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2019 (9) TMI 1542 - AT - Central ExciseValuation - waste arising during the course of manufacture of DOPB films which were captively used by the appellant for manufacture of reprocessed granules - exemption under Rule 8 of Valuation Rules 2000 - HELD THAT - W.e.f. 1-12-2013 there is a change in the provision of Rule 8 of the Valuation Rules and as per the said amendment the appellant is required to pay the duty on the basis of cost of production 10%. Admittedly whatever duty is paid by the appellant same is entitled for Cenvat credit therefore it is a revenue neutral situation. Moreover the appellant claim is that they are entitled as exemption of Notification No. 67/95 dated 16-3-1995 and as per Rule 6 of Cenvat Credit Rules 2004 the appellant is paying 6% of the value and exempted reprocessed granules (as they are not maintaining separate account of re-issued in manufacture of DOPB films which are not exempt from duty) the benefit of exemption under Notification No. 67/95 cannot be denied on the ground that such waste and scrap is used in manufacture of exempted granules. The appellant has paid the amount @ 6% of exempted granules used captively for manufacture of reprocessed granules which were partly cleared on payment of 6% of the value of exempted goods or used in manufacture of DOPB films and is entitled for benefit of exemption of Notification No. 67/95 dated 16-3-1995 - There are no merit in the impugned order the same is set aside. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Valuation of captively consumed waste under Rule 8 of the Valuation Rules, 2000. 2. Application of Rule 8 pre and post amendment dated 1-12-2013. 3. Eligibility for exemption under Notification No. 67/95-C.E. 4. Revenue neutrality and the applicability of penalties. 5. Limitation and the invocation of the extended period for issuing show cause notices. Detailed Analysis: 1. Valuation of Captively Consumed Waste under Rule 8 of the Valuation Rules, 2000: The appellant, engaged in the manufacture of BOPP films, generated waste during production, which was partly sold and partly used internally. The department disputed the appellant's method of paying duty based on "transaction value" for captively consumed waste, asserting that duty should be based on the "Cost of Production" as per Rule 8 of the Valuation Rules, 2000. 2. Application of Rule 8 Pre and Post Amendment Dated 1-12-2013: For the period up to 30-11-2013, the Tribunal held that the appellant was not required to pay duty in terms of Rule 8, as the issue had attained finality through previous orders, including those by the Supreme Court. Post 1-12-2013, Rule 8 was amended to mandate valuation at 110% of the cost of production for captively consumed goods. The Tribunal acknowledged that this amendment required compliance but noted that the duty paid would be eligible for Cenvat credit, making it a revenue-neutral situation. 3. Eligibility for Exemption under Notification No. 67/95-C.E.: The appellant claimed exemption under Notification No. 67/95-C.E. for waste used in the manufacture of reprocessed granules (RPG) and BOPP films. The Tribunal agreed, noting that the appellant paid 6% of the value of exempted RPG as per Rule 6 of the Cenvat Credit Rules, 2004. This compliance entitled the appellant to the exemption, as the waste was used in the manufacture of dutiable final products. 4. Revenue Neutrality and the Applicability of Penalties: The Tribunal recognized the revenue-neutral nature of the situation, as the appellant could avail Cenvat credit for the duty paid on captively consumed waste. Consequently, the imposition of an equivalent amount of penalty under Sec. 11AC was deemed unsustainable, given the absence of intent to evade duty and the revenue-neutral context. 5. Limitation and the Invocation of the Extended Period for Issuing Show Cause Notices: The Tribunal addressed the issue of limitation, noting that the department had invoked the extended period alleging suppression of facts. However, it was established that in a revenue-neutral situation, such allegations do not hold. Additionally, the Tribunal cited precedents where subsequent show cause notices cannot allege suppression if an initial notice for the normal period had been issued. Conclusion: The Tribunal set aside the impugned order, holding that for the period up to 30-11-2013, the appellant was not required to pay duty based on Rule 8. For the period post 1-12-2013, despite the amendment to Rule 8, the appellant's situation was revenue-neutral, and they were entitled to exemption under Notification No. 67/95-C.E. The appeal was allowed with consequential relief, and penalties imposed were deemed unsustainable.
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