2016 (11) TMI 1331 - AT - Central Excise

Demand of differential duty - the appellant had exceeded the small scale industries exemption limit by suppressing the value of the clearances affected which were beyond the threshold limit of ₹ 30 lakhs - Held that - it is a common knowledge that FRP, PVC and PP line tanks are made out of raw material which fall under chapter 39 i.e. commonly known as plastic. In view of this, we hold that the value of the finished goods manufactured under chapter 39 needs to be excluded from the aggregate value of clearances of any year. As regards the total clearances value, we do find some merits in the submission made in the grounds of appeal by the appellant, as the value seems to include the trading activity also and the work done on job work basis. Revenue has included the value of the job work basis on the tanks constructed /fabricated holding it as manufacture. It is on record that the appellant had been given a job work of construction/ fabrication of tank at the site for which the material was also supplied by the concerned assessee. In our view, revenue authorities have misdirected themselves in including such value in job work in the clearance value of the appellant. Appeal allowed.

Summary

Issues:
Differential duty demand for the period 13.11.1990 to 31.03.1991 due to exceeding small scale industries exemption limit by suppressing clearances value.
Inclusion of various elements in the duty liability calculation.
Applicability of notification 53/88-CE for goods manufactured under chapter 39.
Inclusion of job work and trading activity value in total clearances value.

Analysis:
The appeal addressed the demand for differential duty for the period 13.11.1990 to 31.03.1991, alleging the appellant exceeded the small scale industries exemption limit by suppressing clearances value. The appellant contested this demand, arguing that the duty liability calculation was incorrect due to the inclusion of various elements. These elements included the value of traded goods, job work done at customers' sites, and transport charges, which the appellant claimed should not be included to inflate the aggregate value.

Regarding the application of notification 53/88-CE for goods manufactured under chapter 39, it was found that the lower authorities erred in not considering the appellant's claim for exemption under this notification. The notification exempts goods manufactured from raw materials falling under chapter 3901 to 3915, which the appellant argued they were using in the production of FRP, PVC, and PP lining tanks. The Tribunal acknowledged that these tanks are made from raw materials falling under chapter 39 (plastic), and thus, the value of finished goods under chapter 39 should be excluded from the aggregate clearances value.

Furthermore, the Tribunal found merit in the appellant's submission regarding the total clearances value. The value included trading activity and job work basis, with revenue authorities considering job work on tanks as manufacture. However, the Tribunal disagreed with this assessment, stating that revenue authorities misdirected themselves by including such job work value in the appellant's clearance value. The Tribunal concluded that the impugned order was unsustainable and set it aside, allowing the appeal.