2007 (6) TMI 59 - AT - Central Excise

Valuation (Central excise) - Department contended that appellant didn t file any price declaration and paid duty at a price which was much less than cost of raw material conversion charges etc. and accordingly demand duty along with penalty - Held that department contention was correct and allowed

Summary

Issues: Valuation of goods manufactured on job work basis, Duty payment based on price declared by supplier, Applicability of Supreme Court decisions, Time-barred demand, Correct computation of duty

The judgment by the Appellate Tribunal CESTAT, Mumbai, dealt with a dispute regarding the valuation of goods manufactured on a job work basis by the appellant using raw materials supplied by a company. The appellant had a contract to convert steel blooms/billets into rounds/bars and return them to the supplier. The yield from raw material to final product was considered at 87% or 91% depending on the rolling process. The supplier allowed the appellant to retain the scrap. The appellant was paying duty based on the price declared by the supplier, which was lower than the actual cost of raw material, conversion charges, and scrap. The dispute arose as the goods were returned as stock transfer, not sold, leading to issues with valuation under the Central Excise Valuation Rules. The appellant argued that their duty payment method was in line with a Supreme Court decision and tribunal rulings in similar cases.

The appellant cited the Ujagar Prints case and other tribunal decisions to support their argument that duty should be based on the price declared by the supplier. They also referred to a circular clarifying valuation in cases where goods are not returned but sold by the processor. The appellant claimed the demand was time-barred as they had been filing returns and the department was aware of their duty payment method. They contended that any discrepancies were due to a bona fide mistake and cited a subsequent Supreme Court decision clarifying the application of Ujagar Prints.

The Departmental Representative argued that duty should be based on the landed cost of raw material, job work charges, and other expenses, not the price declared by the supplier. They claimed the appellant had not disclosed the correct assessable value and misstated facts in their responses to the department. The Tribunal analyzed the submissions, noting that the Ujagar Prints decision required duty to be based on raw material cost, job charges, and expenses. They held that the duty demand was justified based on these factors, rejecting the appellant's arguments regarding time-bar and valuation method.

Regarding the computation of duty, the Tribunal agreed with the appellant that raw material cost should not be increased due to wastage and scrap. They directed the Commissioner to re-calculate the duty based on raw material cost, conversion charges, scrap value, and documentation charges. The penalty imposed was deemed excessive and was reduced significantly. The appeal was disposed of accordingly, with the Tribunal providing detailed reasoning for their decision on each issue raised in the case.