2010 (10) TMI 152 - AT - Central Excise

Cenvat credit Deemed credit - whether the cash discount, processing charges including colours and chemicals, transportation charges and profit margin were to be taken into the value of the fabrics calculated on the date of applicability of the Notification or not - appellant included all the expenses in the value of fabrics to claim credit as per Notification 35/03-C.E - cash discount, processing charges including the colours and chemical, transport, profit and margin are to be deducted from the value on which the appellant has taken the credit

Summary

Issues:
1. Duty, interest, and penalty under Section 11AC of the Central Excise Act, 1944.
2. Whether certain expenses should be included in the value of fabrics for claiming credit as per Notification No. 35/2003-C.E.
3. Applicability of the decision in the case of Commissioner of Central Excise, Hyderabad v. Balkrishna Textile Pvt. Ltd.
4. Invocation of the extended period due to suppression of facts.
5. Levying penalty equivalent to duty under Section 11AC for suppression of facts.

Issue 1:
The appeal was against the order of duty, interest, and penalty under Section 11AC of the Central Excise Act, 1944. The appellant had declared the value of fabrics by adding various expenses and claimed credit under Notification No. 25/03. The appellant argued that the semi-finished product is also an input, citing a decision in a previous case.

Issue 2:
The dispute revolved around whether expenses like cash discount, processing charges, transportation charges, and profit margin should be included in the value of fabrics for claiming credit as per Notification No. 35/2003-C.E. The appellant included these expenses, arguing they were incurred on inputs that were processed into finished fabrics. However, the tribunal disagreed, stating that such expenses should be deducted from the value for claiming credit.

Issue 3:
The appellant relied on the decision in the case of Commissioner of Central Excise, Hyderabad v. Balkrishna Textile Pvt. Ltd. to support their argument. The tribunal, however, found that the facts of that case were not applicable as the expenses in question should have been deducted from the value for credit, contrary to the appellant's claim.

Issue 4:
The tribunal found that the appellant had suppressed facts regarding how they arrived at the value of fabrics for claiming credit, invoking the extended period for investigation due to this suppression.

Issue 5:
Regarding the penalty under Section 11AC for suppression of facts, the tribunal noted that while the penalty equivalent to duty was leviable, the lower authorities did not provide the appellant with the option to pay 25% of the duty confirmed as penalty. The tribunal granted the appellant the option to pay 25% of the duty as penalty within 30 days or face a penalty of 100% duty.

In conclusion, the appeal was dismissed with the tribunal upholding the duty demand against the appellant due to the inclusion of certain expenses in the value of fabrics for claiming credit and invoking the extended period for investigation due to the appellant's suppression of facts. The tribunal also provided guidance on the penalty under Section 11AC, granting the appellant the option to pay a reduced penalty within a specified timeframe.