2015 (2) TMI 604 - AT - Central Excise

Valuation - Determination of job charges - Revenue argued that assessee have wrongly excluded the sale price of the spent Sulphuric Acid from job charges which is not correct - Held that - When the job charges consist of the conversion charges plus the cost of the raw material belonging to the job worker which were used by him, the cost of only that much quantity of raw material would be required to be included in the job charges which has actually been used. On going through the calculation of the processing charges, annexed with the job work agreement, we find that this is what the assessee have done. The landed cost of 1.1 MT of Sulphuric Acid required for manufacture of 1.45MT of Sulphonic Acid (by treating one MT of LAB) is ₹ 1980/- and in the process 0.8 MT spent acid is generated, which was sold by the assessee for ₹ 380/-. The assessee, therefore, have treated the cost of the Sulphonic Acid used as ₹ 1980 minus ₹ 380, that is, ₹ 1600/- and accordingly, after adding the conversion charges of ₹ 700/- per MT have taken the job charges as ₹ 2300 per MT and it is on the basis of these job charges that the assessable value has been determined after adding the cost of LAB. We find no mistake in the practice adopted by the appellant - Decided against Revenue.

Issues:
1. Calculation of job charges and duty liability for manufacturing Sulphonic Acid.
2. Inclusion of cost of spent Sulphuric Acid in job charges.
3. Invocation of extended period of limitation and imposition of penalty.

Analysis:

Issue 1: Calculation of job charges and duty liability for manufacturing Sulphonic Acid
The case involved the manufacturing of Sulphonic Acid by the Assessee on a job work basis using Lineal Alkyl Benzene (LAB) supplied by another company. The Assessee procured Sulphuric Acid for the manufacturing process. The dispute arose regarding the calculation of job charges, including the cost of Sulphuric Acid, and the duty liability. The Tribunal examined the job charges calculation by the Assessee, which included the cost of Sulphuric Acid used in the process along with conversion charges. The Tribunal found that the Assessee's method of calculating job charges was correct as it only included the cost of the Sulphuric Acid actually used. The duty liability was determined based on the cost of LAB and the job charges. The Tribunal upheld the Commissioner (Appeals) orders in favor of the Assessee, dismissing the Revenue's appeals against them.

Issue 2: Inclusion of cost of spent Sulphuric Acid in job charges
The Revenue argued that the Assessee should have included the cost of spent Sulphuric Acid arising during the manufacturing process in the job charges. However, the Tribunal noted that the Sulphuric Acid used by the Assessee was procured independently and did not belong to the principal manufacturer. Therefore, the Tribunal held that there was no requirement to include the value of the spent acid in the job charges. The Tribunal found the Commissioner (Appeals) order correct in this regard and set aside the subsequent order favoring the Revenue. The Assessee's appeal against the latter order was allowed.

Issue 3: Invocation of extended period of limitation and imposition of penalty
The Revenue contended that the extended period of limitation and penalty under Section 11AC were correctly applied due to the duty short payment. However, the Tribunal, after considering both parties' submissions, found in favor of the Assessee on the job charges calculation and duty liability issue. Therefore, the Tribunal dismissed the Revenue's appeals related to the extended period of limitation and penalty.

In conclusion, the Tribunal dismissed the Revenue's appeals against the Commissioner (Appeals) orders, upheld the Assessee's method of calculating job charges, and allowed the Assessee's appeal. The Tribunal's decision was based on the correct interpretation of the job work agreement and the duty liability calculation, leading to the resolution of the issues raised in the case.

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