2004 (7) TMI 263 - AT - Central Excise

Tribunal Remands Case for Reassessment on Key Issues: Rule 6(b)(i), CAS-4, Dyed Yarn Valuation, and Limitations.

The Tribunal set aside the impugned order and remanded the case to the jurisdictional Commissioner for a fresh decision. Key issues for reconsideration ... Valuation of yarn for captive consumption - yarn purchased from outside for captive consumption after dyeing and sizing - extended period of limitation - Confiscation - Penalty - HELD THAT:- The notice merely states that because of various aspects which may affect the valuation of yarn, such as machinery, count of yarn, fibre etc., yarn can never be valued on the basis of comparable yarn value. On this basis, the notice proceeds to hold that the yarn cannot be valued under Rule 6(b)(i) of the Valuation Rules and has necessarily to be valued in terms of Rule 6(b)(ii). However, we note that in the case of CCE, Bhopal v. Raymonds Ltd.[2001 (3) TMI 128 - CEGAT, NEW DELHI], it has been held that even if yarn differs in material characteristics, necessary adjustment can be made under Rule 6(b)(i) and yarn valued on the basis of comparable yarn. There is no clear finding of the Commissioner as to why yarn whose market value sought to be relied upon is not comparable to yarn captively consumed. There must be a specific finding on the existence of factors which rendered comparison impossible. The Commissioner holds that there is nothing on record to demonstrate that machinery for manufacture of yarn is the same, fibre is the same etc. and yet goes on to hold that therefore yarns are not comparable. Unless material existed for comparison, he could not have come to the conclusion that the yarns are not comparable. As regards dyeing - It is also noted that for the period from 16-3-1995 to 18-5-1995, dyed yarn was entitled to the benefit of exemption in terms of Notification No. 35/95-C.E., dated 16-3-1995. All these aspects are required to be considered afresh by the Commissioner. He is also to consider the time bar aspect once again in the light of the fact that he has held in the impugned order that extended period of limitation is not applicable in so far as yarn captively consumed for dyeing is concerned, since, once it is found that the department is aware that the appellants' unit is actually dyeing the yarn and show cause notices have been issued proposing recovery of duty at spindle stage and not at dyeing stage, the knowledge of the department that the appellants are carrying out dyeing processes in their factory, exists. Thus, we set aside the impugned order and remand the case for fresh decision to the jurisdictional Commissioner on the applicability or otherwise of Rule 6(b))(i) of the Central Excise (Valuation) Rules, for considering the application of CAS-4, for re-computing the value of dyed yarn and for considering the time bar aspect relating to dyeing of yarn purchased from market. He shall pass fresh orders after extending reasonable opportunity of hearing to the appellants. The appeals are thus allowed by remand. Issues Involved:1. Valuation of yarn for captive consumption.2. Valuation of yarn purchased from outside for captive consumption after dyeing and sizing.3. Applicability of extended period of limitation.4. Imposition of penalties on the company and its officers.5. Confiscation of property and imposition of fines.6. Revenue's appeal on reduction of demand and dropping of interest charges.Summary:1. Valuation of Yarn for Captive Consumption:The manufacturer contended that Rule 6(b)(ii) of the Central Excise (Valuation) Rules should not be applied unless Rule 6(b)(i) is ruled out. They argued that the Commissioner did not provide a clear finding on why comparable invoices could not be accepted. They cited the Tribunal's decisions in *Alstom Ltd. v. CCE, Kolkata* and *Bharti Systel Ltd. v. CCE, Chandigarh-I* to support their plea. The Tribunal noted that the Commissioner failed to provide specific reasons for rejecting the comparable yarn valuation and remanded the case for reconsideration, emphasizing the need to apply CAS-4 standards.2. Valuation of Yarn Purchased from Outside for Captive Consumption After Dyeing and Sizing:The appellants argued that the duty demand was inflated and should be reduced. They contended that the process of dyeing was known to the department and should not attract additional duty. The Tribunal noted discrepancies in the valuation approach compared to other units and remanded the case for fresh consideration, including the applicability of Notification No. 35/95-C.E.3. Applicability of Extended Period of Limitation:The appellants argued there was no intention to evade duty, and mere non-filing of price lists did not amount to suppression. The Revenue contended that the extended period was applicable due to non-disclosure of material particulars. The Tribunal directed the Commissioner to reconsider the time bar aspect, noting the department's prior knowledge of the dyeing process.4. Imposition of Penalties on the Company and Its Officers:The appellants argued that no penal action was warranted. The Revenue maintained that penalties were justified due to suppression of facts. The Tribunal did not provide a final ruling on penalties but remanded the case for fresh consideration.5. Confiscation of Property and Imposition of Fines:The Commissioner had confiscated the land, building, plant, and machinery with an option to redeem on payment of a fine. The Tribunal's remand order implies reconsideration of these penalties as part of the overall reassessment.6. Revenue's Appeal on Reduction of Demand and Dropping of Interest Charges:The Revenue appealed against the reduction of the demand and the dropping of interest charges u/s 11AB of the Central Excise Act, 1944. The Tribunal's remand order includes reconsideration of these aspects.Conclusion:The Tribunal set aside the impugned order and remanded the case to the jurisdictional Commissioner for fresh decision on the applicability of Rule 6(b)(i), consideration of CAS-4, re-computation of the value of dyed yarn, and reassessment of the time bar aspect. The Commissioner is to pass fresh orders after providing a reasonable opportunity for hearing to the appellants. The appeals were allowed by remand.