2018 (7) TMI 1933 - AT - Central Excise

Valuation - inclusion of value of the materials supplied by the Indian Railways free of cost in assessable value - period of dispute is from 01.8.1986 to 22.2.1987 - HELD THAT - The department in respect of the Appellant s Agarpara Works, had decided an identical issue where it was categorically recorded in para 3 that Since the duty liability of the wagon vendors will ultimately devolve on the Ministry of Railways on the contractual provisions, Ministry of Railways have taken up the matter for settlement of the issue with the Ministry of Finance directly, and accordingly made payment of 96 crores towards duty liability in respect of wagon manufactured for them by various wagon manufacturers. There is no reason for the department to take a contrary view in respect of another unit of the appellant on a similar issue, even after acknowledging that the SCN that gave rise to the present proceeding covered in the negotiation between the Ministry of Railways and Department of Revenue. Once the matter is settled and duly accepted by the Department, there is no reason for the same Department though a different office to take a contrary view so far as the present demand of ₹ 15,99,482 for the period 23.02.1987 to 14.04.1987 is concerned. However, the appellants have not filed any Chartered Accountant s Certificate to substantiate their claim - the MODVAT credit is allowed subject to verification by the Adjudicating Authority. Appeal allowed by way of remand.

Summary

Issues:
1. Inclusion of the value of materials supplied free of cost by Indian Railways in the assessable value.
2. Dispute regarding payment of excise duty on wagons manufactured on a job work basis.
3. Admissibility of MODVAT Credit on duty paid on free supply items by Indian Railways.

Issue 1:
The case involved a dispute where the appellant, a job worker for Indian Railways, raised invoices reflecting only fabrication charges without including the value of materials supplied free by the Railways. The Department contended that the assessable value should include the value of materials used in manufacturing the products. The period of dispute was from August 1986 to April 1987. The Adjudicating Authority confirmed a demand for wagons cleared from the factory during the specified period and allowed MODVAT credit while not imposing a penalty.

Issue 2:
The appellant argued that prior to March 1986, goods supplied were classified under a specific tariff item, and after a restructuring of the tariff, the dispute arose regarding the inclusion of free issue materials in the assessable value. The appellant, along with other job workers, believed that the value of materials supplied free of cost should not be included until a Supreme Court judgment in 1992 clarified otherwise. The Ministry of Railway and Ministry of Finance settled the matter amicably for the period from March 1975 to November 1986.

Issue 3:
Regarding MODVAT Credit on duty paid for free supply items by Indian Railways, the Tribunal upheld the admissibility of the credit in a similar case involving the appellant's Agarpara Works. Relying on a judgment from the Hon'ble Tribunal Delhi, the Tribunal directed the Adjudicating Authority to allow the MODVAT Credit in this case subject to verification. The Department was advised not to take a contrary view on the demand for the specified period, and the appeal was allowed by way of remand to the Adjudicating Authority for further proceedings.

This judgment clarifies the inclusion of free issue materials in the assessable value, settlement of disputes regarding excise duty on job work basis, and the admissibility of MODVAT Credit on duty paid for free supply items by Indian Railways.