2015 (5) TMI 374 - AT - Central Excise

Valuation - inclusion of value of goods supplied free of cost - Demand of differential duty - Suppression of value of goods - Imposition of interest and penalty - Held that - If certain items supplied by the buyers free of cost to the manufacturer the value consideration of the said items in the form of amortization cost must be added in the assessable value for the reason that the sale value in such case cannot be considered as sole consideration. Therefore, we are of the view on this count that amortization cost is legally includible in the assessable value. - As regard the goods supplied by the appellant to their sister concern, it is undisputed that valuation of such goods is adopted by cost construction method in terms of Rule 8 of Central Excise Valuation Rules, 2000. In accordance to which valuation should be 110% of the cost of manufacture of the goods. From the impugned order it was found that the appellants have not correctly valued the goods and not added 10% notional profit in the assessable value while clearing the goods to their sister concern. - differential duty demand on both the counts are correct and legal and the same does not require any interference. Appellant have not added amortization cost in respect of goods supplied to other than related person and also not correctly valued in respect of goods supplied to their sister concern. The fact of incorrect valuation and consequent short payment of duty was clearly suppressed by the appellant from the department therefore proviso to Section 11A in demanding differential duty was correctly invoked - It is straight law, irrespective of any other factors as and when a manufactured goods is cleared from the factory of the manufacturer he is bound to pay the correct duty leviable thereon, there is no explanation provided in the excise law that if buyer is entitled for the Cenvat Credit therefore no duty is required to be paid. Therefore, we do not agree that merely because recipient of the goods are entitled for the Cenvat Credit, it is a case of revenue neutrality. The availment of Cenvat Credit is subsequent act and that cannot be basis for payment of duty in the clearance of the goods from the manufacturer factory. - . Commissioner has correctly imposed the penalty under Section 11AC and interest under Section 11AB which does not require any interference - Decided against assessee.

Summary

Issues Involved:
1. Non-inclusion of the cost of amortization of tools/dies in the value of goods.
2. Non-inclusion of the cost of drawings, blueprints, technical maps, and similar items.
3. Non-addition of 10% to the cost of production for clearances to sister concerns.

Detailed Analysis:

Non-inclusion of the Cost of Amortization of Tools/Dies:
The Tribunal confirmed that the appellant failed to include the amortization cost of tools, dies, welding guns, and pallets supplied free of cost by the buyer in the assessable value of the goods. This inclusion is mandated under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The rule explicitly states that the value of such free supplies must be added to the transaction value. The Tribunal upheld the Commissioner's order, confirming the duty demand on this count as correct and legal.

Non-inclusion of the Cost of Drawings, Blueprints, Technical Maps, and Similar Items:
The Tribunal found that the appellant did not include the cost of drawings, blueprints, technical maps, and similar items in the assessable value, as required under Rule 6 of CEVR, 2000. This non-inclusion was also deemed incorrect, and the Tribunal upheld the duty demand confirmed by the Commissioner.

Non-addition of 10% to the Cost of Production for Clearances to Sister Concerns:
The Tribunal observed that the appellant did not correctly value the goods supplied to their sister concerns. Rule 8 of CEVR, 2000 mandates that the valuation should be 110% of the cost of manufacture. The appellant failed to add the 10% notional profit to the assessable value, leading to short payment of duty. The Tribunal upheld the Commissioner's order, confirming the duty demand on this count as well.

Imposition of Penalty and Interest:
The appellant contested the imposition of penalties and interest, arguing that the short payment of duty was due to a misinterpretation of valuation provisions and not due to any malafide intention. They also claimed revenue neutrality, as the consignee units would avail of Cenvat Credit, resulting in no loss to the Revenue. The Tribunal rejected these arguments, stating that the non-inclusion of amortization costs and incorrect valuation were clear suppressions of facts. The Tribunal emphasized that the legal obligation to pay the correct duty is independent of the consignee's entitlement to Cenvat Credit. The Tribunal upheld the imposition of penalties under Section 11AC and interest under Section 11AB, citing the Supreme Court's ruling in Union of India vs. Dharmendra Textile Processor, which mandates penalties in cases of duty evasion.

Conclusion:
The Tribunal upheld the Commissioner's order, confirming the duty demands, penalties, and interest. The appellant's appeals were dismissed, and the Tribunal reiterated that the correct duty must be paid at the time of clearance, regardless of revenue neutrality arguments. The Tribunal found no infirmity in the impugned order and upheld it in its entirety.