TaxTMI 
TaxTMI 
2026 (7) TMI 1126
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....er proviso to Section 11A of the Central Excise Act, 1944 alongwith interest under Section 11AB (now Section 11AA) and penalty under Section 11AC of the said Act. In the show cause notice, sale price to unrelated buyers in the range of Rs. 65,000/- to Rs.70,000/- Per MT was adopted to demand differential duty on clearance to related party sales that remained constant @ Rs. 50,000/- Per MT throughout the period of five years. 1.1 The matter was initially decided by the Commissioner vide order dated 26.04.2011 wherein he confirmed the demand along with interest and penalty. This order was challenged by the appellant before CESTAT Ahmedabad which vide order No. A/10826/2019 dated 09.05.2019 set aside the above order and remanded the matter to the adjudicating authority for deciding afresh after considering the amendment in Rule 8 of the Central Excise Valuation Rules, 2000, Board Circular dated 25.11.2013 and various judgments passed by the Tribunal including decision in the case of M/s Ultratech Cement Ltd. and M/s. Surya Roshni Ltd. 1.2 In remand proceedings, Learned Commissioner considered the submissions of appellant, Board's Circular, various decisions of the Tribunal and o....
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....unal, categorically observed that Rule 8 was substituted vide Notification No. 14/2013-CE (N.T) dated 22.11.2013 and the scope of new Rule vis-a-vis old rule was explained in the Board's Circular dated 25.11.2013. The substituted provisions of Rule 8 clearly provided for its application irrespective of whether the whole or a part of manufactured goods are cleared for captive consumption. These amendments in the rule addressed the issues already clarified vide Board Circular dated 01.07.2002. Therefore, provision for application of 110%/115% of cost of production to be adopted for valuation has all along been the same. e) It has been held in various decisions such as CCE, Bopur vs. Ratan Melting & Wire Industries, reported in 2008 (231) ELT 22 (SC.), Siva Industries and Holdings Ltd vs. Commissioner of S.T, Chennai-2017 (47) S.T.R 126 (Mad.), Prayas Engineering Ltd vs. Commissioner of C.EX. S.T, Vadodara-I-2015 (37) S.T.R 508 (Tri-Ahmd.) Commissioner of C.EX. & Customs Vs. Stovec Industries Ltd.-2014 (33) S.T.R 124 (Guj.), Ambuja Cements Ltd Vs. Union of India-2009 (14) S.T.R 3 (P &H) that Board's circulars are binding on the field authorities. Learned Commissioner has not ....
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....in nature and it was applicable to the pending cases as per Circular No. 975/9/2013 dated 25.11.2013. Considering such position of law, it was held that Rule 8 was applicable for valuation of goods cleared on basis stock transfer to the sister concern. Similar view was held by CESTAT Delhi in Surya Roshni case (cited supra), which relied upon the decision of Hon'ble Apex Court in Fiat India case reported at 2012 (283) ELT 161. He therefore, pleads that the value of goods calculated @ 110% of the cost of production of goods is proper and there is no case of evasion of any excise duty. 3.1 On limitation, Learned Advocate pleads that the appellant has regularly filed ER-1 returns with the department and hence, there is no suppression or mistatment of facts. He relies on the decision of Hon'ble Gujarat High Court in the case of CCE, Bhavnagar Vs. Ultratech Cement Pvt. Ltd-2014 (32) ELT 334(Guj.) which held that invocation of extended period for demanding differential duty is not justified, since monthly returns have been regularly filed by the assessee indicating all possible details. Learned Advocate further relied on the decision of CESTAT Hyderabad in the case of Rashtriya Ispat ....
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....only a part has taken for captive consumption and about 90% have been sold to independent buyers. It held that in this situation, Rule 4 of the Central Excise Valuation Rules, 2000 will apply as sale price to independent buyers was available. Similar finding was given by CESTAT Delhi in the case of Jindal Steel & Power Ltd reported at 2017 (3) TMI 1085 which held that if there are independent sales of similar items, then the provisions of Rule 8 of Valuation Rules, 2000 will not apply. 4.1 Learned AR also cited the decision of CESTAT Kolkata in the case of M/s. SAIL [2010 (251) ELT 571] and in Gangotri Electrocastings Ltd case [2013 (293) ELT 395] to plead that Rule 8 will not be applicable where only a part of excisable goods are consumed captively and the balance quantity is sold to independent buyers. In both the cases, decision of Larger Bench in Ispat Industries case has been relied. 4.2 Learned AR also justified invocation of extended period on the ground that the appellant has not separately shown clearance of Bromine to Vadodara unit in their ER-1 returns and showed combined clearance quantity and clearance value. Thus, the appellant has wilfully suppressed the fact t....
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....or the buyer is a holding company or subsidiary Explanation. - In this clause "holding company" and "subsidiary company" shall have the same meanings as in the Companies Act, 1956 (1 of 1956). (b) In any other case, the value shall be determined as if they are not related persons for the purpose of sub-section (1) of section 4. Rule 11. If the value of any excisable goods cannot be determined under the foregoing rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and subsection (1) of section 4 of the Act. 5.1 A bare reading of the extracted provisions indicates that Rules 9 and 10 are applicable only in situations where the entire batch of goods is sold to a related party. This would have ordinarily excluded applicability of those Rules in the present case, given that the assessee was selling its products partly to independent buyers and partly to related buyers. The only remaining option would have been taking recourse to Rule 11, the residuary provision which addresses scenarios that are not otherwise covered by the Central Excise Valuation Rules. The Rule refers b....
