1997 (6) TMI 147 - AT - Central Excise

Summary

Issues:
- Dispute regarding the valuation of ammonia compressors and accessories for the period 1981-82 to 1984-85.
- Allegations of undervaluation and duty evasion by the appellant.
- Application of SSI Notification 80/80 and exemption under Notification 80/62.
- Use of costing method by the adjudicating authority.
- Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

Analysis:

The appellant, engaged in manufacturing ammonia compressors and accessories, filed an appeal against the order-in-original No. 48/89, dated 28-9-1989. The dispute centered around the valuation of ammonia compressors and accessories for the period 1981-82 to 1984-85, with the appellant availing benefits under SSI Notification 80/80. The Central Excise Preventive staff alleged undervaluation by the appellant to evade duty, leading to a demand of Rs. 41,86,158.93 initially, later reduced to Rs. 4,38,695.78 as BED and Rs. 21,933.73 as SED in the impugned order. Additionally, a penalty of Rs. 5 lakhs was imposed on the appellant under Rule 173Q.

The show cause notices accused the appellant of undervaluing compressors by shifting value to duty-exempt accessories, which the appellant denied. The department alleged discrepancies in pricing compared to competitors, leading to duty evasion. The authority sought costing data from the Joint Director (Cost), which showed the appellant's declared prices were below cost. The adjudicating authority, in the impugned order, rejected the department's valuation method and adopted the costing data, leading to a demand based on the Advisor (Cost)'s calculations.

The adjudicating authority's decision to rely on the costing method was deemed unjustified, as it ignored rising costs over the years and lacked necessary margins. The rejection of the appellant's declared value and reliance on the costing data were found unsustainable. Even considering the costing data, the appellant's clearances did not exceed the exemption limit, rendering the demand unsustainable. Consequently, the imposition of the penalty was deemed unjustified, leading to the setting aside of the impugned order and allowing the appeal.