Valuation of barreled Bitumen: depot treated as place of removal, packing cost includible; extended limitation rejected; Cenvat allowed.

Valuation of barreled Bitumen was addressed by treating the depot as the place of removal, requiring valuation under transaction value provisions read with the determination of value rules rather than at refinery; consequently packing cost for barrels is includible where goods are normally sold in packed form from depots. Invocation of the extended limitation period was rejected on available facts, and penalty under the cited excise provision was set aside while permitting departmental consideration under the rules. Cenvat credit for duty paid on purchase of barrels used for packing prior to clearance was allowed. Matter remanded for redetermination of duty for the normal period with interest and applicable penalty considerations.

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Issues: (i) Whether cost of barrels/packing may be deducted from the sale price of barreled Bitumen sold from depots for determining assessable value; (ii) Whether extended period of limitation and penalty under Section 11AC are invocable for alleged suppression; (iii) Whether Cenvat credit of duty paid on barrels used for packing at depots is admissible.

Issue (i): Whether cost of barrels/packing is deductible from the sale price of barreled Bitumen sold from depots for determining assessable value.

Analysis: The goods packed in barrels at depots are not sold from the refinery; Section 4(1)(a) is therefore not applicable for such packed goods. Section 4(3)(c) treats a depot as a place of removal and Section 4(3)(cc) deems the time of removal for goods cleared from a depot to be the time at which such goods are cleared from the factory. Where goods are not sold at the time and place of removal and are transferred to a depot for sale, Rule 7 of the Central Excise Valuation Rules, 2000 governs valuation and requires adoption of the normal transaction value of such goods sold from the depot, including packing where appropriate. Relevant precedents and statutory provisions distinguishing bulk goods removed from factory and smaller packaged goods sold from depot were considered.

Conclusion: Cost of barrels/packing is not deductible from the sale price of barreled Bitumen for assessable value; valuation of barreled Bitumen is to be determined under Rule 7 and packing cost is includible.

Issue (ii): Whether extended period of limitation and penalty under Section 11AC are invocable for alleged suppression of duty on packing cost.

Analysis: The appellant had informed the department about the change in assessment practice by letter dated 20.05.2010 and there was no undisclosed suppression of facts. Invocation of extended period requires deliberate suppression with intent to evade duty. Given the prior intimation and absence of concealment, invocation of extended period and penalty under Section 11AC was examined and found not justified.

Conclusion: Extended period of limitation is not invocable and penalty under Section 11AC is set aside; department may consider penalty under Rule 25 of Central Excise Rules, 2002 if relevant.

Issue (iii): Whether Cenvat credit of duty paid on barrels used for packing at depots is admissible to the assessee.

Analysis: Depots from which barreled goods are cleared are to be treated as place of removal for those goods; inputs or input services used at depots to make goods marketable relate to manufacture and clearance. Tribunal decisions recognising Cenvat credit for packing materials delivered at depots and Supreme Court authority permitting inputs used outside factory were applied to the facts.

Conclusion: Cenvat credit of duty paid on purchase of barrels for packing at depots is admissible; appellant shall be liable to pay excise duty on the value so determined.

Final Conclusion: The appeals are partially allowed by remanding the matters to the adjudicating authority to re-determine duty liability for the normal period (with interest) in accordance with Rule 7 and to allow Cenvat credit for barrels; extended period and penalty under Section 11AC are set aside.

Ratio Decidendi: Where excisable goods are transferred to a depot and sold from the depot in packed form, Rule 7 governs valuation and the transaction value of such goods sold from the depot, including packing cost where packing is part of the goods as sold from the depot, must be adopted for assessable value.

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