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....th this situation where only a part of manufactured goods were consumed captively and the rest were sold to independent buyers. It was held in these relied upon decisions that sale price to independent buyers shall be adopted for valuation of goods cleared for captive consumption. Even the decision in case of Rashtriya Ispat Nigam Ltd relied by the appellant also upholds valuation of captively consumed goods on the basis of price at which goods are sold to independent buyers. 5.5 In case of Ispat Industries Ltd. [2007 (209) E.L.T. 185 (Tri.-LB)] following has been held: "5. We have considered the rival submissions and are of the view that the assessee is correct in contending that provisions of Rule 8 would apply only in a case where its entire production of a particular commodity is captively consumed. This is evident on a plain reading of Rule 8 of the valuation rules, which reads as under "Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufacture of such goods" (emphasis....
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....e submission of the assessee that even if both the rules, i.e. Rule 4 and Rule 8, were applicable, it would only be logical to read and apply the various rules in the Central Excise Valuation Rules in a sequential manner. Though the Central Excise Valuation Rules, 2000 do not specifically prescribe such sequential application of various rules, the same, in our view, is the only reasonable way to read these rules. Any other interpretation would only lead to confusion and chaos. Since the applicability of Rule 4 is not really in dispute, there was no need to look further and regardless of the applicability or otherwise of Rule 8, the assessable value should have been determined in terms of Rule 4 of the Valuation Rules. 8. The conclusion that we are drawing in the present case would lead to determination of a value which, in our view, will not only be reasonable but also consistent with the provisions of Section 4 of the Central Excise Act. We would, at this stage, draw support from the judgment of the Supreme Court in the assessee's own case, as reported in 2006 (202) E.L.T. 561 (S.C.), wherein the Court applied "The Gunapradhan Principle" in interpreting the C....
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....s per Rule 8 of the Valuation Rules. 3. After hearing both the sides and on perusal of the records, we find that the issue is no more res integra, in view of the decision of the Larger Bench of the Tribunal in the case of Ispat Industries Ltd. v. Commissioner of Central Excise, Raigad - 2007 (209) E.L.T. 185 (Tri.-LB), which was followed by this Bench in the case of Jai Corporation v. Commissioner of Central Excise & Service Tax, Daman - 2015 (317) E.L.T. 353 (Tri.-Ahmd). In the case of Jai Corporation (supra), the Tribunal, allowed the appeal of the assessee, observed as under :- "6. At the outset, we would like to recall that there is no dispute as to the fact that as the appellant had valued the products cleared by them to their sister concern on the value which is charged by them to independent buyers. 7. Admittedly, the clearance made to their sister concern would fall under the provisions of Section 4(i)(b) of the Central Excise Act, 1944, as the clearance to their sister concern is not a sale. We find that for determining the correct value under Section 4(i)(b) of the Central Excise Act, 1944, provisions of Central Excise Valuation Rules, 2000 need....
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....ak Vs. Merino Panel Product Ltd reported at 2023 (383)ELT 129 (S.C). The duty demand in this case pertained to Financial Year 2009-2010 and 2010-2011 and the goods were partly sold to independent buyers at higher price and partly at lower price to related parties. It was held that the price charged from independent parties under Section 4(1)(a) of the central Excise Act, 1944 being readily available, can be transposed onto related party purchases as well, to arrive at assessable value. It also upheld invocation of extended period as undervaluation of sales made to related parties was suppressed facts and assessee failed to provide accurate information to revenue regarding its sales. The relevant Paras of the decision are reproduced below:- 35. The unequivocal position which emerges before us is that the price charged from independent parties for the sale of excisable goods can be used as a benchmark for determination of excise duty on related transactions when such a price is readily available. However, we add the caveat that when making such calculations via transposition, the Revenue cannot act in a mechanical way. The assessment of the appropriate value of the related p....
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....facts and failed to provide accurate information regarding its sales to the Revenue. To this extent, there is a finding of fact against the Assessee. At the same time, we are of the considered view that since the Revenue itself appeared to be unclear on the correct method of valuation of the goods, it is not appropriate to saddle the Respondent with additional liability, namely, other than the excise duty. Hence, though we confirm the demand made by the Appellant, we do not approve the levy of interest and penalties upon the Respondent, and direct that these amounts be reduced from the total recoverable amount from the Assessee. D. CONCLUSION 39. Having held so, we can now bring this matter to a close. For the purposes of current dispute, it suffices for us to clarify that Point No. 12 in the Circular of 01.07.2002 is not contrary to the intent of the CEA and CEVR and the object behind it is to merely use "reasonable means" as outlined under Rule 11 of the CEVR, in conformity with Section 4(1)(a) of the CEA and Rule 9 of the CEVR, so as to reach the assessable value of goods for determination of excise duty. 40. When the normal price that is ordinarily ch....