2019 (3) TMI 26 - AT - Central Excise

Tribunal rules in favor of appellants on assessable value determination, citing revenue-neutrality.

The tribunal ruled in favor of the appellants in a case involving the correct assessable value determination for clearances made to sister units, citing ... Valuation - part of final goods cleared to sister unis - related party transaction or not - Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 - Held that:- In the first instance, the appellants have been taking a stand that they are not governed by CAS-4 standards and are not required to produce CAS-4 certificates. On the other hand, we are also unable to fathom the method and manner of working of the differential duty liability adopted by department. If they were not satisfied with appellant’s method of cost construction they should have themselves appointed a Cost Accountant as permitted in Central Excise law to ascertain the cost of production and worked out the assessable value as 115% / 110% of such cost, as the case may be, to demand any duty liability. Instead, a very discernible shortcut, not supported by any provision of law, was adopted, namely, adding 15% to their invoice prices. There are merits in the contention of the appellants that this issue in any case is revenue-neutral. Time limitation - Held that:- There is no doubt that the issue was in correspondence right from 2004. The SCN in question was however issued only on 03.05.2007. If appellants were consistently contesting their requirement to arrive at the assessable value of clearances under CAS-4, department could very well have appointed Cost Accountant as provided in the Central Excise Act, 1944 to ascertain whether the price adopted by them was correct or not. That was not done and instead, the instant SCN was issued, almost after three years after the initiation of correspondence between the department and the appellant, that too on the very dubious methodology of adding 15% to invoice prices - appeal succeeds on the ground of limitation. The appellant will succeed both on the grounds of revenue-neutrality as well as on limitation - appeal allowed. Issues:1. Correct assessable value determination for clearances made to sister units.2. Time-barred demand for production of CAS-4 certificate.3. Imposition of penalties under various provisions of law.Analysis:1. The case involved the appellants, manufacturers of Diesel Generating sets, who were alleged to have not determined the value of goods cleared to their sister units in accordance with Rule 8 of the Central Excise Valuation Rules. The department issued a show cause notice proposing recovery of duty amounting to Rs. 40,18,632. The original authority confirmed the demands with penalties. On appeal, the Commissioner set aside a penalty but upheld the rest of the order. The appellants argued that the duty paid was revenue-neutral as it would be credited by their other unit. The tribunal found the department's methodology of adding 15% to invoice prices unsupported by law and ruled in favor of the appellants based on revenue-neutrality, citing a previous Tribunal decision upheld by the Supreme Court.2. The appellants contended that the demand was time-barred as they had been corresponding with the department since 2004 regarding the production of CAS-4 certificate. The department had not appointed a Cost Accountant to ascertain the correct assessable value, instead issuing the show cause notice in 2007. The tribunal agreed with the appellants that the issue was hit by limitation, as the SCN was issued almost three years after the initiation of correspondence, and ruled in favor of the appellants on this technical ground.3. The imposition of penalties under various provisions of law was a key issue in the case. The original authority had imposed penalties for contravention of valuation rules. On appeal, the Commissioner set aside one penalty but upheld the rest. However, the tribunal did not delve into the merits of the matter regarding penalties, as the appeal was allowed based on the grounds of revenue-neutrality and limitation. The tribunal granted consequential relief to the appellants in line with the law.