2016 (12) TMI 1686 - AT - Central Excise

Valuation - certain goods cleared on stock transfer basis - Revenue entertained the view that the value of the two bought out items also need to be included for payment of excise duty - Held that - excise duty can be charged only on the goods manufactured. The same is to be charged on the assessable value of the goods cleared from the factory - There is no dispute that lightening arrestor as well as insulator are bought out items which has been supplied from the head office along with goods manufactured in the respondent s factory - It is nobody s case that such deduction for bought out items is not to be extended - appeal dismissed - decided against Revenue.

Summary

Issues: Valuation of goods for excise duty on stock transfer basis, inclusion of profit element on bought out items in assessable value, challenge to deduction allowed on profit element.

In this judgment by the Appellate Tribunal CESTAT NEW DELHI, the appeal filed by Revenue challenges the order-in-appeal passed by the Commissioner (Appeals), Jaipur regarding the valuation of goods for excise duty. The dispute revolves around goods cleared on a stock transfer basis by the respondent to their registered office, where the respondent was issuing commercial invoices for a composite item comprising Metallic, Lightening Arrester, and Insulator. The excise duty was paid only on the Metallic part manufactured by the respondent, leading to a demand by the Revenue to include the value of the bought out items for excise duty payment. The original authority confirmed a duty demand, which was partially upheld by the Commissioner (Appeals), resulting in the present appeal by Revenue seeking confirmation of the entire duty amount.

During the proceedings, it was noted that the respondent had paid the entire excise duty demanded but disputed the basis for the total demand calculation. The main contention was the inclusion of the profit element on the bought out items in the assessable value. The original authority allowed deduction for bought out items sold from the head office but disallowed the profit element deduction. However, the Commissioner (Appeals) allowed deduction for the profit element on both manufactured and bought out goods. The Revenue challenged this deduction on the grounds of lack of justification. The Tribunal emphasized that excise duty should only be charged on manufactured goods and should be based on the assessable value. It was acknowledged that the bought out items were supplied from the head office along with the manufactured goods, and deduction for such items should be allowed. The Commissioner (Appeals) was found justified in allowing deduction for the profit margin on both manufactured and bought out goods as per Section 4 of the Central Excise Act. Therefore, the Tribunal upheld the impugned order and dismissed the appeal filed by Revenue.

In conclusion, the Tribunal upheld the order-in-appeal, emphasizing the correct application of excise duty rules regarding the valuation of goods and the inclusion of profit elements on bought out items in the assessable value. The judgment clarified that excise duty should be charged only on manufactured goods and justified the allowance of deductions for profit margins on both manufactured and bought out goods, in line with the provisions of the Central Excise Act.