2015 (10) TMI 1680 - AT - Central Excise

Valuation - Calculation CENVAT credit reversed under Rule 6(3) and recovered from the customers The Department, was of the view that the assessable value for the purpose of payment of the amount under Rule 6(3) would also include the amount of 5% / 10% of the sale price being recovered by the appellant from the customers and the appellant would be liable to pay an amount @ 5% / 10% on the extra amount of 5% / 10% being recovered from the customers - Difference of opinion - Majority order - Held that - The value of the goods works out to equal in both the cases i.e. dutiable / exempted goods. 5% / 10% is payable as per Rule 6(3) of the value of the said goods which the appellant has already paid. Therefore, the analogy drawn by the Revenue is totally misconceived that the appellant is required to pay 5% / 10% of the sale price of goods as per Rule 6(3) of the Cenvat Credit Rules 2004. - Appellant is paying 5% / 10% of the value of the goods to the Revenue as per Rule 6(3) and not claiming any deduction of 5% / 10% on the said amount. Therefore, appellant is not required to pay 5% / 10% to the Revenue on the amount recovered from the buyer on account of amount paid to the Revenue as per Rule 6(3) of the Cenvat Credit Rules 2004. In these circumstances, I take support of the decisions in the case of Unison Metals Vs. CCE- 2006 (10) TMI 171 - CESTAT, NEW DELHI and in the case of CCE Vs. Kisan Sahkari Chini Mills Ltd.- 2001 (8) TMI 119 - SUPREME COURT OF INDIA to hold that the recovery of 5% / 10% amount from the customer which already stand paid to the Department cannot be held to be liable to be added in the assessable value of the goods. - Decided in favour of assessee.

Summary

Issues involved:
1. Interpretation of Rule 6(3) of the Cenvat Credit Rules 2004 regarding payment on exempted goods.
2. Determination of the value of goods for the purpose of calculating payment under Rule 6(3).
3. Whether the appellant is required to pay a percentage of the sale price of exempted goods or the value of exempted goods as per Rule 6(3).
4. Application of case laws in determining the payment requirements under Rule 6(3).

Issue 1: Interpretation of Rule 6(3) of the Cenvat Credit Rules 2004:
The dispute revolves around whether the appellant, a manufacturer of both dutiable and exempted goods, is required to pay 5% / 10% of the exempted final product's value as per Rule 6(3) of the Cenvat Credit Rules 2004. The department contends that the appellant should pay a percentage of the amount recovered from buyers in addition to the value of exempted goods. However, the appellant argues that the payment should be based on the value of the exempted goods, not the sale price.

Issue 2: Determination of the value of goods:
The term "value" under Rule 6(3) is crucial, and its definition is pivotal in deciding the payment amount. While the Act does not define "value," the Revenue asserts that the appellant must pay a percentage of the sale price of exempted goods. However, the judgment clarifies that the sale price differs from the assessable value of goods, emphasizing the need to understand what constitutes the "value" for payment calculation purposes.

Issue 3: Payment calculation under Rule 6(3):
The judgment illustrates through an example the calculation of payment under Rule 6(3) for both dutiable and exempted goods scenarios. It emphasizes that the appellant is required to pay 5% / 10% of the value of exempted goods, not the sale price. The appellant's compliance with paying the stipulated percentage on the value of goods and not seeking a deduction aligns with the interpretation that the payment should be based on the value of exempted goods.

Issue 4: Application of case laws:
The judgment distinguishes the facts of the present case from previous case laws cited by the Revenue, highlighting that those cases are not directly relevant to the current dispute. By referencing decisions in other cases, the judgment supports the view that the recovery amount from customers, already paid to the Department as per Rule 6(3), should not be included in the assessable value of goods. This interpretation aligns with the appellant's position and leads to the conclusion that the appellant is not required to pay a percentage of the amount recovered from buyers.

In conclusion, the judgment resolves the issue by affirming that the appellant is obligated to pay 5% / 10% of the value of exempted goods under Rule 6(3) of the Cenvat Credit Rules 2004, not on the sale price. The decision is supported by the interpretation of relevant provisions and case laws, ultimately ruling in favor of the appellant's position.