2017 (5) TMI 1019 - AT - Central Excise

Valuation - raw material supplied free of cost by the buyers - includibility - Whether the raw material was supplied free of cost by the buyers is required to be added in the assessable value or not? - Held that - As per value Valuation Rules, the value of the components/parts supplied free of cost to the appellants, was required to be added in the transaction value of the goods - the value of the materials, components, parts supplied free of cost by M/s.Jindal Stainless Steel Limited, Hissar (the buyer) to the appellants for use in the machinery manufactured on their behalf, was additional consideration flowing directly or indirectly form the buyer to the appellant and should have been added in the transaction value of the said machinery for the purpose of payment of central excise duty in terms of Rule 6 ibid of the valuation Rules and by not doing so, the appellants had certainly undervalued their goods, resulting into short payment of duty of ₹ 8,31,667/-. Therefore, the demand of duty of ₹ 8,31,667/- is legally sustainable and does not suffer from any legal infirmity - There was certainly suppression of facts on the part of the appellants and hence the extended period of limitation is rightly invokable - equal penalty u/s 11AC also confirmed - demand upheld. Whether the inputs which have been cleared as such without being any activity by the appellant are entitled for the benefit of exemption N/N. 58/03-CE dated 22.7.2003 or not? - Held that - it is admitted fact that the appellant has cleared the inputs as such, and availed Cenvat credit thereon against domestic procurement certificate under N/N. 58/03-CE dated 22.7.2003. To avail the benefit of the said notification, the goods shall be produced or manufactured by the appellant which is not done in the instant case - the benefit of N/N. 58/03-CE dated 22.7.2003 is not available to the appellant. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the raw material supplied free of cost should be added to the assessable value?
2. Whether inputs cleared without any activity by the appellant are entitled to the benefit of exemption Notification No.58/03-CE dated 22.7.2003?

Issue No.1:
The appellant received raw material free of cost, which was not included in the assessable value. The Commissioner (Appeals) found that the value of the raw material should have been added as additional consideration flowing indirectly from the buyer to the appellant. The Commissioner referred to Rule 6 of the Central Excise Valuation Rules, 2000, which states that if the price is not the sole consideration, the value of goods should include any additional consideration. The Commissioner held that the appellant undervalued their goods by not including the value of the free raw material, resulting in short payment of duty. The Commissioner rejected the appellant's argument citing a Supreme Court judgment, stating the facts were different. The Tribunal upheld the Commissioner's decision, stating that the free raw material value should have been included in the assessable value.

Issue No.2:
The appellant cleared inputs without any activity and availed Cenvat credit under Notification No.58/03-CE dated 22.7.2003. However, to avail the notification's benefit, the goods must be produced or manufactured by the appellant, which was not the case here. The Tribunal held that since the appellant did not produce or manufacture the goods, they were not entitled to the notification's benefit. Consequently, the Cenvat availed on the inputs needed to be reversed. The Tribunal upheld the impugned order, dismissing the appeal.

In conclusion, the Tribunal upheld the impugned order, ruling that the value of free raw material should have been included in the assessable value, and the appellant was not entitled to the benefit of the exemption notification due to not producing or manufacturing the goods. The appeal was dismissed accordingly.