2011 (6) TMI 618 - AT - Central Excise

Job work in textile industry the appellants (textile processors) were directed to load their job charges by 15% towards notional profit vide Trade Notice No. 20/2001 dated 24.03.2001 Held that - Trade Notice was clearly in contravention of law and against the direction of the Board issued vide Order No. 24/14/93/Cx Dated 31.12.1993 wherein the Board had clarified that in respect of job work the assessable value shall consist of only the cost of materials at the premises of the job worker job charges. Commissionerate kept on insisting to load trade/job work charges by 15%. Such excess payments have to be necessarily adjusted towards the short payments alleged by the department on the very same transactions. demand has to be re-computed taking into account the excess payments made by the appellants on account of additional of 15% notional profit and we order accordingly. Excess payments made by the appellants towards shrinkage of fabrics - Trade Notice provided for a shrinkage of 4.2% whereas the appellants took shrinkage at 6.2% - Held that - Trade Notice also provided that if the shrinkage is substantially more than 4.2% as provided in the Trade Notice actual shrinkage should be taken into account. appellant-assessee is entitled to the adjustments on account of addition of 15% notional profit and also on account of shrinkage which was taken into account more than the actually incurred shrinkage. After making such adjustments the department has to determine whether any demand towards short levy exist and only to that extent the department can make legitimate claim from the appellant-assessee. Denial of CENVAT credit deemed credit - Held that - learned adjudicating authority has denied the deemed credit facility for the entire period even in respect of fabrics cleared under invoices wherein duty liability has been discharged correctly. Such a denial is not provided for in the Notification or in the law. adjudicating authority directed to re-compute the deemed credit wrongly availed only in respect of those quantum of fabrics specified under invoices in respect of which there is short payment of duty and not on the entire quantum of fabrics cleared during the material period. case remanded back to the original adjudicating authority. Appeals are thus disposed of by way of remand

Summary

Issues Involved:
1. Short payment of Central Excise duty due to non-inclusion of additional job charges.
2. Denial of 'deemed credit' availed for home consumption.
3. Excess 'deemed credit' availed for export clearances.
4. Penalties imposed on company officials.

Issue-wise Detailed Analysis:

1. Short Payment of Central Excise Duty:
The main appellant, an independent textile processor, was found to be under-reporting job charges, leading to short payment of Central Excise duty. The department discovered extra charges such as rotary charges, peaching charges, and zero zero charges were not included in the assessable value. The appellant contended that these omissions were due to clerical errors and that they had been paying excise duty on job charges including a notional profit of 15% as per Trade Notice No. 20/C.Ex./Ch.54 & 55 (03)/2001/M-III dated 24.03.2001. The Tribunal acknowledged that the excess valuation was due to departmental directions and ordered the re-computation of the duty demand, adjusting for the excess payments made due to the inclusion of the 15% notional profit.

2. Denial of 'Deemed Credit' for Home Consumption:
The department proposed to disallow deemed CENVAT credit amounting to Rs.90,89,899/- availed by the appellant for home consumption. The Tribunal noted that the denial of deemed credit for the entire period was not justified as the Notification No. 6/2002-CE (NT) dated 01.03.2002 only disallowed credit where duty was short paid due to fraud or suppression of facts. The Tribunal directed the adjudicating authority to re-compute the deemed credit wrongly availed only for the specific invoices where short payment was alleged, after adjusting for the excess payments.

3. Excess 'Deemed Credit' for Export Clearances:
The appellant was also found to have availed excess deemed credit of Rs.33,39,673/- for export clearances by overvaluing the goods. The Tribunal held that the same principle of adjusting excess payments due to notional profit and shrinkage should apply to export clearances. The adjudicating authority was directed to re-compute the excess deemed credit availed for exports, considering these adjustments.

4. Penalties Imposed on Company Officials:
Penalties were imposed on the Director, Manager, and Excise in-charge of the appellant company under Rule 26 of the Central Excise (No.2) Rules, 2001/Central Excise Rules, 2002. The Tribunal did not specifically address the penalties in detail but remitted the case back to the adjudicating authority for a fresh consideration, implying that the penalties would also be reconsidered in light of the re-computed duty demands and deemed credits.

Conclusion:
The Tribunal set aside the impugned order and remitted the case back to the original adjudicating authority to re-evaluate the duty demands and deemed credits after considering the excess payments made due to the inclusion of notional profit and shrinkage. The adjudicating authority was directed to provide a reasonable opportunity for the appellants to present their case and evidence. The appeals were thus disposed of by way of remand.