2023 (12) TMI 744 - AT - Central Excise

Tribunal Revokes Penalties, Favors Rule 4 in Goods Valuation Appeal, Aligns with Larger Bench and Gujarat HC Decisions.

Andhra Pradesh Paper Mills Ltd. Versus Commissioner of Central Tax Visakhapatnam– II

The Tribunal allowed the appeal concerning the valuation of goods sold to sister concerns and independent buyers. It set aside the impugned order and ... Valuation of the goods - Appellant Assessee have cleared kraft paper to their sister concern, and also to independent buyer during the period November 2001 to September 2010 - HELD THAT:- During the period November 2001 to February 2009 appellant had both sales to independent buyers and also goods removed to their sister concern - it is found that, under such facts and circumstances, the issue is wholly covered by ruling of the Larger Bench decision of this Tribunal in the case of ISPAT INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., RAIGAD [2007 (2) TMI 5 - CESTAT, MUMBAI-LB] - The issue before the Larger Bench was whether the assessable value in respect of goods which are transferred to any plant/unit of the same assessee, is required to be determined as per Rule 4 or Rule 8 of Central Excise Valuation Rules 2000, in case where some goods were also sold to independent buyers. The Larger Bench have held in the circumstances and facts as follows:- (a) the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers; (b) the provisions of Rule 4 are in any case to be preferred over the provisions of Rule 8 not only for the reason that they occur first in the sequential order of the Valuation Rules but also for the reason that in a case where both the rules are applicable, the application of Rule 4 will lead to a determination of a value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act, 1944. For the period March 2009 to September 2010 admittedly there are no independent sales and all the removal of the goods are to the sister unit. Learned Counsel mentions that for this period, they have not disputed the differential duty demanded by Revenue and they have deposited the same with applicable interest. For this period, Learned Counsel states that the issue is of wholly interpretational in nature, thus penalty is not imposable. The issue herein is squarely covered by the ruling of the Larger Bench of this Tribunal in the case of Ispat Industries ltd., which have been confirmed by the Gujarat High Court in the case of Ultra Tech Cements Ltd. - the impugned order set aside - appeal allowed. Issues involved: Valuation of goods in relation to sales to sister concern and independent buyers.Summary:Issue 1: Valuation of goods cleared to sister concern and independent buyersThe appeal dealt with the valuation of goods cleared by the Appellant Assessee to their sister concern and independent buyers during the period from November 2001 to September 2010. The Tribunal referred to a ruling by the Larger Bench in the case of Ispat Industries Ltd. vs. CCE, which addressed the determination of assessable value for goods transferred to a plant/unit of the same assessee when some goods were also sold to independent buyers. Rule 8 of the Central Excise Valuation Rules 2000 specifies the valuation at 110% / 115% of the cost of production for goods used for consumption in production, while Rule 4 is based on the value of goods sold for delivery at a time nearest to the removal of goods under assessment. The Larger Bench held that Rule 4 should be preferred over Rule 8 when both are applicable, as it aligns better with the statutory provisions of the Central Excise Act, 1944.Issue 2: Applicability of valuation rules to goods cleared to sister unitFor the period from March 2009 to September 2010, where all goods were removed to the sister unit without any independent sales, the Appellant did not dispute the differential duty demanded by the Revenue and had deposited the same with interest. The issue was considered interpretational in nature, and the Appellant argued against the imposition of a penalty. The Revenue relied on relevant circulars and notifications, as well as a ruling in a similar case involving clearances to sister units and independent sales. However, the Tribunal found that the issue was squarely covered by the ruling of the Larger Bench and the decision of the Gujarat High Court, leading to the appeal being allowed, the impugned order set aside, and penalties revoked.Conclusion:The Tribunal's decision was based on the interpretation of valuation rules in cases involving sales to sister concerns and independent buyers, aligning with previous rulings and statutory provisions. The appeal was allowed, penalties were set aside, and the Appellant was entitled to any consequential benefits as per the law.