2019 (4) TMI 1681 - AT - Central Excise

Tax Tribunal affirms Commissioner decision, rejects department appeal. Extended period unjustified, valuation method aligned with law.

Commissioner of Customs And Central Excise Versus M/s Himadri Chemicals & Industries Ltd.

Commissioner of Customs And Central Excise Versus M/s Himadri Chemicals & Industries Ltd. - TMI Issues Involved:1. Valuation of goods cleared to sister units versus un-related buyers.2. Applicability of Rule 8 and Rule 9 of the Central Excise Valuation Rules, 2000.3. Invocation of extended period for demand due to alleged suppression of facts.4. Correctness of the Commissioner (Appeals) decision on merits and limitation.Detailed Analysis:1. Valuation of Goods Cleared to Sister Units versus Un-Related Buyers:The respondents were engaged in manufacturing products and clearing them partly to their sister concern and partly to un-related buyers. The department noticed that the value adopted for goods cleared to sister units was lesser than that for un-related buyers. The department argued that the value should be determined as per Section 4(1)(b) of the Central Excise Act, 1944, read with the Central Excise Valuation Rules, 2000. Specifically, the value should be determined by adopting the value nearest to the time of removal for clearances made to un-related buyers. The original authority confirmed the demand for differential duty of Rs. 21,73,192/- along with interest and imposed penalties. However, the Commissioner (Appeals) set aside the demand on both merits and limitation grounds, leading the department to appeal to the Tribunal.2. Applicability of Rule 8 and Rule 9 of the Central Excise Valuation Rules, 2000:The department contended that Rule 8 of the Valuation Rules applies when excisable goods are not sold but are captively consumed, requiring the value to be 110% of the cost of production. Rule 9 applies when goods are sold only to related persons, and if the related person uses the goods in production, Rule 8 should be followed. The department argued that the Commissioner (Appeals) incorrectly relied on the Board’s Circular dated 01.07.2002 and that Rule 8 or Rule 9 should not apply as the goods were cleared to both related and un-related buyers. The adjudicating authority’s decision to resort to Rule 4 read with residual Rule 11 was deemed correct by the department.3. Invocation of Extended Period for Demand Due to Alleged Suppression of Facts:The department claimed that the respondent suppressed the fact of clearing goods at a lesser value, which was only discovered during an audit. The Commissioner (Appeals) found that the facts were known to the department through a letter dated 24.09.2009 from the Range Officer, advising the respondent to pay differential duty. The department argued that this advice was specific to Crude Naphthalene and not the disputed finished products, thus justifying the extended period invocation.4. Correctness of the Commissioner (Appeals) Decision on Merits and Limitation:The respondent argued that the clearances were made to another unit of the same manufacturer and not to related parties. They contended that the valuation should be as per Rule 8 for captive consumption and Rule 9 for transfers to sister units, as clarified by the Board’s Circular. The Commissioner (Appeals) agreed, noting that Rule 11 is not applicable when Rule 8 or Rule 9 can determine the value. The Commissioner (Appeals) also found no suppression of facts, as the respondent followed instructions from the Range Officer and disclosed all transactions in their records and returns.Conclusion:The Tribunal upheld the Commissioner (Appeals) decision, finding no grounds for interference. The department’s appeal was dismissed, affirming that the extended period invocation was unjustified and the valuation method adopted by the respondent was in line with the Board’s Circular and legal provisions. The operative part of the order was pronounced in court upon conclusion of the hearing.