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2012 (11) TMI 294 - AT - Central ExciseExtended period of limitation - Demand of duty along with interest and equivalent amount of penalty shortage of input - appellants are engaged in the manufacture of seats and other interiors required for vehicles of M/s Mahindra & Mahindra Ltd - M/s. Mahindra & Mahindra Ltd. had given tooling development cost, engineering and designing charges to the appellant alleged that these costs were not amortized by the appellant in the assessable value of the seats and other parts manufactured by them - he also received certain inputs free of cost and its value was not considered by the appellant for the purpose of determining assessable value - appellant had also written off modvatable inputs totally from the stock without reversing MODVAT/CENVAT credit pertaining to such inputs. Held that - Extended period of time has been correctly invoked to demand ineligible cenvat credit taken in respect of inputs found short and which have been written off in the books of accounts amount of tooling advance received by the appellant from M/s Mahindra & Mahindra is includible in the assessable value of the goods supplied to them in terms of Section 4(3)(d) of the Central Excise Act itself. Merely because, the demand has been confirmed under rule 11 read with section 4 (3) (d), it does not become infructuous. Value of inputs received free of cost by the appellant from M/s Mahindra & Mahindra is required to be included in the assessable value of goods supplied to them and the extended period for demand of differential duty has been rightly invoked. Extended period of time has been correctly invoked to demand ineligible cenvat credit taken in respect of inputs found short, which have been written off in the books of accounts.
Issues Involved:
1. Inclusion of inputs received free of cost in the assessable value. 2. Inclusion of tooling development costs and engineering/designing charges in the assessable value. 3. Reversal of MODVAT/CENVAT credit on written-off inputs. 4. Invocation of extended period of limitation. 5. Imposition of penalties on the main appellant and co-appellants. Issue-wise Detailed Analysis: Issue No. 1: Inclusion of Inputs Received Free of Cost in Assessable Value - Appellant's Argument: The appellants argued that the show-cause notice was barred by limitation as there was no suppression of facts. They contended that the correct rule for valuation was Rule 6 of the Central Excise Valuation Rules, 2000, which requires the value of tools used in production to be amortized appropriately. The appellants claimed that the adjudicating authority incorrectly invoked Rule 11. - Respondent's Argument: The respondent argued that the appellant admitted to not including the tooling cost in the assessable value and that Rule 11 was correctly applied as the tooling cost was received in terms of money for tool development. - Tribunal's Finding: The Tribunal found that the appropriate rule for valuation was Rule 6, not Rule 11. The allegation of suppression was not sustainable, and thus, the extended period of limitation was not invokable. The Tribunal held that the demand was not sustainable but noted that the appellants would not claim a refund of duty and interest already paid. Issue No. 2: Inclusion of Tooling Development Costs and Engineering/Designing Charges in Assessable Value - Appellant's Argument: The appellants argued that they were job workers for M/s. Mahindra & Mahindra Ltd. (M&M), and the raw material supplied free of cost by M&M should not be included in the assessable value. They relied on the Supreme Court's decision in International Auto Ltd. and other Tribunal decisions. - Respondent's Argument: The respondent cited the Supreme Court decision in Burn Standard Co. Ltd., arguing that the value of inputs received free of cost should be included in the assessable value. - Tribunal's Finding: The Tribunal distinguished the facts from Burn Standard Co. Ltd. and aligned them with International Auto Ltd. and Orissa Industries Ltd., holding that the demand on this issue was not sustainable. The impugned order was set aside on this ground. Issue No. 3: Reversal of MODVAT/CENVAT Credit on Written-off Inputs - Appellant's Argument: The appellants cited the Tribunal's decision in Maruti Udyog Ltd., arguing that they were not required to reverse the credit on written-off inputs. They acknowledged the Bombay High Court's decision in Greaves Cotton Ltd. but argued that the extended period of limitation was not invokable. - Respondent's Argument: The respondent relied on the decision in Greaves Cotton Ltd., asserting that the appellants should reverse the CENVAT credit on written-off inputs. - Tribunal's Finding: The Tribunal agreed with the Bombay High Court's decision in Greaves Cotton Ltd., holding that the demand was sustainable on merit but barred by limitation. Therefore, the demand was not sustainable on this count. Issue No. 4: Invocation of Extended Period of Limitation - Appellant's Argument: The appellants argued that there was no suppression of facts, and thus, the extended period of limitation was not applicable. - Respondent's Argument: The respondent contended that the appellants had suppressed facts by not including the tooling cost and free inputs in the assessable value, justifying the invocation of the extended period. - Tribunal's Finding: The Tribunal found that there was no suppression of facts as there was a genuine dispute regarding the applicable valuation rule. Therefore, the extended period of limitation was not invokable. Issue No. 5: Imposition of Penalties on the Main Appellant and Co-appellants - Tribunal's Finding: Since the demands were not sustainable, the Tribunal held that there was no ground for imposing penalties under Section 11AC on the main appellant and under Rule 26 of the Central Excise Rules on the co-appellants. Separate Judgment by Member (Technical): - Tooling Advance: The Member (Technical) held that the tooling advance received by the appellant from M&M should be included in the assessable value under Section 4(3)(d) of the Central Excise Act, 1944, and the extended period of limitation was rightly invoked. - Inputs Received Free of Cost: The Member (Technical) held that the value of inputs received free of cost should be included in the assessable value, distinguishing the facts from International Auto Ltd. - CENVAT Credit on Written-off Inputs: The Member (Technical) held that the extended period of limitation was correctly invoked for the demand of CENVAT credit on written-off inputs. Final Order by Third Member: - Tooling Advance: The Third Member concurred with the Member (Technical), holding that the tooling advance is includible in the assessable value under Section 4(3)(d). - Inputs Received Free of Cost: The Third Member agreed with the Member (Technical) that the value of inputs received free of cost should be included in the assessable value. - CENVAT Credit on Written-off Inputs: The Third Member held that the extended period of limitation was rightly invoked for the demand of CENVAT credit on written-off inputs. Conclusion: The Tribunal allowed the appeals, holding that the demands were not sustainable and penalties were not justified. The appellants were directed not to claim a refund of duty and interest paid on account of tooling development costs.
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