By TIOL News Service

MUMBAI, FEB 14, 2017: THE appellant located at Pune is engaged in the manufacture of Hub front wheel for Zen and Drive Flange of Gypsy which is used for manufacture of Maruti vehicles. The appellant cleared the goods to the sister concern located at Garauli unit in Haryana on payment of CE duty by considering the value of the semi-finished goods.

It is the contention of the department that the goods cleared are fully finished goods and, therefore, valuation should be done under Rule 6(c)(iii) of CE Valuation Rules, 1975 and after 01.07.2000 under Rule 9 of CE Valuation Rules, 2000. Inasmuch as the sale price at which the goods were sold by Garauli unit to MarutiUdyog Ltd. should have been adopted for the clearance of the goods from Pune factory of the appellants, the Revenue contended.

A differential duty demand was confirmed by the AA and upheld by the Commissioner(A).

An appeal against this order came to be filed in the year 2006.

The matter was heard recently but none represented the appellant.

On going through the grounds of appeal, the Bench observed that the goods cleared by the appellant were not finished goods inasmuch as the process such as drilling, reeling, broaching were yet to be carried out by the recipient and thus the basis of the department's case that the goods cleared by the appellant are not semi-finished does not sustain.

The Bench also observed that the Garauli unit was paying excise duty on the sale price of the same goods after carrying out certain process and whatever duty ought to be paid by the appellant is available as modvat credit by the Garauli unit; therefore, demand should not sustain; that since Garauli unit cleared the same goods on payment of duty and availed the credit of the duty paid by the appellant's Pune unit, there is no question of suppression of fact and, therefore, the demand is hit by limitation.

The AR submitted that as per the statement given by the Director of the appellant company, the goods manufactured and cleared by the appellant were fully finished goods;that, therefore, the confessional statement has evidentiary value.

After considering the submissions, the Bench observed -

+ Revenue has solely relied upon the statement of the Director for holding that the goods cleared by the appellant are fully finished goods and no further process was required. However, the record maintained by the appellant i.e. route card clearly shows that the process such as drilling, reeling, broaching etc. were not carried out by the Pune unit, therefore, the said process were carried out by their Garauli unit.

+ When documentary evidences are available, statement alone cannot be relied upon. The record maintained by the appellant is not under dispute. Therefore, it is established that the goods cleared by the appellant to their Garauli unit was not fully finished. Therefore, the valuation could not have been done under Rule 6(c)(iii) of Central Excise Valuation Rules, 1975 and/or Rule 9 of Central Excise Valuation Rules 2000.

+ It is also noted that the goods manufactured by the appellant is exclusively meant for Maruti vehicles and subsequently sold by Garauli unit of the appellant on payment of duty on the sale value of the goods. Therefore, even if it is assumed there is some short payment at appellant's factory, the same was made good since the duty was finally paid by Garauli unit on sale price of the goods.

+ The Larger Bench decision of the Tribunal in Jay Yuhshin Ltd. vs. CCE - 2002-TIOL-126-CESTAT-DEL-LB supports the case of the appellant as in the present case also the transaction is of revenue neutrality.

Holding the demand confirmed as not sustainable, the impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-421-CESTAT-MUM)