2018 (11) TMI 969 - AT - Central Excise

Valuation - place of removal - Whether the appellants have paid the duty at the time of removal from the factory with intention to resort to under valuation of excisable goods and with intent to evade the payment of respected cenvat duty for the respective period in dispute? Held that - The place of removal is not merely confined to the factory/ the place of manufacture but also includes a warehouse and even a Depot provided no duty at the time of shifting was paid and that the goods are sold after their clearance from the factory but from the place from where such goods are removed - For the present case, it is apparent and admitted fact that before removing goods from the appellants factory in Raipur to their Depot in Nagpur the appellants have paid the Excise Duty. In the given scenario the definition of transaction value acquires importance for the adjudication of the above question. It becomes clear that the value is a normal price that is the price at which such goods are ordinarily sold by the assessee to a buyer where the buyer is not the related persons and the price is the sole consideration - the differentiating fact of the present case is that the appellants are not removing the entire manufactured Silicon Manganese to their Deport rather they are selling the major portion thereof from the factory itself and the remaining is being transferred to the Depot to be sold to the further buyers. The bare perusal makes it clear that Rule 7 is invokable only in the case where the goods are not sold by the manufacturer/ assessee from the factory, which basically is the place of removal. It is in that case only that the transaction value has to be considered as the value at which the manufactured product is sold from the Depot to its buyer. That too, at or about the same time - the Silicon Manganese is simultaneously sold from the factory/place of manufacture itself that too the major portion of the manufacture and it is only the part produced which has been shifted to Depot for further sale to the buyers. The Department has wrongly invoked Rule 7 of Valuation Rules. The transaction value in the present case is the value at which the Silicon Manganese has been sold by the appellant at its factory gate, while transferring the unsold portion thereon to the Depot. Apparently and admittedly, the excise duty has been paid by the appellant at the said value. The question of alleged short payment does not at all arise. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Central Excise Valuation Rules 2000 regarding the place of removal and transaction value.
- Application of Rule 7 of Valuation Rules in the case of goods transferred to a Depot for sale.
- Determination of duty liability on excisable goods cleared through a Depot.
- Allegation of under-valuation and duty evasion by the appellants.

Analysis:

1. The judgment addresses the issue of the interpretation of Central Excise Valuation Rules 2000 concerning the place of removal and transaction value. The Department alleged that the appellants did not discharge their duty liability on finished goods cleared through a Depot as per the provisions of Central Excise Valuation Rules, 2007. The demands were confirmed by the Order-in-Original and Order-in-Appeals, except for one appeal where the demand was initially dropped but later restored by the Commissioner (Appeals), leading to all four appeals before the Tribunal.

2. The Tribunal heard arguments from both parties. The appellant contended that the demand was based on Rule 7 of Valuation Rules 2007, which contradicted the amended definition of place of removal. They argued that the Department wrongly invoked Rule 7 despite guidelines issued by the Department indicating under what circumstances it should be applied. The appellant cited relevant case laws to support their position and sought to set aside the order and allow the appeal.

3. The Department, represented by the ld. DR, rebutted the appellant's arguments, stating that the adjudicating authorities had given findings that the sale of finished goods through the Depot fell under the Central Excise Act and Valuation Rules. The Department justified the orders and requested the dismissal of the appeals.

4. After considering the arguments and examining the record, the Tribunal analyzed the definitions of place of removal and transaction value under the Central Excise Act. It noted that the appellants paid excise duty before transferring goods to the Depot for further sales. The Tribunal highlighted the importance of transaction value in determining the assessable value of goods cleared from the factory or warehouse.

5. The Tribunal specifically discussed the applicability of Rule 7 of Valuation Rules 2000, emphasizing that it was invokable only when goods were not sold from the factory, which was the place of removal. The Tribunal cited relevant case laws to support its interpretation, stating that Rule 7 was irrelevant and illegal in the present case where the majority of goods were sold from the factory itself. The Tribunal concluded that the Department wrongly invoked Rule 7 and set aside the orders, allowing the appeals with any consequential benefits.

6. The judgment was pronounced on 15.11.2018 by the Tribunal, comprising MR. C.L. MAHAR, MEMBER (TECHNICAL) and MRS. RACHNA GUPTA, MEMBER (JUDICIAL), with detailed reasoning provided for the decision.