2015 (5) TMI 1024 - AT - Central Excise

Includibility of value of flaps in the assessable value of tyres and tubes - Demand already paid by the appellant but same was not paid under protest - whether value of flaps is not includible in the assessable value of tyres and tubes - Held that - Once the demand is set aside for any reason amount already paid cannot be held as validly paid and cannot be justified on merit. We are of the view that the findings of the ld. Commissioner (Appeals) in the impugned order on one hand holding that value of flaps is not includible in the assessable value of the tyres and tubes and on other hand simultaneously confirmed the demand already paid only on the ground that the same was not paid under protest are clearly contradictory which is not permissible in law. Demand set aside - Decided in favour of assessee

Summary

Issues Involved:
1. Inclusion of the value of bought-out flaps in the assessable value of tyres and tubes.
2. Legality of the demand for Rs. 4,04,487/- and Rs. 1,64,508/-.
3. Validity of the penalty imposed under Section 11AC of the Central Excise Act, 1944.
4. Applicability of interest under Section 11AB of the Central Excise Act, 1944.
5. Payment of duty under protest.

Detailed Analysis:

1. Inclusion of the Value of Bought-out Flaps in the Assessable Value of Tyres and Tubes:
The appellant, engaged in the manufacture of tyres and tubes, included bought-out flaps in the composite packing but did not include the value of these flaps in the assessable value of the tyres and tubes. The Commissioner (Appeals) held that the value of flaps is not includible in the assessable value of tyres and tubes. This finding was not challenged by the Revenue, thus attaining finality. The Tribunal agreed with this conclusion, emphasizing that once it is held that the value of flaps is not includible, any demand based on such inclusion cannot be sustained.

2. Legality of the Demand for Rs. 4,04,487/- and Rs. 1,64,508/-:
The original adjudicating authority confirmed a demand of Rs. 5,68,995/- (Rs. 4,04,487/- + Rs. 1,64,508/-). The Commissioner (Appeals) set aside the demand of Rs. 1,64,508/- but confirmed the demand of Rs. 4,04,487/- on the ground that it was not paid under protest. The Tribunal found this contradictory, as the Commissioner (Appeals) had already held that the value of flaps is not includible in the assessable value. Consequently, the Tribunal ruled that the entire demand must be dropped, as the root cause (inclusion of flaps' value) was invalid.

3. Validity of the Penalty Imposed under Section 11AC of the Central Excise Act, 1944:
The penalty of Rs. 5,68,995/- was imposed by the original adjudicating authority. The Commissioner (Appeals) did not sustain the penalty related to the demand of Rs. 1,64,508/- but upheld the penalty corresponding to Rs. 4,04,487/-. The Tribunal, referencing the Commissioner (Appeals)'s finding that the value of flaps is not includible, concluded that the penalty imposition was unsustainable. The Tribunal emphasized that the entire demand, including penalties, must be dropped once the inclusion of flaps' value is deemed invalid.

4. Applicability of Interest under Section 11AB of the Central Excise Act, 1944:
Interest recovery at the applicable rate was confirmed by the original adjudicating authority. The Commissioner (Appeals) did not address this specifically but implied it by confirming the demand of Rs. 4,04,487/-. The Tribunal, however, ruled that since the demand itself is unsustainable, the interest charge under Section 11AB is also not applicable.

5. Payment of Duty under Protest:
The appellant argued that the payment of Rs. 4,04,487/- should be treated as made under protest, given that they had been contesting the demand from the investigation stage. The Tribunal agreed, stating that the payment should be deemed under protest since the appellant had been challenging the demand consistently. The Tribunal found the Commissioner (Appeals)'s stance-that the amount was not paid under protest-contradictory and unsustainable.

Conclusion:
The Tribunal allowed the appeal, modifying the impugned order to the extent that the confirmation of the demand of Rs. 4,04,487/- was not sustainable. The Tribunal ruled that once the value of flaps is held not includible in the assessable value of tyres and tubes, any demand based on such inclusion cannot be sustained, irrespective of whether the duty was paid under protest or otherwise. The Tribunal emphasized that the findings of the Commissioner (Appeals) were contradictory and not permissible in law.