2017 (6) TMI 974 - AT - Central Excise

Valuation - parts and components stock transferred - components manufactured at Chennai factory and cleared to Jaipur unit - includibility - CBEC Circular No.692/8/2003-CX dt. 13.2.2003 - goods manufactured on sub-contract basis from job-workers - Held that - We note that differential duty has been demanded by Revenue by confirming the value differently from that adopted by the appellant. However, any differential duty payable at the stage of Chennai unit will be available as cenvat credit/modvat credit to the Jaipur unit. Consequently, it leads to a situation of revenue-neutrality between the two units of the same company - similar issue decided in the case of COMMR. OF C. EX. & CUS., VADODARA-II Versus INDEOS ABS LIMITED 2010 (3) TMI 656 - GUJARAT HIGH COURT , where it was held that Absence of any substantial question of law, appeal is dismissed - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Undervaluation of parts leading to differential duty demand and penalty imposition.
2. Dispute regarding stock transfer of parts/components between Chennai and Jaipur units.
3. Challenge on the determination of cost of manufacture for components cleared to Jaipur unit.
4. Dispute over duty payment on components manufactured on sub-contract basis and transferred to Jaipur unit.

Analysis:
1. The appeal addressed the undervaluation of parts issue, where the department alleged expenses were not considered, resulting in a demand for differential duty and penalty imposition. The Joint Commissioner confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the present appeal.

2. The dispute revolved around stock transfers of parts/components between Chennai and Jaipur units. The appellant transferred parts from Chennai to Jaipur, some manufactured in-house and some via subcontractors. Duty payment was based on the cost of manufacture. The appellant argued for CAS-4 compliance in determining the cost, citing a CBEC circular and a Supreme Court judgment, ultimately leading to setting aside the duty demand.

3. The issue of determining the cost of manufacture for components cleared to the Jaipur unit was crucial. The appellant's reliance on CAS-4 provisions and a Supreme Court ruling supported their argument, resulting in the duty demand being deemed unsustainable and set aside.

4. Regarding components manufactured on a sub-contract basis and transferred to Jaipur, duty payment method was contested. The appellant argued for revenue-neutral treatment, where any differential duty paid would be available as cenvat credit to the Jaipur unit. Citing relevant case laws, the tribunal agreed, leading to partial allowance of the appeal and setting aside most of the impugned order except for a minor uncontested demand.

This detailed analysis of the legal judgment highlights the key issues, arguments, and decisions made by the tribunal, providing a comprehensive understanding of the case and its implications.