2021 (3) TMI 730 - AT - Central Excise

Tribunal overturns order, rules in favor of appellant citing lack of evidence and time limitation.

M/s. T & T Metals Private Limited Versus Principal Commissioner of CGST & CX, Ranchi Commissionerate

The Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law. The decision emphasized that the transaction value ... Method of Valuation - assessable value adopted for payment of duty is lower than the actual cost of manufacture of said products - whether valuation to be done in terms of Section 4(1)(a) of the Central Excise Act, 1944 (the Act), but under Section 4(1)(b) of the said Act, read with Rule 8 and Rule 11 of the Central Excise Valuation Rules, 2000? - suppression of facts or not - time limitation - HELD THAT:- There is no dispute that the goods have been sold to the unrelated buyers and there is no flow back of additional consideration, as also have been specifically admitted by the learned Pr. Commissioner. On perusal of the clarifications issued by the CBEC vide Circular dated 15.01.2014, it is noted that the Board has accepted that mere sale of price lower than the manufacturing cost cannot be made the criterion to reject the transaction value unless the aspects such as the percentage of loss at which such sale takes place and the period for which such loss takes place, reasons of sale at such loss, etc. are examined to ascertain if there was any “extra commercial consideration”. The Board has also accepted the fact that the Apex Court in its judgement has observed that selling of final products below the manufacturing cost was intended to penetrate the market which also constitutes extra commercial consideration in the hands of the manufacturer. The appellant’s case is squarely covered by the ratio laid down by the Apex Court in the case of COLLECTOR OF C. EX., NEW DELHI VERSUS GURU NANAK REFRIGERATION CORPN. [2003 (3) TMI 100 - SUPREME COURT] wherein also, in identical facts and circumstances, the Department proposed to reject the transaction value for the reason that cost of manufacture was found to be higher than the price at which goods were eventually sold. The Apex Court taking note of the fact that when there was no additional consideration and the goods were cleared to independent buyers, upheld the valuation adopted by the assessee under Section 4(1)(a). There are no positive evidence to show that there is any fraud or willful suppression on the part of the appellant and hence, the demand is clearly barred by limitation - appeal allowed - decided in favor of appellant. Issues Involved:1. Rejection of transaction value under Section 4(1)(a) of the Central Excise Act, 1944.2. Application of Fiat India Ltd. case for determining valuation.3. Allegations of earning profit from commodity trading.4. Limitation period for issuing Show Cause Notice (SCN).5. Imposition of penalty and interest.Issue-wise Detailed Analysis:1. Rejection of Transaction Value under Section 4(1)(a) of the Central Excise Act, 1944:The Department rejected the transaction value under Section 4(1)(a) merely because the cost of manufacture was higher than the sale price. The Tribunal noted that the goods were sold to unrelated buyers with no additional consideration. The CBEC Circular dated 15.01.2014 clarified that merely selling goods below the manufacturing cost does not justify rejecting the transaction value. The Tribunal emphasized that no investigation was conducted by the Department to ascertain if there was any 'extra commercial consideration.' The Tribunal concluded that the decision in Fiat India Ltd. was not applicable as the facts of the present case were distinguishable.2. Application of Fiat India Ltd. Case for Determining Valuation:The Department mechanically applied the decision in Fiat India Ltd. to raise the impugned demand. The Tribunal highlighted that the Fiat India case involved selling cars at a loss to penetrate the market, constituting extra commercial consideration. In contrast, the appellant’s average loss was around 10%, not intended to penetrate the market. The Tribunal found that the appellant’s case was covered by the Apex Court’s decision in Guru Nanak Refrigeration Corp., where the transaction value was accepted under similar circumstances.3. Allegations of Earning Profit from Commodity Trading:The Tribunal noted that the impugned order alleged that the appellant earned profits from commodity trading to counter losses from manufacturing. However, these allegations were not made in the SCN, and thus, the impugned order had traveled beyond the allegations in the SCN. The Tribunal relied on several case decisions to support this contention.4. Limitation Period for Issuing Show Cause Notice (SCN):The appellant contested the demand on the grounds of limitation, arguing that the SCN dated 05.05.2017 for the period 2012-13 to 2015-16 was barred by limitation. The Tribunal found no positive evidence of fraud or willful suppression by the appellant. Consequently, the demand was deemed barred by limitation.5. Imposition of Penalty and Interest:The Tribunal found that in the absence of extra commercial consideration and given the facts of the case, the imposition of penalty and interest was not justified. The demand, penalty, and interest were thus not sustainable.Conclusion:The Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law. The decision emphasized that the transaction value adopted by the appellant could not be rejected without concrete evidence of extra commercial consideration, and the demand was barred by limitation. The Tribunal's order was pronounced in open court on 18 March 2021.