Valuation - Clearance to sister concerns at lower rates - Neither questions of facts nor any anticipated question of law would have any bearing on Revenue inasmuch as any outcome of this case will not detract from revenue neutral situation: CESTAT
By TIOL News Service
MUMBAI, SEPT 12, 2010: A valuation dispute is involved in this appeal of the Revenue. During the period of dispute (from October 1994 to June 2000), the respondent had cleared wire rods to their sister units at Tarapur and Borivli at lower rates when compared to the price charged to independent buyers in respect of identical goods. The department, therefore, issued periodical show-cause notices, covering the above period, to the respondent seeking to recover differential duty of over Rs.25 crores.
In each of the show-cause notices, the maximum rate charged to independent buyers during the relevant period was adopted as basis for determination of the assessable value of the goods transferred to the sister units in the same period , an exercise done in terms of rule 6(b)(i) of the Central Excise Valuation Rules, 1975.
The respondent contested the demand of duty on numerous grounds. They submitted that they had given various discounts to independent buyers, which required to be abated from the invoice value and the net value charged to independent buyer should have been taken as the basis for assessing the goods cleared to sister unit, under rule 6(b)(i).
After following the principles of natural justice, original authority confirmed demand of duty to the extent of Rs.16,69,98,005/- against the assessee by adopting the average of the rates charged to the independent buyers.
Against the order-in-original, both sides preferred appeals to the Commissioner(Appeals), the Revenue questioning the reduced demand of duty and the assessee challenging the entire demand. Disposing of both the appeals by a common order, Commissioner(Appeals) set aside the order-in-original and held the duty payments made by the assessee to be in order.
Hence the Revenue is before the CESTAT.
The Revenue representative placed reliance on the CESTAT decision in Crompton Greaves Ltd. vs. CCE, Aurangabad, where the Bench approved the method of valuation done under Rule 6(b)(i) and also upheld the adoption of maximum price at which the goods were sold to independent buyers as basis for assessing the goods sold to the sister unit. It is also pointed out, that though the civil appeal 7853 of 2004 filed by Crompton Greaves Ltd. was admitted by the Supreme Court on 17.12.2004, no stay of operation of the Tribunal order was granted.
The respondent assessee suggested that the case could be disposed of on the sole ground of revenue neutrality. It was submitted that whatever differential amount of duty paid by respondent for the period of dispute would be available as CENVAT credit to their sister units and, therefore, a typical revenue neutral situation exists. In this connection, the following judgments were relied upon:
(a) CCE, Pune vs. Coca Cola India Pvt. Ltd. [2007-TIOL-245-SC-CX]
(b) India Pistons Ltd. vs. CCE [2007-TIOL-2010-CESTAT-MAD]
It was also submitted that apart from the fact that the valuation dispute pertains to the period prior to 01.07.2000, the same is not of recurring nature and the issue is only of academic interest inasmuch as any amount of duty which may be paid by the assessee must be available as CENVAT credit to their sister unit without any abatement, thereby giving rise to a revenue neutral situation. It was also suggested that whatever questions of facts or law arising in this case could be left open.
However, the Revenue representative insisted for a decision on merits.
The Bench after going through the submissions observed –
“7. …, we are inclined to dispose of this case, for the ends of justice, by taking into account, the revenue neutral situation pointed out by the Counsel. The valuation dispute involved in this case is prima facie not relevant to the period from 01.07.2000. Nobody has claimed that a similar dispute between the assessee and Revenue for any other period prior to 01.07.2000 is up-coming. Apparently, the issue has no recurring effect and is only of academic interest. It is not in dispute that any amount of duty paid by the assessee will be available as CENVAT credit, without abatement, to their sister units, in which event a revenue neutral situation would emerge it. In the case of Coca Cola India Pvt. Ltd. (supra), the Hon'ble Supreme Court considered a similar situation and disposed of the case, leaving a question of law open. In the case of India Pistons Ltd. (supra), similar course of action was taken by the Tribunal. In the instant case, questions of facts do arise and, of course, a question of law is also in sight. Neither the questions of facts nor any anticipated question of law would have any bearing on Revenue inasmuch as any outcome of this case will not detract from the revenue neutral situation . Whatever duty paid by the assessee must be available as CENVAT credit to their sister units. The appellant neither stands to gain nor stands to loose. In this view of the matter, we dispose of this appeal without expressing any view on the questions of fact/law involved in this case.”
All great ideas are dangerous – Oscar Wilde, De Profundis
(See 2010-TIOL-1176-CESTAT-MUM in 'Excise')