2013 (9) TMI 380 - AT - Central Excise

Valuation - Job Work - The principal-manufacturer supplied the raw material on payment of duty which had been taken credit of by the job-worker - the job-worker thereafter undertakes the job-work and returns the same to the principal-manufacturer on payment of appropriate duty - Held that - Scrap value was liable to be added in the value of the job-worked product which had been returned to the principal-manufacturer on payment of duty - The job-worker was retaining the scrap and selling the scrap and retaining the sale proceeds of such scrap with himself - It was unimaginable that a job-worker would not have taken into account the value of the scrap that he can retain while quoting his job-charges - Similarly, the principal-manufacturer while negotiating the job-work charges obviously would have taken into account the cost of scrap that the job-worker was entitled to retain and sell - Normal business prudence would compel both the principal-manufacturer and the job-worker to take into account the value of the scrap that will be retained by the job-worker which can be sold by him Following GENERAL ENGINEERING WORKS Versus COMMR. OF C. EX., JAIPUR 2005 (3) TMI 16 - SUPREME COURT OF INDIA . Revenue Neutrality Held that - The job-worker and the principal-manufacturer were separate, distinct and different legal entities and, therefore, mere availability of credit to the principal-manufacturer cannot be said to have led to a revenue neutral situation - The principal-manufacturer can take the credit of the duty paid by the job-worker, such an argument was devoid of merits - Revenue neutrality situation will arise only if the job-working unit and the principal manufacturing unit belong to the same organization. Jay Yuhshin Ltd. v. Commissioner of Central Excise, New Delhi 2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI - revenue neutrality being a question of fact, the same had to be established in the facts of each case and not merely by showing the availability of an alternative scheme - where the scheme opted for by the assessee was found to have been misused, the existence of an alternate scheme would not be an acceptable defence and with particular reference to MODVAT scheme it had to be shown that the revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee s manufactured goods. Extended Period of Time - Waiver of Pre-deposit - Whether the Revenue could have invoked extended period time to confirm the duty demand - Held that - This would depend on the evidence available on record and would require detailed examination which can be done only at the time of final hearing and disposal of the case - The appellants had not made out a case for complete waiver of the pre-deposit of the dues - they were required to make pre-deposit of the demand of duty within the normal period of limitation - Decided against Assessee.

Summary

Issues Involved:
1. Waiver of pre-deposit
2. Inclusion of scrap value in the assessable value of intermediate products
3. Applicability of judgments from previous similar cases
4. Revenue neutrality
5. Invocation of the extended period for duty demand

Issue-wise Detailed Analysis:

1. Waiver of Pre-deposit:
The Tribunal initially directed M/s. Sanvijay Rolling & Engineering Ltd. to make a pre-deposit of Rs. 68.8 lakhs and M/s. Vinar Ispat Ltd. to make a pre-deposit of Rs. 11.52 lakhs. The appellants challenged these orders before the Bombay High Court, which remanded the matters back to the Tribunal for reconsideration of the waiver of pre-deposit applications. The Tribunal, upon reconsideration, directed the appellants to make pre-deposits of Rs. 62,000 and Rs. 11,51,101, respectively, within four weeks.

2. Inclusion of Scrap Value in Assessable Value:
The appellants argued that the value of scrap should not be included in the assessable value of intermediate products, citing the Tribunal's decision in P.R. Rolling Mills Pvt. Ltd. and the Supreme Court's decision in International Auto Ltd. The Tribunal, however, distinguished these cases, noting that the job-worker in the present case was not operating under Rule 57F(2) of the Central Excise Rules, 1944, or Rule 4(5)(a) of the CENVAT Credit Rules, 2004. Instead, the job-worker retained and sold the scrap, which had a depressing effect on conversion charges. Thus, the value of the scrap was includible in the assessable value as per the Supreme Court's decisions in General Engineering Works and Lloyds Steels Industries Ltd.

3. Applicability of Judgments from Previous Similar Cases:
The Tribunal examined whether the rulings in International Auto Ltd. and P.R. Rolling Mills Pvt. Ltd. were applicable. It concluded that these cases were not relevant because the job-workers in those cases operated under specific rules that exempted the inclusion of the value of inputs supplied by the principal manufacturer. In contrast, the present case involved job-workers who retained and sold the scrap, affecting the conversion charges.

4. Revenue Neutrality:
The appellants argued that the situation was revenue-neutral since the principal manufacturer could take credit for the duty paid by the job-worker. The Tribunal rejected this argument, stating that revenue neutrality applies only when the job-working unit and the principal manufacturing unit are part of the same organization. In this case, the job-worker and the principal manufacturer were separate legal entities, so the availability of credit to the principal manufacturer did not create a revenue-neutral situation.

5. Invocation of the Extended Period for Duty Demand:
The Tribunal noted that the invocation of the extended period for confirming the duty demand depended on the evidence available and required a detailed examination, which could only be done at the final hearing. Therefore, it did not make a definitive ruling on this issue at the stay stage.

Conclusion:
The Tribunal directed the appellants to make specified pre-deposits within four weeks and report compliance. Upon compliance, the pre-deposit of the balance amount would be waived, and recovery stayed during the pendency of the appeals. The Tribunal emphasized that the value of scrap retained and sold by the job-worker must be included in the assessable value, distinguishing the present case from previous rulings cited by the appellants.