2014 (5) TMI 28 - AT - Central Excise

Electricity transformer manufacturers win dispute over duty levy assessment under Central Excise Valuation Rules

MPS LTD (FORMERLY KNOWN AS MACMILLAN INDIA LTD) Versus Commissioner of Service Tax - BANGALORE-SERVICE TAX

The Tribunal ruled in favor of the appellants, manufacturers of Electricity Distribution Transformers, in a dispute concerning the assessable value for ... Demand of differential duty - Valuation of goods / transformers - Mis declaration of goods - Suppression of facts - Extended period of limitation - Held that:- The appellants when they received the order for implementation of turn key projects had intimated the department and submitted the cost structure to the department. The assessable value of the transformers was determined as per CAS-4 by a qualified Chartered Accountant and this was submitted on 31.7.2004 to the officer in respect of his letter dated 22.4.2004. Nevertheless, show-cause notice was issued on 12.8.2005 invoking suppression and mis-declaration and proposing to revise the assessable value and demand of differential duty with interest and imposition of penalty as above. We find that what the department has done is to add the freight element from the factory gate to the sites in respect of transformers by invoking Rule 7 read with Rule 11 of the Central Excise Valuation Rules and also calculate the assessable value on the basis of transformer oil requirement indicated in the contract and adopt the one whichever is higher. There is no finding or evidence to show that actual quantum of oil used was higher than what was indicated in the CAS-4 and why the Chartered Accountants certificate cannot be accepted. In the absence of any evidence of actual use of excess transformer oil and in the absence of any finding as to why Chartered Accountants certificate cannot be accepted, stand taken by the Revenue to arrive at the assessable value by including the quantum of oil indicated as required in the contract cannot be sustained - important statutory aspects regarding limitation as well as reasons for inclusion of elements of cost have not been given and hence cannot be sustained. In these circumstances, we find that the Revenue has not made out a case for increasing the assessable value on the ground of suppression, mis-declaration or on merits - Decided in favour of assessee. Issues:1. Determination of assessable value for levy of duty on Electricity Distribution Transformers.2. Application of Central Excise Valuation Rules.3. Consideration of cost elements in the valuation process.4. Allegations of suppression and mis-declaration by the appellant.5. Appeal against the imposition of penalty and demand for differential duty.Analysis:1. The appellants, manufacturers of Electricity Distribution Transformers, availed SSI benefits with Cenvat credit facility under Notification No. 09/2003-C.E. They cleared goods at concessional rates but faced a dispute regarding the assessable value for levy of duty. The Revenue contended that the assessable value should be determined under Section 4 of Central Excise Valuation Rules, resulting in a higher value than what the appellants had self-assessed based on cost structures submitted.2. The Revenue calculated the assessable value considering elements like transformer oil quantity and provisional profit. The higher value arrived at under the Valuation Rules was used to demand differential duty from the appellants. The Commissioner (Appeals) upheld the decision, leading to the appeal before the Tribunal. The Revenue insisted on adopting the value determined under Rules 7 & 11 of the Valuation Rules.3. The Tribunal observed that the department had not provided sufficient evidence to justify the increase in assessable value based on inclusion of freight costs and transformer oil quantities. The appellants had submitted a cost structure as per CAS-4, certified by a Chartered Accountant. The Tribunal found no valid reason to disregard the Chartered Accountant's certificate and include additional elements in the valuation without proper justification.4. The Tribunal noted the lack of evidence supporting allegations of suppression or mis-declaration by the appellants. It emphasized the importance of statutory aspects and reasons for including cost elements in the valuation process. The Revenue's argument to increase the assessable value was deemed unsustainable due to insufficient grounds and lack of evidence supporting the adjustments made to the self-assessed value by the appellants.5. Ultimately, the Tribunal ruled in favor of the appellants, stating that the Revenue failed to establish a case for increasing the assessable value on grounds of suppression or mis-declaration. The appeals were allowed, and consequential relief was granted to the appellants. The decision was pronounced in open court on 30/01/2014 by the Tribunal.