By TIOL News Service

CHENNAI, SEPT 17, 2016: WHILE finalizing the valuation of interunit transfers, the Assistant Commissioner dropped the proposal to adopt the price of comparable goods, under Rule 6b(i) of the Central Excise (Valuation) Rules, 1975 and ordered that the value should be arrived at, in terms of Rule 6b(ii) of the Rules. The Assistant Commissioner also observed that the duty element on raw materials should be included in the cost. There is no challenge to this finding by the assessee. Consequently, the Superintendent quantified the demand as per the Assistant Commissioner's order.

The assessee filed appeal against the quantification of differential duty by the Superintendent. The appeal filed by the assessee was dismissed by the Commissioner (Appeals) as the order of Assistant Commissioner attained finality, but on further appeal, the Tribunal remanded the matter to the Superintendent. Aggrieved by the order of Tribunal remanding the matter to the Superintendent, who is not proper officer for finalization of assessment, revenue is in appeal before the High Court.

Revenue contended that the Commissioner (Appeals) had dismissed the respondent's appeal, on the ground that, the Assistant Commissioner's order, finalising provisional assessment, had not been challenged and consequently, the same has attained finality. Tribunal has remanded the matter to an authority, who is not empowered to issue any orders for finalisation of the provisional assessment and he is also bound by the directions, passed by the Assistant Commissioner. Unless the Assistant Commissioner's order is challenged and set aside, the Superintendent cannot be directed to consider the judgment in Dai Ichi Karkaria's case.

After hearing both sides, the High Court held:

++ As rightly contended by the standing counsel for the Central Excise and Service Tax Department, reasonable opportunity and personal hearing, have been given to the respondent/assessee, when adjudication was done.

++ Admittedly, the respondent/ assessee has accepted that the cost of construction declared by them under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 can be applied and prayed for further proceeding, which exactly, the Assistant Commissioner of Central Excise, has done, while passing the order-in-original dated 22.05.1998. As rightly contended, the order-in-original had attained finality and therefore by following the decision in CCE vs Flock India Pvt. Ltd. - 2002-TIOL-208-SC-CX , the Commissioner of Central Excise has, passed an order in Appeal No.216/2003 (Pondicherry) dated 12.06.2003, stating that there cannot be any indirect challenge to the order-in-original No.30/1998.

++ The direction that has been issued to the Superintendent is only to quantify the differential duty, if any, due to the inclusion duty element on the raw material and finalise RTI2 assessment in terms of Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975. In the light of the directions issued by the adjudicating authority, computation of differential duty on the basis of the cost of denatured ethyl alcohol worked out, while including the input duty paid, cannot be said to be an adjudicatory function, to be discharged by the Superintendent and therefore, an opportunity of hearing is not required.

++ The directions of the Tribunal, to the Jurisdictional Range officer to provide an opportunity of hearing, is not in accordance with the scheme of the Act and the rules framed thereunder, and hence the directions are liable to be set aside and accordingly set aside.

++ The second aspect of the case is whether the directions issued by the Tribunal to the Jurisdictional Superintendent to consider the submission of the assessee, in the light of the decision in Dai Ichi Karkaria Ltd. vs. Collector of Central Excise, Pune, reported in 1996 (81) E.L.T. 676 (Tribunal) has to be followed or not?

++ In the case on hand, provisional assessment has been directed to be finalised as per the order-in-original No.30/98 dated 22.05.1998 passed by the Assistant Commissioner of Central Excise, Central Excise Division, Cuddalore. Dai Ichi Karkaria's case has been decided on 11.08.1999. Perusal of the order-in-original dated 22.05.1998 does not indicate, any reference to the said judgment. The Appellate authority has passed the order on 12.06.2013, by which time, the Hon'ble court in Collector of Central Excise, Pune vs. Dai Ichi Karkaria Ltd - 2002-TIOL-79-SC-CX-LB has approved the decision of the Tribunal.

++ The decision of the Hon'ble Supreme Court dated 11.08.1999 was not placed before the appellate authority and considered. Had it been placed before the Commissioner of Central Excise, Cuddalore, it would have been considered and appropriate orders would have been passed, though the assessment order had reached finality. Directions to compute the differential duty, in terms of the said rule and Dai Ichi Karkaria would have been issued. Needless to state that judgment of the Hon'ble Supreme Court, is binding on all courts/tribunals/authorities, with reference to matters, pending on file.

++ The range jurisdictional officer is bound to take note of the decision of the Hon'ble Apex Court and compute the value of excisable goods under assessment. While doing so, the jurisdictional officer is under no obligation in law to provide an opportunity of hearing to the assessee. He is required to only compute the value and the differential duty, as per the rule and decision of the Hon'ble Apex Court.

(See 2016-TIOL-2145-HC-MAD-CX)