2013 (2) TMI 566 - AT - Central Excise

Job work - Waiver of pre-deposit - Stay petition - Demand u/s 11A - Penalty u/s 11AC - Extended period of limitation - Rule 4(5)(a) of CENVAT Credit Rules, 2004 - Cost of production plus 10%/15% of the cost of the goods - Imported raw materials sent to job worker - After processing goods were returned to the applicants - Cleared on stock transfer basis to their other Unit - Reversing the credit taken by them at the time of import - After processing the same, have been cleared on payment of duty - Filing the ER-1 returns regularly Held that - The applicants are reversing the credit taken by them at the time of import on stock transfer basis and the duty has been discharged by their sister Unit after processing the goods. Therefore, there is no Revenue loss to the department and further it is also contended that clearances made by them are in the knowledge of the department, therefore, extended period of limitation is not invokable The applicants have to discharge their duty liability as per the formula adopted by Ujagar Prints i.e., cost of production plus 10%/15% of the cost of the goods, same has not been done by the applicants. Further, the valuation adopted by the applicants was also not disclosed at the time of clearance of the goods. Therefore, the applicants have failed to make a case for 100% waiver of predeposit and hence they are directed to pre-deposit 50% of the duty confirmed against them. Pre-deposit waive partly.

Summary

Issues: Duty demand under Section 11A confirmed against applicants with interest and penalty under Section 11AC for not discharging duty liability correctly. Applicability of Rule 4(5)(a) of CENVAT Credit Rules, 2004. Calculation of duty based on value equal to 110%/115% of cost of goods plus cost of production. Revenue loss, extended period of limitation, and valuation disclosure in clearance of goods.

Analysis:
1. Duty Demand and Rule 4(5)(a) of CENVAT Credit Rules, 2004:
The duty demand of Rs.13,77,261/- was confirmed against the applicants for not discharging their duty liability correctly as per Rule 8 of the Valuation Rules. The applicants followed Rule 4(5)(a) of CENVAT Credit Rules, 2004, where goods were sent to job workers and received back after processing. However, they failed to discharge duty liability at the appropriate rate based on the value of goods. The applicants reversed the CVD component but did not pay duty as required by Rule 8.

2. Contentions and Arguments:
The applicants argued that they reversed the credit on stock transfer basis and duty was discharged by their sister unit after processing. They claimed there was no revenue loss as clearances were known to the department, thus invoking extended period of limitation was not justified. On the contrary, the Revenue contended that valuation was crucial, not disclosed during clearance, and duty should be paid based on Cost Construction Method when there is no sale of goods.

3. Judgment and Decision:
After hearing both sides, it was found that the applicants did not follow the duty liability calculation as per the Ujagar Prints formula of cost of production plus 10%/15% of the cost of goods. The valuation adopted was not disclosed during clearance, leading to failure in making a case for 100% waiver of pre-deposit. Consequently, the applicants were directed to pre-deposit 50% of the confirmed duty within eight weeks. Upon compliance, the balance amount of duty, interest, and penalty would be waived, with recovery stayed during the appeal's pendency.

This judgment highlights the importance of correctly discharging duty liability as per the prescribed rules and valuation methods under the Central Excise Act, emphasizing the need for transparency in disclosures during goods clearance to avoid disputes and ensure compliance with legal requirements.