2023 (6) TMI 1240 - AT - Central Excise

Tribunal upholds valuation of Lead Acid Batteries under Central Excise Act

The tribunal upheld the valuation of Lead Acid Batteries under Section 4A of the Central Excise Act, 1944, rejecting the appellant's argument for ... Method of Valuation - Lead Acid Battery falling under sub heading 85071000 of the Central Excise Tariff Act, 1985 - to be valued under Section 4 of the Central Excise Act, 1944 or Section 4A of the Central Excise Act, 1944? - suppression of facts - extended period of limitation - HELD THAT:- The entire defence of the appellant is on the basis of the affidavit which was filed belatedly that the Lead Acid Batteries cleared by the appellant which is used for automobiles were correctly valued under Section 4A on the ground that they had supplied the uncharged batteries and the charging was carried out at the dealers’ place which activity amounts to manufacture. Therefore, any goods cleared which is subjected to further manufacture should be valued under Section 4 and not 4 A - It is found that other than affidavit there is no documentary evidence produced by the appellant to establish the claim of the appellant that the battery was cleared uncharged and at the dealers’ place the batteries were charged before selling to the customers. From the finding of the Adjudicating Authority it is clear that except affidavit there is no other evidence to show that the battery cleared by the appellant was uncharged Lead Battery. Therefore, there is no difference in the nature of the clearance made to individual customer wherein the valuation was admittedly done by the appellant under Section 4 A and the nature of clearance made to the dealers. Therefore, the clearance made to dealers is also to be valued under Section 4 A of Central Excise Act, 1944. Extended period of limitation - Suppression of facts - HELD THAT:- The appellant have not disclosed that whether the battery was cleared charged or uncharged. Moreover, the affidavit was also filed belatedly, this fact was not declared during statement of the director recorded at the time of investigation - the appellant have suppressed the vital fact from the department about the nature of clearance. In this fact, the extended period was rightly invoked in the present appeal. There are no infirmity in the impugned order - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the value of lead acid batteries cleared to dealers must be determined under Section 4A of the Central Excise Act, 1944 (MRP/RSP-based assessment) or under Section 4 (transaction value) when the manufacturer contends the batteries were cleared in an uncharged/dry state and charging was performed later by dealers. 2. Whether the demand for differential duty and penalties could be made for the extended period of limitation (beyond one year) on the ground of suppression of facts by the manufacturer regarding the nature of clearance (charged vs. dry batteries). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Valuation: Section 4A (MRP/RSP) v. Section 4 (transaction value) for lead acid batteries cleared to dealers Legal framework: Section 4A prescribes valuation based on retail sale price (MRP/RSP) for specified packaged goods or where applicable rules/notifications require RSP-based assessment; Section 4 governs assessable value based on transaction value. The definition of 'manufacture' under Section 2(f)(iii) includes adoption of any treatment on goods to render the product marketable to the consumer, which can bear on whether a cleared product is a finished/marketable article or an intermediate unmarketable (dry) product. Precedent treatment: The appellant relied on prior decisions holding that genuinely dry batteries (requiring filling of acid and charging by buyer) fall outside SWAM (Standards of Weight and Measures (Packaged Commodities) Rules, 1977) and, on that basis, may not attract RSP-based assessment; such precedents were invoked to argue valuation under Section 4. The Tribunal/Adjudicating Authority considered those precedents but examined factual distinctions. Interpretation and reasoning: The Court examined documentary and testimonial evidence rather than accepting a belated affidavit assertion that dealer-stage charging occurred. The reasoning relied on contemporaneous materials recovered at the factory (panchnama) and the invoices/price-lists: price-lists expressly described 'Prices are for charged Batteries'; invoices did not indicate sale of 'dry battery'; panchnama and process notes reflected addition of sulphuric acid and D.M. water (container filling) at the manufacturing premises. The Court probed logical inconsistencies in the affidavit claim (e.g., direct sales to customers would preclude customer charging if the manufacturer lacked charging facilities). The Tribunal therefore concluded the factual matrix showed clearances were of charged/marketable batteries, not uncharged intermediates; consequently the goods fell within the scope of RSP/MRP assessment as notified and valuation under Section 4A was required for dealer clearances as well as direct customer sales. Ratio vs. Obiter: Ratio - where contemporaneous documentary evidence (price lists, invoices) and panchnama/process entries establish that batteries were cleared as charged/marketable goods, RSP-based valuation under Section 4A applies notwithstanding a subsequent or belated affidavit claiming clearance in uncharged form. Obiter - discussion distinguishing the cited High Court decision is factual: precedent about genuinely dry batteries remains valid where established on evidence, but is inapplicable where facts demonstrate charged clearances. Conclusion on Issue 1: The Court upheld the view that the batteries supplied to dealers were cleared in charged/marketable condition as evidenced by price-lists, invoices, panchnama, and trade inquiry; therefore valuation under Section 4A was correctly applied and the Assessment under Section 4 was not justified. Issue 2 - Extended period of limitation: applicability due to suppression of facts Legal framework: Extended period for issuance of show cause notices/demands is permissible where there is suppression of facts, misstatement or fraud; limitation is one year ordinarily unless extended period is invoked on established suppression. Precedent treatment: Appellant cited authorities where extended period was disallowed or where taxpayers were held not to have suppressed facts; the Tribunal considered those lines of authority but focused on evidentiary conduct here. Interpretation and reasoning: The Tribunal found the manufacturer did not disclose material facts during investigation or in the director's recorded statement - specifically the claim that batteries were cleared dry and charged by dealers was not made contemporaneously but raised only by a belated affidavit filed years later. The affidavit was treated as an afterthought and misleading in light of documentary evidence (price lists indicating charged batteries, invoices lacking 'dry battery' notation, and process/panchnama showing acid/water addition). Given non-disclosure of this critical fact during investigation and the timing of the affidavit, the Tribunal concluded there was suppression of material facts sufficient to justify invoking the extended period of limitation for demand and penalties. Ratio vs. Obiter: Ratio - where a taxpayer suppresses material facts regarding the nature of clearances and presents belated/exculpatory evidence only after detection, the department may invoke the extended period; concurrent evidential indicators (invoices, price lists, panchnama) supporting suppression render extended limitation invocation valid. Obiter - general propositions on limitation in cases of full disclosure remain applicable where factual disclosure is contemporaneous and supported by documents. Conclusion on Issue 2: Extended period was properly invoked because of suppression of the true nature of clearances; the belated affidavit did not cure the suppression given contrary contemporaneous documentary evidence; hence the demand and penalties for extended period were maintainable. Interrelationship / Cross-references The valuation issue and limitation issue are interlinked: the Tribunal's conclusion on valuation (that batteries were cleared as charged/marketable goods attracting Section 4A valuation) relied heavily on contemporaneous documentary evidence which also supported the finding of suppression for limitation purposes. Precedents favorable to the appellant were distinguished on factual grounds where the material facts (genuinely dry clearances) were not established by evidence in this record.