2016 (1) TMI 699 - AT - Central Excise

Valuation of the goods for which job work was undertaken - determining the cost of an excisable product - whether the Central Excise duty paid on inputs needs to be included in the costing of the final product for arriving at the assessable value or otherwise? - Held that - The issue is now settled by the Supreme Court in the case of Daiichi Karkaria (1999 (8) TMI 920 - SUPREME COURT OF INDIA) wherein held that the Central Excise duty paid on the inputs need not be included for arriving at the costing of final product as the availment of Cenvat credit neutralizes the impact of the duty on costing of the finished products. Following the judgement, we hold that the basic allegation of non-inclusion of Central Excise duty paid on inputs needs to be included for costing of finished goods has no locus standi accordingly, on merits we hold that appeal needs to be allowed. The differential duty payable shall be paid by the appellants along with interest and the differential duty will be calculated on the basis of the law settled by the Apex Court as cited hereinabove.

Summary

Issues: Valuation of goods for job work undertaken by the appellant, inclusion of Central Excise duty in the value, differential duty payment, interpretation of whether Central Excise duty paid on inputs should be included in the costing of the final product.

Analysis:

1. Valuation of Goods for Job Work:
The appeals were filed against an Order-in-Appeal regarding the valuation of goods for which job work was undertaken by the appellant. The appellant submitted a declaration of the price based on the information provided by the principal manufacturers, which included the Central Excise duty in the value. The revenue claimed that the appellant had paid the duty correctly and was liable to pay the differential duty.

2. Central Excise Duty Inclusion in Costing:
The main issue to be decided was whether the Central Excise duty paid on inputs should be included in the costing of the final product for determining the assessable value. The appellant argued, citing the Supreme Court case of Daiichi Karkaria, that the duty on inputs need not be included for costing as Cenvat credit neutralizes its impact on the finished products. The Tribunal agreed with this interpretation, following the Supreme Court's decision, and held that the allegation of non-inclusion of Central Excise duty in the costing of finished goods had no merit. Consequently, appeal number E/3423/05 was allowed, and the impugned order was set aside.

3. Differential Duty Payment:
In the case of appeal number E/3424/05, it was acknowledged that there might be instances of short payment of duty even after applying the principle established by the Supreme Court in Daiichi Karkaria. The Tribunal ruled that the appellants should pay the differential duty along with interest, calculated based on the law laid down by the Apex Court. No penalty was imposed on the appellant as the issue was deemed to be a question of interpretation.

4. Final Decision:
The Tribunal disposed of the appeals by allowing appeal number E/3423/05, setting aside the impugned order, and directing the appellants in appeal number E/3424/05 to pay the calculated differential duty with interest. The judgment was pronounced in court on a specified date, concluding the legal proceedings in this matter.