2015 (3) TMI 429 - AT - Central Excise

Demand of Differential duty - excess amount was collected by the appellant from the customers in their invoices - It has been alleged that the appellants paid duty not on actual basis but on the previous month s actual - Assesse contends that after adjustment of excess/short payment of duty, no demand will sustain. They have not collected the excess amount from their customers - Held that - Tribunal in the case Bajaj Tempo Ltd. (2004 (7) TMI 145 - CESTAT, MUMBAI), held that net amount of differential duty is payable by the appellant after adjustment of the excess/short payment of duty. In that case, the issue relates to valuation of the impugned goods cleared from one factory of the appellants to another factory under the new Valuation Rules brought into effect from 01.07.2000. The Department contented that the appellant should have paid the differential duty and claimed refund of excess amount instead of adjustment excess/short payment. In the present case, we find that no sale of the goods involved and the appellant is a job worker and cleared the goods to the raw material supplier on the basis of conversion charges. Hence, the decision of the Tribunal in the case of Bajaj Tempo Ltd. (supra), would applicable in the present case. The decision of the LB in the case of BDH Industries Ltd. (2008 (7) TMI 78 - CESTAT MUMBAI) as relied upon by the Ld. AR is in respect of suo motto adjustment of cenvat credit, which is not applicable in the present case. - adjudicating authority to make adjustment of short payment and excess payment of duty made by the appellant and also take into consideration as to whether the appellants have collected any excess amount of duty from the raw material supplier. Thereafter, the adjudicating authority will determine the demand of duty - Decided in favour of assesse.

Summary

Issues:
1. Whether the appellants correctly paid duty on the assessable value based on the Cost Construction Method.
2. Whether the show cause notices proposing demand of differential duty along with interest and penalty were justified.
3. Whether the appellants contravened the provisions of Section 11 D of the Central Excise Act, 1944.
4. Whether the appellants were eligible for adjustment of short payment of duty against excess payment or should have applied for a refund.
5. Whether the decisions cited by the appellants and the Revenue were applicable to the case.
6. What directions should be given to the adjudicating authority regarding the adjustment of short payment and excess payment of duty.

Analysis:
1. The appellants were engaged in manufacturing Cotton and Polyester Sewing Thread on a job work basis for a company. They paid duty on the assessable value using the Cost Construction Method. Show Cause Notices were issued proposing a demand for differential duty, alleging short/excess payment of duty. The adjudicating authority confirmed the demand of duty, interest, and imposed a penalty, which was upheld by the Commissioner (Appeals).

2. The appellant's counsel argued that the excess amount was not collected from customers, and after adjusting excess/short payment of duty, no demand should sustain. They cited Tribunal decisions to support their argument. The Revenue contended that since the appellants did not opt for provisional assessment, they were not eligible for adjustment of short payment of duty against excess payment, but could apply for a refund. They relied on a Larger Bench decision.

3. The Tribunal found that the appellants paid duty based on raw material and conversion charges, following a Supreme Court decision. The show cause notices alleged excess collection from customers, but the appellant paid duty based on the previous month's actual. The Tribunal referred to a previous case to determine the net amount of differential duty payable by the appellant after adjusting excess/short payment.

4. The Tribunal distinguished the present case from a previous case involving valuation of goods, as there was no sale of goods in the present case, and the appellant was a job worker. The decision of the Larger Bench cited by the Revenue was deemed inapplicable. The Tribunal directed the adjudicating authority to adjust the short payment and excess payment of duty made by the appellant and determine the demand of duty accordingly. The impugned order was set aside, and the appeal was disposed of with specific directions to the adjudicating authority.