1988 (2) TMI 252 - AT - Customs

Tribunal affirms Collector's valuation decision & extends time limit for duty demand. Remand for revaluation.

The Tribunal upheld the Collector (Appeals) decision on the valuation of goods and the applicability of the extended time limit for demanding duty due to ... Exemption under Notification No. 105/80-C.E. - value of clearances for home consumption - goods cleared for export excluded from exemption computation - manufacturer within the meaning of Section 2(f) - valuation under Section 4 - first proviso to Section 4(1)(a) and the concept of a class of buyers - Notification No. 120/75-C.E. - invoice value option - proviso to Section 11A(1) - extended period for suppressionGoods cleared for export excluded from exemption computation - exemption under Notification No. 105/80-C.E. - Whether value of goods supplied to HOC and exported by HOC should be excluded from computation of clearances for grant of exemption under Notification No. 105/80-C.E. - HELD THAT: - Notification No. 105/80-C.E. applies to first clearances for home consumption and therefore clearances made for export are not to be included in computing the value of clearances for the purpose of the exemption. The Tribunal follows its earlier decision in M/s. International Minelmech P. Ltd. that actual export by the buyer is sufficient and it is not necessary that the goods be exported directly from the manufacturer's factory. In the present case the appellants claimed the goods supplied to HOC were exported by HOC and produced some documents to Collector (Appeals), but the Collector (Appeals) did not examine them on the ground that exports were not effected directly from the appellants' factory. Because entitlement to the exemption therefore depends on factual proof that the goods supplied to HOC were actually exported, the Tribunal directed a limited remand for re-determination by the Assistant Collector after allowing the appellants an opportunity to produce documentary evidence and to be heard. [Paras 10, 15]Remanded to the Assistant Collector for redetermination of the value of clearances after excluding the value of those goods supplied to HOC which the appellants can establish were actually exported by HOC, with opportunity to produce evidence and personal hearing.Manufacturer within the meaning of Section 2(f) - valuation under Section 4 - first proviso to Section 4(1)(a) and the concept of a class of buyers - Notification No. 120/75-C.E. - invoice value option - Proper assessable value of goods supplied to HOC for excise liability and whether valuation can be based on material cost plus conversion charges or must follow market sales value. - HELD THAT: - The Tribunal held that the appellants are the manufacturers within the meaning of Section 2(f) and therefore liable to determine assessable value under Section 4. The 93% of production supplied to HOC were not sales but supplies for conversion with only conversion charges recovered; HOC does not constitute a class of buyers for the purpose of the first proviso to Section 4(1)(a). Since identical goods were sold to independent buyers at the market price, that market value must be applied to the supplies to HOC. The alternative contention invoking Notification No. 120/75-C.E. (invoice value option) fails because its benefit requires a sale and compliance with the notification's conditions, which are not satisfied where no sale to HOC has occurred. The Collector (Appeals) valuation adopting the market price is therefore correct. [Paras 11, 13, 15]Upholds valuation adopted by Collector (Appeals): goods supplied to HOC to be valued at the same market price as goods sold to independent buyers; Notification No. 120/75-C.E. inapplicable as no sale took place.Proviso to Section 11A(1) - extended period for suppression - Whether the extended fiveyear limitation under the proviso to Section 11A(1) is attracted on the ground of suppression/misdeclaration by the appellants. - HELD THAT: - The show cause notice alleged that the appellants' earlier declaration did not reveal the bifurcation between conversion charges for supplies to HOC and market sales value, and thus misdeclared particulars of clearances. The Tribunal found that the declaration dated 361982 did not disclose that different values had been adopted for market sales and for supplies to HOC, which amounted to suppression of material facts. On that basis the Collector (Appeals) was justified in invoking the extended period under the proviso to Section 11A(1). Consequently any demand for duty is not barred by limitation. [Paras 14, 15]Finds suppression in the declaration and upholds invocation of the extended fiveyear limitation period under the proviso to Section 11A(1); demand not timebarred.Final Conclusion: The Tribunal upholds the Collector (Appeals) on valuation (market value to be applied to supplies to HOC) and on limitation (extended period applicable for suppression), but remands the limited factual question whether the goods supplied to HOC were actually exported-if proved by documentary evidence the value of such exported goods is to be excluded from computation of clearances for the exemption; the Assistant Collector is to redetermine after giving the appellants an opportunity for production of evidence and personal hearing. Issues Involved:1. Admissibility of the exemption under Notification No. 105/80-C.E., dated 19-6-1980.2. Valuation of the goods.Detailed Analysis:1. Admissibility of Exemption under Notification No. 105/80-C.E.The appellants manufactured 3-3' Diamino Diphenyl Sulphone (DADS) from Dinitro Diphenyl Sulphone (DNDS) supplied by Hindustan Organic Chemicals Ltd. (HOC). They supplied 93% of the DADS to HOC and sold the remaining 7% in the market. They claimed exemption under Notification No. 105/80-C.E. for the years 1981-82 and 1982-83, without applying for a central excise license.The Superintendent of Central Excise issued a show cause notice, alleging incorrect valuation for the DADS supplied to HOC, asserting that the correct assessable value should be Rs. 63/- per Kg., as in the case of DADS sold in the market. This would make the total value of clearances exceed Rs. 30 lakhs, thereby disqualifying them from the exemption under Notification No. 105/80-C.E.The Assistant Collector initially dropped the charges, holding that HOC were the manufacturers and the goods supplied to HOC were meant for export, thus should not be included in the value of clearances for the exemption purpose. However, the Collector (Appeals) overturned this decision, holding that the appellants were the manufacturers and the value of goods supplied to HOC should be included in the clearances for determining eligibility for exemption. The Collector (Appeals) also held that the appellants suppressed facts and filed wrong declarations, justifying the extended time limit of 5 years for demanding duty.The Tribunal observed that Notification No. 105/80-C.E. exempts goods cleared for home consumption up to Rs. 30 lakhs. Goods cleared for export should not be included in this value. The Tribunal relied on its decision in the case of M/s. International Minelmech P. Ltd. v. Collector of Central Excise, Meerut, holding that goods meant for export should not be included in the computation of clearance value, even if not directly exported from the factory. The Tribunal remanded the case to the Assistant Collector for re-determination of the value of clearances, excluding the value of goods actually exported by HOC, based on documentary evidence.2. Valuation of the GoodsThe appellants adopted an assessable value of Rs. 30.48 per Kg. for DADS supplied to HOC and Rs. 63.00 per Kg. for DADS sold in the market. The Collector (Appeals) held that the value for goods supplied to HOC should be the same as for those sold in the market, i.e., Rs. 63.00 per Kg., as there was no sale to HOC in the ordinary course, and HOC cannot be considered a separate class of buyers.The Tribunal agreed with this valuation, stating that 7% of the goods sold in the market at Rs. 63.00 per Kg. should set the assessable value for the 93% supplied to HOC. The Tribunal dismissed the appellants' reliance on decisions reported in 1987 (29) E.L.T. 167 (Tribunal) and 1987 (12) ECR 421 (App. Collector), as the facts in those cases were not similar to the present case.The Tribunal also rejected the appellants' argument for adopting the invoice value under Notification No. 120/75-C.E., as there was no sale to HOC, and the conditions of the notification were not fulfilled.ConclusionThe Tribunal upheld the Collector (Appeals) decision on the valuation of goods and the applicability of the extended time limit for demanding duty due to suppression of facts. The case was remanded to the Assistant Collector to re-determine the value of clearances after excluding the value of goods supplied to HOC and actually exported by them, based on documentary evidence. The appellants were to be given an opportunity to produce evidence and a personal hearing before the re-determination.