2016 (9) TMI 1096 - AT - Central Excise

Valuation - includability - additional consideration - debit notes raised to various buyers of excisable goods to compel them to return the durable packing - amount raised in debit note have not been received by the appellant - Demand - Held that - any debit note issued with reference to sale transaction of excisable goods will necessarily be form part of the transaction value. The Central Excise duty is not levied only on the quantum of consideration actually received by the appellant. The invoice as well as debit note indicate the sale value of excisable goods. Some amount has been defaulted by the buyer cannot result in reduction in duty incidence. In other words Central Excise duty is not on receipt basis. The levy is on manufacture and the collection is at the time of clearance. As such, we find no merit in the appellant s plea for non-inclusion of the additional consideration admittedly raised in the form of various debit notes to the buyers. Valuation - includability - additional consideration - cost of raw material supplied free by the buyer of finished goods - Demand - Held that - the raw material received free of cost has to be additional consideration over and above the amount received by the appellant towards sale of the finished goods. Admittedly the free raw material would have resulted in the lesser invoice value which does not duly reflect the normal transactional value for excise duty purposes. Demand - lesser payment of duty paid on the cables which were cleared for second time - appellants claimed that these goods were re-manufactured by using additional inputs as untenable - Held that - the appellants received back the finished goods, did some processing to obtain similar finished goods and cleared to another customer. There is nothing on record to say that the second time clearance was of different goods resulting after a process of manufacture. In terms of Rule 16 (2) if the process to which the goods are subjected before being removed does not amount to manufacture the manufacturer shall pay an amount equal to the Cenvat credit taken under sub-Rule (1). In the present case, the appellant is liable to pay the Cenvat credit already availed on return of the said finished goods. Hence, we find no merit in the plea of the appellant against such demand. Demand - capital goods cleared to the other unit of the appellant - denial of credit was on technical ground and the machine was sent to their own unit for further maintenance - Held that - it is found that the capital goods are no more available with the appellant for intended use and there is no record of their return after maintenance work. In such situation, the Original Authority is correct in demanding to recover the credit taken on such capital goods. Cenvat credit - misuse of provisions of Rule 16 - availed as a credit by the appellant upon return of duty paid final products back to the unit - defective goods returned back have been accounted for by the appellant - denial of such credit is on the ground of alleged motive of appellant to avail the credit and to keep the goods without clearance in the unit - Held that - the duty paid goods when returned back with a purported intend of re-conditioning or for any other reason the appellant is rightly eligible for credit of duty already paid. The presumed motive or the retention of returned goods inside the premises for long time are not reasons for denial of credit under the said Rules. In fact it has to be noted that duty is only a portion of the sale value of finished goods which has got considerable economic value for the manufacturer and nobody will intend to keep such saleable goods only to avail credit on returned goods. The misuse of Rule 16 has not been demonstrated in the present case as per the original order. As such, we find the denial of credit by the Original Authority is not sustainable. Imposition of penalties - Held that - the penalty imposed under Section 11AC has been justified as the various additional consideration, as discussed above, have escaped duty and the appellant s act of non-payment due to not disclosure of material facts cannot be denied. As such, we uphold the penalty imposed under Section 11AC. Regarding penalty under Rule 15 of Cenvat Credit Rules, 2004, since the main demand of ₹ 63,32,710/- in terms of Cenvat Credit Rules, 2004 was held unsustainable the penalty also required to be suitably reduced. Accordingly, we reduce the penalty to ₹ 1,00,000/- under Rule 15 of Cenvat Credit Rules, 2004. Since, penalty under Section 11AC has already been upheld, we find further penalty under Rule 25 is not warranted in the present case. Accordingly we set aside the penalty imposed under the said Rule. - Decided partly in favour of appellant

Issues:
1. Central Excise duty demand on debit notes and irregular Cenvat credit availed on returned goods.
2. Additional consideration received in the form of free raw materials.
3. Lesser payment of duty on goods cleared for the second time.
4. Denial of Cenvat credit on returned goods.
5. Demand on capital goods cleared to another unit.
6. Time bar for demands.

Analysis:

1. The appellant challenged the Central Excise duty demand based on debit notes and irregular Cenvat credit availed on returned goods. The appellant argued that the debit notes were not received from buyers and were mainly issued to recover durable packing. However, the Tribunal held that any debit note issued in relation to excisable goods forms part of the transaction value, irrespective of actual receipt of the amount. The duty is levied on manufacture, not receipt, and hence, the demand was upheld.

2. The issue of additional consideration in the form of free raw materials was raised. The Tribunal determined that the cost of raw materials provided free by buyers must be included in the transactional value for excise duty purposes. The free raw materials constitute additional consideration over the sale value of finished goods, and thus, the demand for additional consideration was deemed valid.

3. Concerning the lesser payment of duty on goods cleared for the second time, the Tribunal found the appellant's claim of re-manufacturing using additional inputs untenable. The appellant received finished goods, processed them, and cleared them to another customer without substantial changes. As per Rule 16, the appellant was liable to pay the Cenvat credit availed on the return of finished goods, leading to the rejection of the appellant's plea against the demand.

4. The denial of Cenvat credit on returned goods was contested by the appellant. The Tribunal observed that the denial was based on alleged misuse of Rule 16, citing the appellant's intention to keep goods without clearance. However, the Tribunal found no misuse demonstrated, emphasizing that the appellant was eligible for credit on goods returned for re-processing. The denial of credit was deemed unsustainable.

5. A demand related to capital goods cleared to another unit was disputed. The appellant claimed the goods were sent for maintenance but failed to provide evidence of their return. The Tribunal upheld the demand to recover the credit taken on such capital goods, as they were no longer available for intended use.

6. The issue of time bar for demands was raised, claiming proper record maintenance and contesting demands beyond the statutory period. However, the Tribunal did not find merit in the time bar argument, upholding the demands based on the findings related to Central Excise duty, Cenvat credit, and penalties.

In conclusion, the Tribunal partly allowed the appeal based on individual findings regarding duty, Cenvat credit, and penalties, as discussed in the judgment delivered on 15/09/2016.

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