2011 (2) TMI 599 - AT - Central Excise

Valuation in Case of Job-Worker - Extended Period of Limitation - The appellants M/s.Mahindra Ugine Steel Co. Ltd.are the manufacturers of motor vehicle parts and they undertake the said activity on job work basis, out of the raw materials supplied by M/s.Mahindra & Mahindra Ltd. The scrap generated during the process of manufacture was detained by the appellants and the cost of scrap has been reduced from the assessable value of the motor vehicle parts. In the issue of valuation - Held that - When such a specific directions exists for consideration of Scrap value as part of Assessable Value. decided against Assessee. In the issue of extended period of limitation. - Held that - When the appellants had entertained a bonafide belief that the value of the scrap was not an element of inclusion in the assessable value of automobile components. Decided in favour of Assessee. The impugned order set aside and remand the case back to the adjudicating authority to re-quantify the demand for the normal period of limitation.

Issues Involved:
1. Suppression of facts and mis-declaration of assessable value.
2. Adjustment of excess duty paid against short payment.
3. Limitation period for demand of duty.

Issue-wise Detailed Analysis:

1. Suppression of Facts and Mis-declaration of Assessable Value:
The appellants, M/s. Mahindra Ugine Steel Co. Ltd. (MUSCO), were alleged to have suppressed facts by not including the value of scrap in the assessable value of motor vehicle parts manufactured on a job work basis. The department issued a show-cause notice, leading to a confirmed duty demand of approximately Rs. 1.90 crores and a penalty of Rs. 1.82 crores. The Tribunal initially allowed the appeal, but the Supreme Court remanded the matter back to the Tribunal based on a cost auditor's report. The Tribunal further remanded the matter to the original adjudicating authority to reconsider the issue afresh. The Commissioner, after considering the cost auditor's report, concluded that there was short payment of duty and rejected the appellant's claim for adjustment of excess duty paid.

2. Adjustment of Excess Duty Paid Against Short Payment:
The appellants argued that the excess duty paid should be adjusted against the short payment of duty. However, the Commissioner observed that there is no provision in the Central Excise Act, 1944, allowing such adjustments, especially when the assessments are not provisional. The Commissioner also noted that the excess duty paid had already been recovered from the buyers, and allowing such an adjustment would violate the principles of unjust enrichment. The Tribunal upheld the Commissioner's view, stating that the appellants' reliance on certain judgments was not applicable to the present case due to different factual circumstances.

3. Limitation Period for Demand of Duty:
The appellants contended that the demand was barred by the limitation period, arguing that they had a bona fide belief that the value of scrap was not to be included in the assessable value. The Commissioner, however, held that the issue of assessable value had been settled by the Supreme Court in previous cases, and the appellants' actions constituted suppression of facts. The Tribunal, however, found that in a similar case involving the appellants' Nasik factory, the demand invoking the extended period was held to be barred by limitation. The Tribunal noted that the department was aware of the method adopted by the appellants for arriving at the assessable value, as approved by the jurisdictional Assistant Commissioner in 1996. Consequently, the Tribunal set aside the impugned order and remanded the case back to the adjudicating authority to re-quantify the demand for the normal period of limitation.

Conclusion:
The Tribunal concluded that the appellants' claim for adjustment of excess duty paid against short payment was not supported by the law and upheld the Commissioner's decision on this matter. However, it found merit in the appellants' contention regarding the limitation period and remanded the case back to the adjudicating authority for re-quantification of the demand within the normal period of limitation. The appeal was thus allowed by way of remand.

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