2024 (12) TMI 2 - AT - Central Excise

Clinkers transferred to sister units must be valued under Rule 4 with Rule 11, not Rule 8 of Central Excise Valuation Rules 2000

M/s. Ultra Tech Cements Ltd. Versus Commissioner of Central Excise, Belgaum and Commissioner of Central Excise, Mangalore

CESTAT Bangalore held that clinkers transferred to sister units should be valued under Rule 4 read with Rule 11 of Central Excise Valuation Rules, 2000, ... Valuation of goods transferred to sister units - clinkers transferred by the appellant to their sister concern - to be valued under Rule 4 or Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000? - Revenue Neutrality - Extended period of limitation - suppression of facts or not. HELD THAT:- This Tribunal in appellant’s own case for their own unit for the period from March 2011 to November 2013 held that Rule 4 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 be adopted following the judgment of the Larger Bench of the Tribunal in the case of Ispat Industries case [2007 (2) TMI 5 - CESTAT, MUMBAI-LB]. This Tribunal in M/S. ULTRATECH CEMENT LTD., (UNIT: RAJASHREE CEMENT WORKS), VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS [2024 (1) TMI 663 - CESTAT BANGALORE] observed 'we have no hesitation to hold that the appropriate rules for determination of the assessable value of the goods for the transferred clinkers to sister units will be Rule 4 read with 11 of the Central Excise Valuation Rules, 2004 rather than Rule 8 of the Central Excise Valuation Rules, 2000 for the period in question.' Revenue Neutrality - HELD THAT:- The appellant has argued that the aspect of revenue neutrality is not considered while deciding the case for earlier period. In support, they have referred to the judgment of the Hon’ble Supreme Court in Nirlon Ltd.’s case [2015 (5) TMI 101 - SUPREME COURT]. It is found that the said argument of the learned advocate is misplaced and the principle of law laid down by the Hon’ble Supreme Court has been misunderstood in ascertaining the correct method of valuation applicable for clearance of goods to own unit on stock transfer basis. The revenue neutrality is not a statutory concept but a principle of equity developed by courts as a mitigating factor in appreciating the intention of the persons while applying the principle of law to a particular situation to determine the reason for non-payment of duty. Revenue neutrality cannot be considered as an incentive not to follow the statutory provision governing principle of valuation solely on the ground that the other unit could avail the benefit of credit of the differential duty payable. Extended period of limitation - suppression of facts or not - HELD THAT:- This Tribunal for the earlier period while applying the principle of valuation under Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 to the circumstances of the case has set aside the demand for the extended period of limitation holding that the same cannot be applicable to cases involving interpretation of statutory principles of valuation and in absence of suppression or misdeclaration of facts on the part of the assessee. Appeal is modified to the extent of setting aside the demand for the extended period of limitation and the demand with interest to be confirmed for the normal period of limitation. All these appeals are remanded to the adjudicating authority to redetermine the assessable value applying the principle of Rule 4 read with Rule 11 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and compute the differential duty with interest for the normal period. As the issue pertains to interpretation of provision of Central Excise (Valuation) Rules, 2000 imposition of penalty is also not warranted and accordingly not sustainable, hence, set aside. Appeal disposed off by way of remand. Issues Involved:1. Determination of the correct rule for valuation of goods transferred to sister units: Rule 4 or Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.2. Applicability of revenue neutrality in determining the intention behind the valuation method adopted.3. Legitimacy of demands raised for the extended period of limitation.4. Imposition of penalties in cases involving interpretation of valuation rules.5. Entitlement to refund claims based on differences in valuation.Detailed Analysis:1. Valuation of Goods Transferred to Sister Units:The core issue revolves around whether the valuation of clinkers transferred to sister units should be governed by Rule 4 or Rule 8 of the Central Excise Valuation Rules, 2000. The Tribunal observed that Rule 4, which considers the value of such goods sold at a comparable time, should be preferred over Rule 8, which applies when goods are used for captive consumption. This preference is based on the sequential order of the rules and the judgment of the Larger Bench in the Ispat Industries case. The Tribunal held that Rule 4 read with Rule 11 should be applied to determine the assessable value, as it aligns more closely with the statutory provisions of Section 4 of the Central Excise Act, 1944.2. Revenue Neutrality:The appellant argued that the situation was revenue neutral, as any differential duty paid would be available as credit to their sister units. However, the Tribunal clarified that revenue neutrality is not a statutory concept but an equitable principle used to assess the intention behind the valuation method. The Tribunal noted that revenue neutrality cannot justify non-compliance with statutory provisions, as it does not negate the obligation to follow the correct valuation rules.3. Extended Period of Limitation:In Appeal No. E/939/2012, the appellant contended that the demand was barred by limitation, as there was no suppression or misdeclaration of facts. The Tribunal agreed, setting aside the demand for the extended period, as the issue involved interpretation of statutory valuation principles. The demand was confirmed only for the normal period of limitation.4. Imposition of Penalties:The Tribunal found that since the issue pertained to the interpretation of valuation rules, the imposition of penalties was unwarranted. It held that penalties are not sustainable in cases where the dispute arises from differing interpretations of statutory provisions, and accordingly, set aside the penalties imposed.5. Refund Claims:Regarding the refund claim in Appeal No. E/1445/2012, the Tribunal dismissed the appeal as infructuous. This was due to the remand of the matter to re-determine the assessable value, rendering the refund claim based on differences in the CAS-4 Certificate and actual production costs moot.Conclusion:The Tribunal remanded the appeals to the adjudicating authority to re-determine the assessable value using Rule 4 read with Rule 11 for the normal period of limitation. It set aside the penalties and dismissed the refund claim appeal as infructuous, disposing of all appeals on these terms.