Fact– M/s. Vandana Global Limited (“the assessee”) is engaged in manufacture of sponge iron, ingots, billets and silicon manganese availing credit of CENVAT duty paid on inputs, capital goods and Service Tax paid on input services in terms of CENVAT Credit Rules, 2004. The assessee was transferring the manufactured Silicon-manganese to their Depot i.e. M/s. Vandana Global Ltd. Nagapur, for further sales to their customers after paying duty at the time of removal. Revenue contended that assessee was not discharging duty liability on finished goods so cleared through Depot as per provisions of Central Excise Valuation Rules, 2007 and accordingly issued a show cause notice raising demand which was confirmed.
Assessee’s Interpretation of Law-The assessee contended that Revenue has wrongly invoked the said Rule 7 despite that there were the guidelines issued by the Department itself in Circular No. 354/81/2000 – TRU dated 30th June, 2000 indicating under what circumstances Rule 7 can be invoked and also how the value has to be arrived under the said Rules.
Held – The Hon’ble CESTAT in the case of M/s. Vandana Global Limited vs. C.C.E., Raipur dated November 23, 2018 held that if the goods are not sold at the factory gate or at the warehouse but they are transferred by the assessee to its Depots or consignment agents or any other place for sale, the assessable value in such case for the goods cleared from the factory/warehouse shall be the normal transaction value of such goods at the Depot etc. at or about the same time on which the goods being valued are removed from the factory or the warehouse.
Further, Referring to Rule 7 of Valuation Rules, CESTAT observed that the assessee was not removing entire manufactured Silicon Manganese to their Depot rather they were selling the major portion thereof from factory itself and remaining was being transferred to Depot to be sold to further buyers. CESTAT stated that Rule 7 is invokable only in case where goods are not sold by manufacturer/ assessee from factory, which basically is the place of removal hence invoking Rule 7 is irrelevant and illegal. Therefore, CESTAT opined that Revenue had wrongly invoked Rule 7 of Valuation Rules holding that the transaction value in the present case is the value at which the Silicon Manganese has been sold by the assessee at its factory gate, while transferring the unsold portion thereon to the Depot. Therefore, the question of alleged short payment does not at all arise.
Citation: TS-690-CESTAT-2018-EXC