The assessable value for Central Excise duty depends on whether sales are FOR or ex-factory based on purchase order terms. Extended period of limitation cannot be invoked for issues involving interpretation of law or where the department had prior knowledge via audits.

[Order per: A.K. JYOTISHI ]

The Department has come in appeal against Order-in-Original dt.24.01.2019 passed by the Commissioner, whereby the Commissioner has confirmed the demand of Rs.3,08,785/- for the period November, 2015 to March, 2017, as against demand of Rs.2,55,97,224/- for the period November, 2012 to March, 2017, vide SCN dt.27.11.2017. The department is aggrieved with the dropping of the demand of Rs.69,31,506/- pertaining to the period November, 2015 to March, 2017 and is also aggrieved by the fact that the adjudicating authority has not upheld the invocation of extended period in the facts of the case, as also imposition of penalty undersection 11AC of the Central Excise Act, 1944.

2. M/s Eco-Care Building Products Pvt Ltd (hereinafter referred to as the respondent) have also filed Cross Objections, vide Application No.E/CROSS/30568/2019, pursuant to the appeal filed by the department.

3. The grounds of appeal, on which the department has filed the appeal, are as under:

(i) Non-examination of purchase orders placed by all the major customers of the respondent.

(ii) Setting aside of invocation of extended period is not proper and correct on the grounds of examination by audit.

(iii) Non-imposition of penalty under section 11AC by the adjudicating authority.

4. The brief facts of the case are that the respondents are engaged in the manufacture of ‘fly ash bricks’ and are supplying to various customers. The department, based on certain intelligence, asked for certain information from the respondents, which was furnished by them during the period September, 2016 to September, 2017. Based on the scrutiny of such records, the department also recorded statements of Deputy Manager (Finance & Accounts) of the respondent, as also that of Managing Director. Thereafter, it was felt that in view of certain terms and conditions of sale, the place of removal in respect of sales made by the respondents is the customer’s premises and hence, exclusion of transportation and loading charges and non-payment of Central Excise duty thereon is not in conformity with the provisions under section 4 of the Central Excise Act, 1944. The department also invoked extended period for raising the demand primarily on the ground that they have suppressed non-inclusion of the cost of transportation and loading charges in the assessable value and the fact that the value of impugned goods declared by the respondent in ER1 returns filed by them did not include the element of freight and loading charges, thereby adopting incorrect assessable value and hence, certification given by them in the invoices appeared to be a willful misstatement of facts and suppression of facts with intent to evade payment of duty and further that but for current investigation conducted by the officers of the department going through various documents like purchase orders, invoices, etc., all theabove facts would have gone unnoticed.

5. On adjudication, the adjudicating authority examined the grounds taken in the SCN for demanding differential duty, evidence on record and submissions of both sides. Thereafter, he proceeded to examine the issue as to whether based on given facts and evidence on record, as also judgments relevant to the issue, there is a requirement for inclusion of amount attributable to transportation and loading in the value or otherwise, for the purpose of discharging Central Excise duty. He also took note of the fact that the verification of purchase orders by the department has ascertained,inter alia, the following:

(i) The price agreed upon by the assessee is inclusive of duties/taxes, freight and loading charges;

(ii) The assessee is required to supply their goods i.e., Fly Ash Bricks by road, with a condition that any damage over and above the agreed percentage i.e., 2%/3% during the transit, will be borne by theassessees;

(iii) 100% payment against sales would be made only on delivery of the goods.

6. He also took into account