2024 (11) TMI 1474 - AT - Central Excise

CENVAT Credit - Method of valuation - captive consumption - clearance of goods to other units which were being used as inputs and those units were paying excise duty on the finished products cleared - Rule 8 of the Valuation Rules 2000 - time limitation. Method of Valuation - HELD THAT - In the present case there is no dispute that the demand has been raised for the clearances made by the Appellant to their own other units for their captive consumption - The value adopted by the appellant is based on the CAS-4 certificate issued by the cost accountant. Just because the previous month s value was adopted for clearance during the next month it does not make out any case of undervaluation. Admittedly the CENVAT Credit is available for the receiving unit. Time limitation - HELD THAT - The appellants have been filing their monthly Returns showing details of clearances made to their unit. Thus neither the details of such clearances nor the value and duty for such clearances have been suppressed. It is also observed that the other units of (belonging to the same appellant) are taking the CENVAT Credit. In such a case there would be complete absence of suppression with no intention to evade coming to light. Hence the confirmed demand for the extended period is not legally sustainable. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the valuation adopted by the appellant for clearances made to their own other units (for captive consumption) under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, is legally correct and valid.

- Whether the use of a previous month's costing (CAS-4 certificate) for subsequent clearances amounts to undervaluation and results in lower payment of excise duty.

- Whether the excise duty paid by the appellant on such clearances is eligible for CENVAT Credit at the receiving units, and if so, whether this negates any allegation of undervaluation or suppression.

- Whether the demand confirmed by the adjudicating authority is barred by limitation (time-barred) due to the appellant's disclosure of the clearances and value in monthly ER-1 Returns.

- Whether there was any suppression of facts or intent to evade duty by the appellant in adopting the valuation method and filing returns.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Valuation Method under Rule 8 of the Valuation Rules

Relevant legal framework and precedents: Rule 8 of the Central Excise Valuation Rules, 2000, provides that where excisable goods are not sold but used for consumption in the manufacture of other articles, the value of such goods shall be 110% of the cost of production or manufacture.

Court's interpretation and reasoning: The Court noted that the appellant cleared goods to their own other units for captive consumption, which qualifies under Rule 8. The appellant adopted the assessable value based on the CAS-4 certificate issued by a cost accountant, adding 10% profit as prescribed. The Tribunal held that this method of valuation is consistent with Rule 8 and is legally permissible.

Key evidence and findings: The appellant consistently submitted CAS-4 certificates and paid excise duty based on the costing plus 10% profit. The goods cleared to other units were inputs for further manufacture, and the receiving units paid excise duty on finished goods.

Application of law to facts: Since the clearances were for captive consumption and the valuation was based on certified costing plus 10%, the appellant complied with the statutory valuation method. The Tribunal rejected the Revenue's contention that the valuation was improper.

Treatment of competing arguments: The Revenue argued that the valuation was incorrect because the appellant used previous month's costing for subsequent clearances, potentially resulting in undervaluation. The Tribunal found that mere adoption of previous month's costing does not constitute undervaluation if the method conforms to Rule 8 and is supported by CAS-4 certificates.

Conclusion: The valuation adopted by the appellant under Rule 8 is legally valid and does not amount to undervaluation.

Issue 2: Allegation of Undervaluation and Suppression

Relevant legal framework and precedents: The principle of valuation under Rule 8 and the requirement of accurate disclosure in ER-1 Returns are central. Additionally, the concept of revenue neutrality when CENVAT Credit is availed by the receiving unit is relevant.

Court's interpretation and reasoning: The Tribunal observed that the appellant disclosed the clearances and values in monthly ER-1 Returns, and the excise duty paid was eligible for CENVAT Credit at the receiving units. This establishes a revenue-neutral situation, negating any presumption of suppression or intent to evade duty.

Key evidence and findings: The appellant's regular submission of CAS-4 certificates, disclosure of clearances in returns, and the receiving units' availing of CENVAT Credit were undisputed facts.

Application of law to facts: Since the duty was paid and credit availed downstream, there was no loss to revenue. The Tribunal held that in such circumstances, allegations of suppression or undervaluation lack legal basis.

Treatment of competing arguments: The Revenue's contention of suppression was rejected due to absence of concealment and the transparent disclosure by the appellant.

Conclusion: No suppression or undervaluation was established; the appellant's conduct was bona fide and compliant.

Issue 3: Time-Bar (Limitation) on Confirmed Demand

Relevant legal framework and precedents: The law on limitation for raising demands requires that the department act within prescribed periods unless suppression or fraud is established.

Court's interpretation and reasoning: The Tribunal found that since the appellant disclosed all relevant details in monthly ER-1 Returns and there was no suppression or intent to evade duty, the extended period demand was not sustainable. The absence of concealment precludes invoking extended limitation provisions.

Key evidence and findings: The appellant's returns consistently showed the clearances and values, and the receiving units claimed CENVAT Credit. No evidence of concealment was found.

Application of law to facts: The Tribunal applied the principle that limitation cannot be extended in absence of suppression or fraud. Therefore, the demand raised beyond the normal period was time-barred.

Treatment of competing arguments: The Revenue's reliance on extended limitation was rejected due to lack of suppression or concealment.

Conclusion: The confirmed demand for the extended period is barred by limitation and is set aside.

3. SIGNIFICANT HOLDINGS

- "Just because the previous month's value was adopted for clearance during the next month, it does not make out any case of undervaluation."

- "The excise duty paid by the appellant is eligible as CENVAT Credit at the other end, resulting in a revenue neutral situation; in such cases, the allegation of suppression with intent to evade duty cannot sustain."

- "The appellants have been filing their monthly Returns showing details of clearances made to their unit. Thus, neither the details of such clearances, nor the value and duty for such clearances have been suppressed."

- "In such a case, there would be complete absence of suppression with no intention to evade coming to light. Hence, we hold that the confirmed demand for the extended period is not legally sustainable."

- The Tribunal conclusively held that the valuation method under Rule 8 adopted by the appellant is legally correct, the demand based on alleged undervaluation is unsustainable, and the extended period demand is barred by limitation due to absence of suppression or concealment.