Rule 8 of Valuation Not Applicable Where Goods Are Cleared to Independent Buyers as well as Sister Units: CESTAT Rules in favour of Steel Authority of India [Read Order]
The counsel submitted that the determination of value was done as per Rule 4 and not Rule 8 at the price at which the goods were sold to independent external customers.
The Customs, Excise and Service Tax AppellateTribunal (CESTAT), Kolkata Bench, ruled in favour of the Steel Authority of India wherein it was held that Rule 8 of the Valuation Rules is not applicable in cases where goods are cleared to independent buyers as well as sister units.
The facts of the case are that the appellant integrated steel plants at different places of the country. One such plant, Durgapur Steel Plant (DSP), is duly registered under the Central Excise Act, 1944 as well as the Finance Act, 1994 for carrying out manufacturing and other activities.
The ‘Annual Statistics’ submitted before the jurisdictional Central Excise authorities details the clearance of various steel scarps like processed steel scarps, steel turning and borings, mould splashing, rejected wheels. These are cleared upon payment of appropriate duty of excise to external customers and to its other sister units, including Alloy Steel Plant, Durgapur (ASP) for further use in the manufacture of other iron and steel products.
However, the appellant received a show cause notice issued by the Commission of Central Excise, Bolpur wherein it was alleged that the appellant had contravened the provisions of Rule 8 of Valuation Rules by allegedly under valuing the scraps and suppressing relevant facts without determining the correct duty liability with intent to evade duty.
The appellant replied to this notice by denying the allegations. However, the Joint Commissioner confirmed the demand of central excise duty of INR 1,27,02,287/- along with interest and penalty. When appealed to the Commissioner (Appeals), the previous order was upheld but set aside only the penalty imposed under Section 11AC of the Act. Still aggrieved, the appellant appealed before CESTAT.
The counsel submitted that the determination of value was done as per Rule 4 and not Rule 8 at the price at which the goods were sold to independent external customers. A number of judicial precedents were relied upon in furtherance of their submissions.
The CESTAT observed that the penalty set aside by the Commissioner (Appeals) as the appellant “did not have any intention to evade duty” thereby lacking mens rea. As per this reasoning, it should have also held, in the eyes of the bench, that the demand confirmed was also illegal. Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) also mentioned that Rule 8 is to be applied in cases where goods are sold only to sister units.
The demands of duty and penalty were set aside and found unsustainable and the appeal was allowed, accordingly.
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