2019 (5) TMI 212 - AT - Central Excise

Tribunal rules on assessable value for goods, limits demand to normal period, revokes penalties

The Tribunal determined that the assessable value for goods cleared to sister concerns and for self-use in expansion projects should be calculated under ... Method of Valuation - goods cleared to the sister concerns and also for self-use within the factory of the appellant, which have been utilized in the expansion (civil works) projects - Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 - HELD THAT:- To fit into the ambit of Rule 8, excisable goods are not sold by the assessee, but are used for consumption by him (viz., captive consumption) or on his behalf in the production or manufacture of other articles. However, what is forthcoming from the facts is that the impugned goods which have been cleared for captive use or stock transferred to other units were not used for consumption by or on behalf of the appellant. The impugned goods were used for construction activities in the expansion projects of the appellant and/or sister units concerned. From the facts on record, it is also evident that the appellants had cleared CTD bars/rods to their group concerns situated at Vijayanagar, Tarapur and Vasind for utilization in various expansion projects of those entities. The appellant cannot come under the fold of “self consumption” as claimed by the appellants, to justify resorting to valuation at 110% of the cost of production as envisaged under Rule 8 of the Central Excise Valuation Rules, 2000 - There is no doubt that some of the clearances made under the claim of “self consumption” were also for captive consumption. However, even in these cases, the impugned goods were only used for Expansion (Civil Works) Projects. Just because the goods have been captively consumed for use within the same factory, it cannot automatically fall within the four walls of Rule 8 ibid. To do so, the excisable goods should be used for “consumption” in the production or manufacture of other articles. The assessable value to be adopted in the case of the impugned goods cleared to sister concerns and also for self-use within the factory, which have only been utilized in expansion projects (civil or construction works), is required to be done as envisaged under Rule 4 of the Central Excise Valuation Rules, 2000 read with Rule 11 ibid. Time Limitation - HELD THAT:- The allegations of suppression, mis-statement, etc., cannot be made on the appellants and in consequence, extended period of limitation cannot be invoked based on such allegations - the SCN dated 19.08.2010 is hit for the most part by limitation and that the demand can only survive for the normal period from the date of issuance of the Show Cause Notice. Penalties - HELD THAT:- As the necessary ingredients for the imposition of penalties are absent and especially since there is absence of suppression, mis-statement, etc., equal penalty imposed under Section 11AC of the Central Excise Act, 1944 as also the penalty imposed under Rule 25 of the Central Excise Rules, 2002, cannot be sustained and will require to be set aside. Appeal allowed in part. Issues Involved:1. Assessable value for goods cleared to sister concerns and for self-use within the factory.2. Applicability of Rule 8 of the Central Excise Valuation Rules, 2000.3. Demand and imposition of penalties under Section 11A and 11AC of the Central Excise Act, 1944.4. Invocation of the extended period of limitation.Detailed Analysis:1. Assessable Value for Goods Cleared to Sister Concerns and for Self-Use:The primary issue revolves around the correct assessable value for goods cleared to sister concerns and for self-use within the factory, utilized in expansion (civil works) projects. The Department contended that the valuation should be based on Rule 11 read with Rule 4 of the Central Excise Valuation Rules, 2000, consistent with Section 4 of the Central Excise Act, 1944, instead of Rule 8.2. Applicability of Rule 8 of the Central Excise Valuation Rules, 2000:The appellant argued that Rule 8, which mandates valuation at 110% of the cost of production, should apply as the goods were used for self-consumption and within other factories of the same company for expansion purposes. However, the Tribunal concluded that Rule 8 is applicable only when goods are used for consumption in the production or manufacture of other articles. Since the goods were used for construction activities in expansion projects, Rule 8 was deemed inapplicable. The Tribunal upheld the adjudicating authority's decision that Rule 11 read with Rule 4 should be applied for valuation.3. Demand and Imposition of Penalties:The Department issued a Show Cause Notice (SCN) demanding Rs. 4,92,93,111/- under Section 11A for the period from 2007-08 to 2009-10, along with interest and penalties under Section 11AC and Rule 25. The Tribunal, while upholding the demand on merits, restricted it to the normal period of one year from the date of issuance of the SCN due to the absence of suppression or misstatement by the appellant. Consequently, the penalties imposed under Section 11AC and Rule 25 were set aside.4. Invocation of the Extended Period of Limitation:The Tribunal found merit in the appellant's contention regarding the limitation period. The Department was aware of the appellant's valuation methodology since October 2007, as evidenced by audits and communications. Therefore, the extended period of limitation could not be invoked. The demand was restricted to the normal period from the date of issuance of the SCN.Conclusion:The Tribunal concluded that the assessable value for goods cleared to sister concerns and for self-use in expansion projects should be determined under Rule 4 read with Rule 11 of the Central Excise Valuation Rules, 2000. The demand was upheld but restricted to the normal period, and penalties were set aside due to the absence of suppression or misstatement. The appeal was partly allowed on these terms.