2016 (12) TMI 990 - AT - Central Excise

Valuation - non-inclusion of value of shrinkage - Held that - if the claim of the appellant that they have already included a value which need not be included, is true, then the addition of value of shrinkage to the tune of 2.4% is uncalled for in these facts - to ascertain the fact that the appellant has included more value than it is due, only for limited purpose we remit the matter back to the lower authorities - appeal allowed by way of remand.

Summary

Issues involved:
Valuation of processed fabrics for Central Excise duty, inclusion of shrinkage value, extended period for demand of duty, interpretation of assessable value, limitation period for show cause notice, applicability of judicial precedents, duty liability of job processor, consideration of pre-shrunk fabric value, consistency in assessable value declaration.

Valuation of processed fabrics for Central Excise duty:
The appeal concerned the non-inclusion of the value of shrinkage for discharging Central Excise duty by the appellant for the period 1992 to March 1995. The appellant contested the show cause notice issued for demanding differential duty, arguing that the assessable value declared by them, including job charges and 10% of raw material cost, already accounted for the shrinkage value. The appellant relied on judicial precedents to support their valuation method. The departmental representative contended that the value of pre-shrunk fabrics should be considered for duty liability, citing a Tribunal decision. The Tribunal noted the conflicting positions and remitted the matter back to the lower authorities for a detailed reconsideration based on the factual submissions.

Extended period for demand of duty and limitation period for show cause notice:
The show cause notice was issued invoking the extended period for demanding duty, as the stock taking exercise revealing the shrinkage value was conducted on 16 February 1995, while the notice was issued on 13 September 1996. The appellant argued that the notice was hit by limitation due to the delay in issuance after the stock taking. The Tribunal directed the lower authorities to consider this aspect while re-evaluating the case.

Interpretation of assessable value and consistency in declaration:
The appellant contended that their assessable value declaration, including job charges and 10% of raw material cost, was consistent with the law settled by the Apex Court. They argued that the value declared by them already covered the shrinkage value, which did not need separate inclusion. The Tribunal observed that the lower authorities did not dispute the assessable value declared by the appellant, which was used for duty payment. The Tribunal upheld the appellant's valuation method and directed the authorities to re-examine the claim in light of the factual position presented.

Duty liability of job processor and consideration of pre-shrunk fabric value:
The departmental representative argued that the pre-shrunk fabric value should be considered for determining the duty liability of the job processor. Citing a Tribunal decision, it was contended that the appellant had not included the pre-shrunk value in their assessment. The Tribunal acknowledged the conflicting interpretations and instructed the lower authorities to review the matter comprehensively, considering all relevant aspects of the valuation of processed fabrics for duty payment.

Applicability of judicial precedents and remand of the case:
The Tribunal referred to the settled law established by the Apex Court regarding the assessable value of processed fabrics in the hands of processors. While acknowledging the appellant's argument based on judicial precedents, the Tribunal remitted the case back to the lower authorities for a detailed examination to determine if the appellant had indeed included more value than required in their assessable value declaration. The Tribunal set aside the impugned order and allowed the appeal by way of remand for fresh consideration in line with their directions.