2003 (3) TMI 378 - AT - Central Excise

Summary

Issues:
1. Reopening of assessment based on abatement of scrap value in the cost of production.
2. Applicability of proviso to Section 11A for reassessment and demand of short-levied duty.
3. Interpretation of costing method and abatement of scrap value in the price of raw material.
4. Allegation of suppression of facts for invoking the proviso to Section 11A.

Detailed Analysis:
1. The judgment revolves around the appellant's manufacturing of 'Sheet Metal Components' for a company, where the raw material is supplied free of cost, and the appellant pays a conversion charge for the job work. The dispute arose when the Commissioner proposed to reopen the assessment, claiming that the goods were not assessed at the full assessable value. The reassessment led to a demand for differential duty and penalty, based on the extended period permitted under the proviso to Section 11A of the Central Excise Act.

2. The appellant challenged the order, arguing that the abatement of scrap value in the cost of production was a permissible accounting practice, supported by the agreement with the supplying company. The appellant contended that the Commissioner's view on including the cost of total raw material, including wasted material, in the assessable value was erroneous. The appellant also argued that the demand could not cross the limitation period specified in the proviso to Section 11A, as there was no suppression of facts, given the declarations made to the Central Excise Authorities.

3. The Tribunal examined the method of costing, particularly the abatement of scrap value from the raw material price. It noted that the abatement appeared to be a correct costing method, and the order lacked any authority supporting a contrary view. The Tribunal emphasized that the reassessment under Section 11A required exceptional circumstances like fraud or suppression of facts leading to short-levy or non-levy of duty. In this case, the Tribunal found no such contumacious conduct by the appellants, as they had been transparent in their declarations to the authorities.

4. Ultimately, the Tribunal set aside the impugned order, ruling in favor of the appellant. It concluded that the demand for short-levied duty could not be justified under the proviso to Section 11A, as there was no suppression of facts by the appellants. The Tribunal highlighted that the authorities could have easily discerned the abatement towards scrap value from the job orders and working sheets, indicating that the demand was unwarranted. Therefore, the appeal was allowed, providing consequential relief to the appellants.