2013 (11) TMI 1415 - AT - Central Excise

Tribunal Upheld Valuation Method for Duty, Penalties Reviewed

The Tribunal upheld the valuation method based on comparable goods for goods cleared without payment of duty, rejecting the cost construction method. Duty ... Marketability of Goods – optical transmission equipment - clearance for Field Replacement/ Advance Field Replacement/ Rework and Demo - Held that:- Relying upon A.P. State Electricity Board Vs. CCE [1994 (2) TMI 56 - SUPREME COURT OF INDIA] - For goods to be marketable it is not necessary that goods in question should be generally available in the market - Marketability does not depend upon the number of purchasers - Huge machineries as also small parts of one machinery may be designed to the order of one customer and such item may not be useful to others - Still such goods will be considered as marketable. Valuation of goods – Cost construction method OR value of comparable goods – Held that:- The goods cleared without payment of duty for which duty is now demanded cannot be considered as goods cleared to other units of the appellant for further manufacture of other excisable goods - These are cases of clearances for evasion of duty - thus valuation under Rule 8 will not apply and the value of comparable goods is correctly applied. Demand of duty on removals for replenishments of short-shipments - clandestine Removal - Held that:- The question whether short shipments and subsequent replacement to make good the short shipment was genuine or not is a question of fact rather than law -The second consignments sent on the pretext of goods short shipped were clandestinely removed - Excise liability does not depend on realisation of money but on manufacture and removal - the appellant has been freely removing goods under the pretext of testing to be done, replacement of defective pieces etc. without payment of duty and proper accounting of the goods after testing etc. – thus in the case of short shipment also this is only a method adopted for clandestine removal and not cases of genuine supplies to make good short shipments. Extended period of limitation – Held that:- Following Commissioner of Central Excise, Mumbai Versus M/s. Kalvert Foods India Pvt. Ltd. & Ors. [2011 (8) TMI 24 - SUPREME COURT OF INDIA] - The argument of the first appellant that SCN was issued after one year from the date of knowledge and hence time barred is not a legally correct argument - Section 11A of Central Excise Act provides time limit from the ‘relevant date’- Decided against Assessee. Penalty on employees of the Company - The second appellant and the third appellant are only employees of the first appellant which is a company - Nothing has been brought on record to show that they have personally gained by the duty evaded – thus after imposition of adequate penalty on the first appellant there is no justification to impose penalty on the second and their appellants also – the penalties imposed on second and third appellant set aside. Issues Involved:1. Valuation method for goods cleared without payment of duty.2. Duty demand for goods removed to replenish short shipments.3. Applicability of the extended period for issuing the Show Cause Notice (SCN).Issue-wise Detailed Analysis:1. Valuation Method for Goods Cleared Without Payment of Duty:The appellants argued that the valuation for goods cleared to their Bangalore office and field offices without payment of duty should be based on the cost construction method rather than the value of comparable goods. They contended that each transaction should be treated independently, and the demand based on the price of comparable goods was not maintainable. The appellant's advocate did not contest the fact that goods were cleared under various pretexts without payment of duty but argued that these goods were not marketable and should be valued based on cost construction. The Tribunal disagreed, stating that the goods cleared without payment of duty were not for further manufacture and thus, valuation under Rule 8 did not apply. The Tribunal upheld the valuation based on comparable goods as detailed in the Show Cause Notice (SCN).2. Duty Demand for Goods Removed to Replenish Short Shipments:The appellants argued that the demand for duty on goods removed to replenish short shipments was unsustainable as no consideration was received for such goods. They claimed that the goods were cleared only for replenishments of short shipments, and no extra price was charged. The Tribunal found that the evidence indicated the clearances were not genuinely for replenishments but were methods for clandestine removal of goods without payment of duty. The Tribunal noted that excise duty liability arises upon manufacture and removal, regardless of price realization. The Tribunal upheld the duty demand, stating that the evidence showed clearance of the same goods twice, and the appellant failed to provide adequate defense or proper accounting for these clearances.3. Applicability of the Extended Period for Issuing the SCN:The appellants argued that the extended period for issuing the SCN was not applicable as the department knew about the clearances by 31-03-2006 but issued the SCN only on 01/11/2007, making the demand time-barred. The Tribunal rejected this argument, stating that Section 11A of the Central Excise Act provides a time limit from the 'relevant date,' which does not depend on the department's date of knowledge. The Tribunal referenced various Supreme Court decisions, emphasizing that the extended period is applicable in cases involving suppression, mis-declaration, and similar actions with intent to evade payment of duty. The Tribunal found the demand within the time limit and sustainable.Separate Judgments for Appellants:The Tribunal upheld the adjudication order against the first appellant, rejecting their appeal. However, for the second and third appellants, who were employees of the first appellant company, the Tribunal set aside the penalties imposed on them, noting that there was no evidence of personal gain by the duty evasion.Conclusion:The appeal filed by the first appellant was rejected, and the adjudication order was upheld. The appeals filed by the second and third appellants were allowed by setting aside the penalties imposed on them.