Once Ex-Factory Price List Is Approved, Dept Barred from Reassessing Valuation for Same Period: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that once the Assistant Collector has approved the ex-factory price list, the department cannot reopen valuation for the same period.

Mangalam Timber Products Ltd., the appellant, is a manufacturer of Medium Density Fibre Board (MDF) under Chapter 44 of the Central Excise Tariff Act, 1985. The company cleared a small portion of its goods to independent buyers from the factory and transferred the rest to depots across India.

The appellant filed price lists under Rule 173C of the Central Excise Rules, 1944, for approval by the Assistant Collector of Central Excise and Customs, Sambalpur Division.

On 27 March 1991, the Assistant Collector passed an order approving the price list based on ex-factory sales, holding that these prices were genuine and could be adopted for all clearances. The order attained finality, as the department did not challenge it before the Commissioner (Appeals).

Subsequently, the department issued a show cause notice on 22 September 1997 demanding Rs. 1,26,56,696 in duty for the period from 1 January 1988 to 31 March 1992, alleging undervaluation on clearances to depots.

The adjudicating authority confirmed the demand along with interest and penalty, and the Commissioner of Central Excise (Appeals) upheld the order. Aggrieved, the appellant approached the CESTAT.

The appellant’s counsel argued that the valuation issue had already been settled by the Assistant Collector’s order which accepted the ex-factory price as genuine. They submitted that since no appeal was filed against this order, it had reached finality and the department could not reopen valuation for the same period.

The department’s counsel argued that the appellant sold only a small quantity of goods at the factory gate to justify adopting lower prices for depot transfers, while the majority of sales through depots fetched higher realizations. They argued that the department was justified in demanding the differential duty.

The two-member bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that the Assistant Collector had already examined the same issue in 1991 and approved the price lists based on ex-factory prices after verifying supporting documents, including the Chartered Accountant’s certification of transportation and depot expenses.

It explained that the ex-factory prices were found genuine and no evidence was produced by the department to prove otherwise. The tribunal pointed out that since the Assistant Collector’s order had attained finality, the department had no authority to reopen valuation or raise fresh demands for the same period.

The tribunal set aside the impugned order and allowed the appeal both on merits and limitation, granting consequential relief as per law.

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