2015 (7) TMI 584 - AT - Central Excise

Valuation of goods - clearance of fresh manufactured goods and goods after reprocessing - inclusion of amortizing cost of moulding - Credit had been taken under Rule 16 of the Central Excise Rules, 2002 in respect of the consignments of plastic moulded furniture returned from the distributor for being re-made / re-manufactured - Held that - It is seen that this statement of Shri G.M. Bhandari is not corroborated any other evidence and not only this, when the statements of Shri K.K. Maheshwari, Director of the appellant company and of Shri Harinder Kumar Garg, Manager of the appellant company were recorded they were also not confronted with this statement. In view of this we hold that merely on the basis of statement dated 23/07/2002 of Shri G.M. Bhandari, it cannot be presumed that in past also, the appellant had taken CENVAT Credit under Rule 16 of the Central Excise Rules, 2002 in respect of the old and used plastic furniture received by them which had not manufactured and cleared by the appellant on payment of duty. In view of this, the CENVAT Credit demand of ₹ 6,61,719/- along with interest and equivalent penalty is not sustainable. As regards the dispute regarding including the amortized cost of moulds in the assessable value of the goods, the appellant themselves conceded that the same would be includible. However, the dispute in this regard is over the method of calculation. In our view, the amortized cost must be calculated in accordance with the Board s Circular No. 170/4/96CX dated 23/1/1996, i.e., the cost of the mould divided by the total quantum of production which can be made by using that moulded multiplied by the number of pieces manufactured as cleared. There is no dispute that if the amortized cost is calculated in this manner, out of the duty demand of ₹ 7464/- and the duty demand of ₹ 2936/- can be confirmed. Accordingly, the duty demand of ₹ 2936/- is confirmed and the rest of the demand on this count is set aside. Re-moulding charges are for the expenses incurred for re-processing and re-manufacturing of the goods and the same cannot be treated as consideration for the goods earlier cleared on sale. In view of this, we hold re-moulding charges are not includible in the assessable value and as such the duty demand of ₹ 1,73,427/-along with interest and equivalent penalty is not sustainable. - only duty/CENVAT Credit demand of ₹ 54096/- along with interest and equivalent penalty is upheld and the remaining duty/CENVAT Credit demand along with interest and equivalent penalty is set aside - Decided partly in favour of assessee.

Summary

Issues:
1. CENVAT Credit taken by the appellant for returned goods.
2. Inclusion of amortized cost of moulds in assessable value.
3. Duty demand on re-moulding charges.

Analysis:
1. The appellant, a manufacturer of plastic moulded furniture, claimed CENVAT Credit under Rule 16 for defective furniture returned by distributors. An investigation revealed discrepancies in the description of the returned goods, leading to a demand of Rs. 7,17,879. However, the Tribunal found lack of corroborating evidence to support this claim, resulting in the confirmation of only Rs. 51,160 as the duty demand upheld due to mismatched descriptions of goods found during the visit.

2. The dispute over including the amortized cost of moulds in the assessable value was resolved by the Tribunal. It was agreed that the cost should be included but calculated based on the total production capacity of the mould. Following the prescribed method of calculation, a duty demand of Rs. 2,936 was confirmed, while the rest of the demand was set aside.

3. Regarding the duty demand of Rs. 1,73,427 on re-moulding charges, the department argued that these charges constituted additional consideration and should be included in the assessable value. However, the Tribunal disagreed, stating that re-moulding charges were for expenses incurred in re-processing, not as consideration for previously cleared goods. Consequently, the duty demand on re-moulding charges was deemed unsustainable.

In conclusion, the Tribunal partially allowed the appeal, upholding a duty/CENVAT Credit demand of Rs. 54,096 along with related penalties and interest, while setting aside the remaining demands.