2022 (12) TMI 453 - SC - Central Excise

Valuation - sale made partly to related party and partly to independent party - incorrect method of valuing related party transactions or not - SCN issued by the Revenue noted that the CEVR did not contain any guidelines on the methodology to be adopted for discovering the assessable value of goods, when sales are made partially to both independent parties and related parties - extended period of limitation.

HELD THAT:- The CBEC Circular of 01.07.2002 is binding on the Revenue. If the show cause notice issued by the Revenue is found to be contrary to the Circular, it would prima facie result in abrogation of the uniformity and consistency which is strongly emphasized upon in RANADEY MICRONUTRIENTS VERSUS COLLECTOR OF CENTRAL EXCISE [1996 (9) TMI 124 - SUPREME COURT]. It goes without saying that the Revenue’s stance against its own circular can potentially lead to a chaotic situation where, with one hand, the Revenue would lay down instructions on how to interpret the relevant statutes and rules, and with the other hand, it would promptly disobey those very directions. Maintaining predictability in taxation law is of utmost importance and, for this reason, the Court should not accept an argument by the Revenue that waters down its own Circular as this would fall squarely within the contours of the prohibition outlined in PAPER PRODUCTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [1999 (8) TMI 70 - SUPREME COURT].

The presumption under Section 4(1)(a) is that the sale from an Assessee to an independent party is the proper valuation to be used for determining excise duty. Conversely, a rebuttable presumption can be drawn regarding related party transactions and the value at which goods are sold in such situations. Rule 9 would be sufficient to resolve this issue when sales are made only to related entities, but where both independent and related parties are involved, we must refer to other means. In this context, Rule 11 obliges the Revenue to use “reasonable means” consistent with the principles under Section 4(1) of the CEA to arrive at the appropriate value - the show cause notice and the order of the Commissioner proceed along the basis that Section 4(1)(b) is applicable as the Assessee and MIL and MSL are related parties. Section 4(1)(a) was deemed to be inapplicable as it addresses situations where the parties are not related.

Extended period of limitation - HELD THAT:- The justification of extending the period of limitation depends upon whether the Respondent-Assessee has suppressed 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

Levy of interest and penalty - HELD 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.

The demand made by the Appellant is confirmed, 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.

Appeal disposed off.