2010 (6) TMI 383 - AT - Central Excise

Valuation Job worker Additional consideration Assessee paid excise duty on value determined following the formula approved by the Apex Court in the case of Ujagar Prints Etc. Etc. v. Union of India & Others Allegation that same amounting to manufacture - cost of husk already stood included in the value when the cost of cocoa beans was included in the value No question of adding the value of scrap in the value of the intermediate product cleared by job worker to principal manufacturer

Summary

Issues:
1. Assessment of differential duty, interest, and penalty against the appellant.
2. Inclusion of additional consideration in the assessable value.
3. Applicability of Central Excise Valuation Rules.
4. Allegation of suppression of facts to evade duty.
5. Interpretation of legal precedents regarding inclusion of scrap value in assessable value.
6. Bar of limitation for issuing the show cause notice.

Analysis:
1. The appeal challenged an order confirming a differential duty, interest, and penalty imposed by the Commissioner of Central Excise (Appeals). The appellant, a chocolate factory, had manufactured and cleared cocoa products on a job work basis for another company. The dispute arose from the inclusion of proceeds from the sale of cocoa husk in the assessable value. The Original Authority relied on a Tribunal decision that deemed such proceeds as additional consideration. The appellant contended that they had paid duty based on a formula approved by the Apex Court and that the inclusion of husk value twice was incorrect.

2. The central issue revolved around whether the sale proceeds of waste material should be included in the assessable value of goods manufactured on a job work basis. The Tribunal had previously held differing views on this matter, citing various legal precedents. The appellant argued that the inclusion of husk value twice was contradictory to law and provided cases where such inclusion was not warranted based on Supreme Court and Tribunal judgments.

3. The appellant contended that the Central Excise Valuation Rules were wrongly applied to the period in question and that no misdeclaration of value had occurred. They cited legal precedents where the value of waste material was not included in the assessable value of goods. The appellant also raised the issue of limitation, arguing that the show cause notice was issued beyond the permissible period.

4. The Tribunal considered the arguments presented, including the appellant's compliance with duty payment based on established formulas. They referenced legal precedents and the interpretation of the Modvat scheme to determine the inclusion of waste material value in the assessable value. The Tribunal found merit in the appellant's arguments, noting the confusion in previous decisions and the strong case for limitation due to the delayed issuance of the show cause notice.

5. Ultimately, the Tribunal vacated the demand and penalty against the appellant, allowing the appeal based on the arguments presented, including the correct application of legal principles, the interpretation of precedents, and the issue of limitation. The decision was made in consideration of the facts presented during the hearing and the legal framework governing the assessment of duty in job work scenarios.