The court ruled that the invocation of the extended period of limitation was unsustainable due to the Revenue's awareness of the appellant's valuation methods, resulting in the appeal being allowed.

Per: Shri P. Dinesha

This Appeal is filed against Order-in-Original No. 48/2016-Commr. dated 30.12.2016 passed by Commissioner of Central Excise, Coimbatore.

2. Brief and relevant facts as could be gathered from the Appeal records as well as the written submissions are that Appellant is a manufacturer of goods such as Parts of Textile machinery like ‘Rings & Spindles’, ‘Gears’ and ‘Bearings’ etc. They were removing the goods on payment of duty on stock transfer basis to their sister units for further use in the manufacture of textiles machinery following self- assessments and self-removal procedure under the provisions of Central Excise Rules (CER), 2002. They were also availing the facility of Cenvat credit on inputs, capital goods and input services under the provisions of Cenvat Credit Rules (CCR), 2004. However, they had stopped the manufacturing activity and closed down their factory with effect from October 2012 onwards and had shifted their plant and machinery to LMW-Unit I, Perianaickenpalayam by way of merger. It appeared to the Revenue that Appellant had contravened the provisions of(i) Rule 6 of CER inasmuch as they had failed to correctly assess themselves and appropriate value of goods cleared on stock transfer basis to their sister units and the duty payable thereon;(ii) Rule 8 of CER as they had failed to pay appropriate duty liability on the above goods;(iii) Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules (CEVR), 2000 read with Section 4 (1) (b) of Central Excise Act, 1944 and Rule 9 of CEVR 2000; and(iv) Rule 12 of CER as they had failed to file the correct details of the goods cleared in the E.R.1 returns and failed to discharge the differential duty liability within the specified date for the goods cleared during the Financial Years from 2009-10, to 2012-13, resulting in short payment of duty amounting to Rs.2,48,93,177/-. The above was therefore proposed to be recoverable under Section 11A (1) (as it existed upto 07.04.2011) and Section 11A (4) (w.e.f. 08.04.2011 onwards) of the Act ibid, along with equal penalty under Section 11A C of the Act ibid along with read with Rule 25 of CER.

3. It was observed by the Revenue that the goods removed by Appellant on stock transfer basis were in the nature of semi-finished goods which were subsequently consumed captively for further use in the manufacture of textile machinery by the respective sister units and they in turn cleared the textile machinery manufactured on payment of duty, sister units did not clear any goods received from Appellant ‘as such’ on payment of duty. It appeared that when the excisable goods were not sold by the Assessee, but were used captively by them or by the sister units or used on their behalf in the manufacture of other articles, the valuation of such goods for the purpose of payment of Central Excise Duty had to be made as per Rule 8 of CEVR i.e. the value shall be 110% of the cost of production or manufacture of such goods.

4. It appeared from the details provided by the Assessee that they had excluded certain expenses from the total expenses as per Profit & Loss Account during the said period and the net expenses had been taken into consideration for arriving at the cost of production as per CAS-4. The following expenses were therefore proposed to be added by the Department to the cost of production and duty demand on the 110% of this expenses :

Hence, a Show Cause Notice dated 05.11.2015 was issued to the Appellant proposing to invoke proviso to Section 11A (1) (as it existed upto 07.04.2011) and Section 11A (4) (w.e.f. 08.04.2011) to demand duty for the extended period of 5 years