2019 (3) TMI 2051 - AT - Central Excise

SSI Exemption - clubbing of clearances for determining value of clearances - Whether the value of duty paid engine fitted chassis supplied by owner of chassis for manufacture / fabrication of body on such chassis has to be included for determining aggregate value of clearance for the purpose of Notification No. 8/2003 dated 01 March, 2003? - Extended period of limitation - suppression of facts or not - HELD THAT - It is apparent that the transaction between the appellant and the supplier of the duty paid Automobile chassis was on principal to principal basis and, therefore, the consideration charged for the body building by the appellant from the supplier of duty paid automobile chassis will constitute the transaction value for the purpose of valuation of excisable goods for the purpose of charging the duty of excise. The transaction between the appellant and its principal manufacture i.e. supplier of duty paid automobile chassis is only for fabrication charges which the appellant undertook on the duty paid chassis of the automobile. It is beyond comprehension as to how the value of the excisable product which has been manufactured by some other assessee / person and which is duty paid can be included in the aggregate value of the clearances of small scale industry manufacturer, which is only undertaking the fabrication work of body. Only fabrication charges of the body which have been built on the duty paid chassis need to be taken for determining the aggregate value of the clearance for the purpose of Notification No. 8/2003 dated 01 March, 2003 as that is the transaction value between the chassis supplier and the body building unit. Thus, the demand under the show cause notice and impugned order in appeal is legally not sustainable. Extended period of limitation - suppression of facts or not - HELD THAT - The show cause notice was issued on 18 February, 2014 by invoking the extended time proviso under section 11 A of the Central Excise Act, 1944 by alleging that the appellant had indulged in fraud, suppression of facts, mis-representation with an intent to evade duty. None of these elements are present in the present case. The Department has also not adduced any evidence to support its claim that the appellant indulged in any of the activities, such as fraud, misrepresentation, suppression etc. with an intent to evade payment of duty. The issue at hand is primarily a matter of interpretation and same cannot be taken as suppression of facts with a malafide intent to evade payment of duty. Thus, the demand under the impugned Show cause notice is also barred by limitation, and therefore, the demand of Central Excise duty is also legally not sustainable. The impugned order in appeal deserves to be set aside and is set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether the value of duty-paid engine-fitted chassis supplied by the owner of the chassis for the manufacture/fabrication of the body on such chassis has to be included for determining the aggregate value of clearance for the purpose of Notification No. 8/2003 dated 01 March 2003.
2. Whether the demand under the show cause notice is barred by limitation.

Detailed Analysis:

1. Inclusion of Value of Chassis in Aggregate Value of Clearance:

The appellant, engaged in the manufacture of gantry cranes and motor vehicles, availed the benefit of the Small Scale Industries (SSI) exemption under Notification No. 8/2003. The Department alleged misuse of this exemption by not including the value of the chassis in the aggregate value of clearances, resulting in an evasion of Central Excise duty amounting to Rs. 26,52,031/- for the period from August 2009 to February 2011.

The appellant contended that the transaction value, as per Section 4(1)(a) of the Central Excise Act, 1944, should only include the body-building charges received from the owner of the chassis, and not the value of the chassis itself. The appellant argued that the transaction was on a principal-to-principal basis, and the value for the purpose of the SSI exemption should be the amount charged for the body-building, not the chassis.

The Department, however, argued that the provisions of Section 4(1)(b) read with Rule 10A of the Valuation Rules, 2007, were applicable, and the value of the chassis along with the body-building charges should be included in the aggregate value of clearances.

Judgment:

The Tribunal held that the transaction between the appellant and the supplier of the duty-paid chassis was on a principal-to-principal basis. Therefore, the consideration charged for body-building by the appellant constituted the transaction value for the purpose of valuation of excisable goods. The Tribunal emphasized that the value of the excisable product manufactured by another entity (the chassis) could not be included in the aggregate value of clearances of the SSI manufacturer, which only undertook the fabrication work. Hence, only the fabrication charges should be considered for determining the aggregate value of clearances under Notification No. 8/2003. Consequently, the demand under the show cause notice was deemed legally unsustainable.

2. Barred by Limitation:

The appellant argued that the demand was barred by limitation as all relevant facts and figures were provided to the Departmental officers during their visit on 07 December 2011. The show cause notice was issued on 18 February 2014, invoking the extended time proviso under Section 11A(1) of the Central Excise Act, 1944, without any evidence of suppression of facts, mis-declaration, or intent to evade duty.

Judgment:

The Tribunal noted that all transactions were duly recorded in the appellant's books of accounts and that there was no evidence of suppression of facts or intent to evade duty. The issue was primarily a matter of interpretation and could not be construed as suppression with a malafide intent. Therefore, the demand under the show cause notice was also barred by limitation and legally unsustainable.

Conclusion:

The Tribunal set aside the impugned order in appeal and allowed the appeal, ruling that the demand under the show cause notice was not sustainable both on merits and on the grounds of limitation. The operative part of the order was pronounced in the open Court.