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2016 (5) TMI 1071 - AT - Central ExciseValuation - Goods manufactured by M/s.TCIL on job-work basis for M/s.TISCO - Whether valuation of goods manufactured on job-work basis are required to be done @ 115% of the cost of manufacture of FHCR Coil under Rule 8 of the Central Excise Valuation Rules during the period 01.07.2000 to 09.02.2001 - Held that - job-worker M/s.TCIL is not a sister concern of M/s.TISCO and the goods manufactured by the job-worker are not used captively by him or on his behalf (job-worker s behalf) in the production or manufacture of other articles. In view of the observations and the settled proposition of law duty on manufacture by job-worker M/s. TCIL cannot be demanded @115% of the cost of manufacture for the said period, under Rule 8 of the Central Excise Valuation Rules. Whether demand of ₹ 17.00 Lakhs (approx.) calculated by the Adjudicating authority by taking the yield percentage as 92% was correct - Held that - as per the conversion agreement between M/s.TCIL and M/s.TISCO minimum yield has been considered to be 92% but at the same time the contract also mentions it clearly that yield shall be calculated on actual basis. Appellant has brought on record the documents conveying that yield during the relevant period of demand varies from 94.86% to 95.42%. Accordingly quantification of demand, if any, has to be done by taking into consideration the percentage of actual yield during the period under consideration. However, such a quantification is required to be done by the Adjudicating authority for which this aspect is required to be remanded back to the Adjudicating authority for quantification purpose only. Whether outward freight incurred by M/s.TCIL on transporting finished goods from the factory is required to be included in the assessable value - Held that - Adjudicating authority has observed that Appellant M/s.TCIL has not given the required data as to how much freight shown in his books of account pertain to inward freight on raw materials and how much pertain to outward freight on the finished products. On merits it is held that outward freight incurred by the Appellant from the place of removal is not required to be added to the assessable value of the goods manufactured on job-work basis which are cleared on payment of duty from the factory gate of the job-worker. However, the quantum of such outward freight incurred by the Appellant is required to be substantiated by the relevant record maintained by the Appellant and also supported by a Cost Accountant s Certificate. For this quantification also the matter is required to be remanded back to the Adjudicating authority for quantifying the demand, if any, based on Cost Accountant s Certificate to be produced by the Appellant before the Adjudicating authority. Imposition of penalties - Held that - it is observed that Appellant M/s.TCIL was aware of the fact that cost of raw materials supplied by M/s.TISCO was on a higher side. M/s.TCIL took up the matter with M/s.TISCO regarding calculating duty liability based on higher value of raw materials supplied. This correspondence regarding payment of duty at higher cost of raw material supplied with M/s.TISCO was also initiated only after department started investigating into the matter. At that stage Appellant M/s.TCIL was required to approach the department as soon as they realized higher cost of raw material supplied. Accordingly penalty is required to be imposed upon the Appellant only under Rule 173Q of the Central Excise Rules, 1944. Bench is of the considered view that excess duty, if any, paid by the Appellant would be admissible as Cenvat Credit to M/s.TISCO, therefore, there cannot be any intention to evade payment of duty for attracting imposition of penalty under Section 11AC as held by CESTAT Delhi in the case of Agarwal Pharmaceuticals vs. Commissioner of C.Ex., Delhi-I 2001 (11) TMI 162 - CEGAT, NEW DELHI . So far as imposition of penalties upon Appellant M/s.TISCO, Shri B.Muthuraman, MD and Shri M.K.Jha, Dy.Controller of Accounts of M/s.TCIL is concerned, it is observed that Shri B.Muthuraman, MD and Shri M.K.Jha, Dy.Controller of Accounts were the employees of M/s.TISCO and M/s.TCIL and were not to gain financially on account of short payment for which credit was also admissible. Similarly M/s.TISCO has not dealt directly with the manufacture and clearance of goods on which duty has been demanded. Accordingly, it is held that no penalty is imposable upon Appellants M/s.TISCO, Shri B.Muthuraman and Shri M.K.Jha. - Appeals allowed by way of remand
Issues:
1) Valuation of goods manufactured on job-work basis under Rule 8 of Central Excise Valuation Rules. 2) Calculation of demand based on a yield percentage of 92%. 3) Inclusion of outward freight in the assessable value. 4) Excess demand due to calculation errors. 5) Imposition of penalties. Valuation of Goods on Job-Work Basis: The Appeals challenged an Order-in-Original confirming a demand against the Appellants for not paying duty at 115% of the cost of production of FHCR Coils under Rule 8 of the Central Excise Valuation Rules. The Appellants argued that the valuation should be determined as per Supreme Court judgments and not Rule 8. The Tribunal held that the demand based on 115% for the period specified is not valid as Rule 8 does not apply to goods manufactured on job-work basis. The demand was set aside following established legal principles. Calculation of Demand Based on Yield Percentage: The Adjudicating authority calculated a demand based on a yield percentage of 92%, while the Appellants argued that the actual yield varied between 94.86% to 95.42%. The Tribunal noted that the demand should consider the actual yield during the relevant period. This aspect was remanded back to the Adjudicating authority for proper quantification based on the actual yield percentage. Inclusion of Outward Freight in Assessable Value: The Appellants contested the inclusion of outward freight in the assessable value, arguing that only expenses up to the place of removal should be considered. The Tribunal agreed that outward freight from the place of removal of finished goods should not be added to the assessable value. However, the quantification of such outward freight needed substantiation and verification, leading to a remand for quantification based on proper documentation. Imposition of Penalties: Regarding penalties, the Appellants argued against their imposition, citing legal precedents. The Tribunal found that penalty under Rule 173Q was justified for the Appellant M/s.TCIL due to delayed action on realizing the higher cost of raw materials. However, no penalties were imposed on M/s.TISCO, Shri B.Muthuraman, and Shri M.K.Jha as they were not directly involved in the manufacturing and clearance of goods. The Tribunal allowed the Appeals related to penalties for these Appellants. In conclusion, the Tribunal allowed the Appeal filed by the Appellant M/s.TCIL by remanding the matter back to the Adjudicating authority for quantification of duty demand based on actual yield percentage and outward freight, with an opportunity for a personal hearing. Penalties were imposed on M/s.TCIL under Rule 173Q, while penalties were not imposed on M/s.TISCO, Shri B.Muthuraman, and Shri M.K.Jha. The Appeals were disposed of based on the outlined parameters.
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