duty paid was instantly available as credit to the sister unit, resulting in no additional revenue for the department. The Tribunal, however, focused on the correct application of valuation rules rather than the revenue impact. The Tribunal set aside the Order-in-Appeal dated 9-11-2005, as the entire demand was deemed barred by limitation. The appellants were granted the opportunity to present their case adequately in the fresh decision process. The appeals were disposed of based on the above terms, emphasizing the importance of adherence to valuation rules and limitation periods in duty demands.