Avon Steel Industries Pvt. Ltd. Vs Commissioner of Central Excise (CESTAT Chandigarh)
CESTAT Chandigarh held that duty demand valuing goods cleared to sister concern in term of rule 8 of the Central Excise (Valuation) Rules, 2000 (CVR, 2000) without any reasonable justification and without providing report of Deputy Director (Cost) is unsustainable in law.
Facts- The appellants are engaged in the manufacture of “HR Coils”; they sell the coils to related as well as unrelated parties. On conduct of an audit of the appellants, Revenue came to the conclusion that the appellant is clearing part of the final goods to their sister concerns and therefore, the valuation of the goods removed to the sister concerns should be, on the basis of cost plus 10%,in terms of Rule 8 of Central Excise (Valuation) Rules, 2000.
A show-cause notice demanding duty of Rs.43,52,529/- along with penalty and interest was issued to the appellants; the show-cause notice was adjudicated vide OIO wherein duty of Rs.29,17,703/- was confirmed under the extended period along with equal penalty u/s. 11AC of the Central Excise Act, 1944.
Conclusion- Held that as contended by the learned Counsel for the appellants, the report of the Deputy Director (Cost) was not provided to the appellants; the working papers on the basis of which the Deputy Director (Cost) has arrived at the figures are also not given; the same are not even explained in the show-cause notice. We find that this is a serious case of violation of principles of natural justice as the appellants have been denied an opportunity to analyse or counter the findings of the Deputy Director (Cost).
Held that no reasonable justification has been given to invoke the Valuation Rules except for making a bland averment that the appellants are clearing goods to their sister concerns at a lower price. The variation in the quality and thickness of the goods supplied to the sister concerns has not been distinctly brought out; no chemical analysis of the products has been made. We are of the considered opinion that prices of goods cleared to their sister concern are shown to have been less compared to their clearances of comparable goods to independent buyers, the Department has not made any case for taking recourse to CVR, 2000.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The appellants, M/s Avon Steel Industries Private Limited assail the Order-in-Appeal dated 06.06.2013 passed by the Commissioner (Appeals) of Central Excise, Chandigarh.
2. Brief facts of the case are that the appellants are engaged in the manufacture of “HR Coils”; they sell the coils to related as well as unrelated parties. On conduct of an audit of the appellants, Revenue came to the conclusion that the appellant is clearing part of the final goods to their sister concerns and therefore, the valuation of the goods removed to the sister concerns should be, on the basis of cost plus 10%,in terms of Rule 8 of Central Excise (Valuation) Rules, 2000. A show-cause notice dated 13.09.2010 demanding duty of Rs.43,52,529/- along with penalty and interest was issued to the appellants; the show-cause notice was adjudicated vide OIO dated 23.09.2011 wherein duty of Rs.29,17,703/- was confirmed under the extended period along with equal penalty under Section 11AC of the Central Excise Act, 1944.
3. Shri Sudeep Singh Bhangoo, learned Counsel for the appellant, submits that the price at which they clear their “HR Coils” to independent buyers as well as sister concerns depends on the thickness of the HR Coils; as the sale price to independent buyers was available and is comparable, there was no need to take recourse to Valuation Rules. He submits further that the Department has relied upon the report of the Deputy Director (Cost), Central Excise, disregarding the certificate issued by the independent Chartered/ Cost Accountant which was submitted to the Department before the issuance of show-cause notice; the Department has not made available the copy of the certificate issued by Deputy Director (Cost) and have not specified as to how the said Deputy Director has arrived at different figures for calculation; extracts of the report were shown to the appellants only at the time of personal hearing before the Commissioner (Appeals); he submits that this is a clear violation of principles of natural justice. He submits, also that in a case having identical facts, in case of their sister concern, “M/s Avon Tubes”, Tribunal has decided the issue in favour of the appellants.
3. Learned Counsel further submits that if the Revenue goes by the independent Chartered Accountant’s certificate, the price at which they have cleared goods to their sister concern is more than what is payable as per the report. He submits that Deputy Director (Cost) has seriously erred in including the job charges earned by them in respect of job-work performed by them to other manufacturers; if the said job charges are deducted, the prices at which HR Coils are cleared to their sister concerns are comparable to or more than the value indicated in the report and therefore, there was no scope for demand of differential duty. He submits alsothat the entire issue is revenue neutral as their sister concern would any way be eligible to avail CENVAT credit even if duty paid is at a higher price. He relies on the following cases:
