The Chandigarh bench of Customs Excise and Service Tax Appellate Tribunal (CESTAT) held that the demand of duty for clearing goods as per Rule 8 of Central Excise (Valuation) Rules, 2000 is not justifiable if the report of Deputy Director (Cost) is not provided and allowed the appeal by Avon Steel Industries Pvt. Ltd (The Appellant) against The Commissioner of Central Excise (CCE) (The Respondent).
After the audit of the appellant, the revenue came to the conclusion that the appellant was 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 and a show-cause notice demanding duty of Rs.43,52,529/- along with penalty and interest was issued to the appellant. The show-cause notice was adjudicated 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.
Sudeep Singh Bhangoo, the counsel who appeared on behalf of the appellant submitted 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.
The counsel further submitted that the Department had relied on the report of the Director (Cost), Central Excise, regarding the certificate issued by the independent Chartered/ Cost Accountant which was submitted to the Department before the issuance of show-cause notice; the Department had not produced the copy of the certificate issued by Deputy Director (Cost) and have not specified as to how the said Deputy Director had arrived at different figures for calculation; extracts of the report were shown to the appellant only at the time of personal hearing before the Commissioner (Appeals); and this was a clear violation of principles of natural justice.
Harish Kapoor, the counsel who appeared on behalf of the revenue reiterates the findings of the impugned order and submitted that all the issues raised by the appellants had been discussed by the Appellate Authority and the appellant’s contention that the expenses under job-work charges needs to be deducted is not correct in terms of Point No. 5.3 of Chapter 3 of Revised Guidance Note on Cost Accounting Standard on cost of production for captive consumption (CAS-4) job charges are direct expenses to be included in the calculation of the assessable value.
The two-member bench consisting of S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) after hearing both sides held that “we are of the considered opinion that the impugned order is not sustainable and is liable to be set aside. It is to make it clear that we are not going, at this juncture, into the issue of limitation or revenue neutrality as we find that the appeal survives on merits. In the result, the impugned order is set aside and appeal is allowed” and the appeal was allowed.
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