2017 (7) TMI 16 - AT - Central Excise

Penalty u/s 11AC - Quantum of reversal of credit - Rule 6(3)(b) of CCR - The department s contention is that value for the purpose of 6(3)(b) should be the total contract price minus works contract sales, no other element are deductible from the total value for the purpose of calculating 8% - Held that - the issue indeed involved interpretation of the valuation provision in a case where a value is towards the works contract and arrived at the value of 6(3)(b). Therefore, looking to the nature of the issue no malafide can be attributed to the appellants. Accordingly, penalty under Section 11AC is not imposable. Job-work - demand of differential amount of 8% between the value of amount charged to the customer and the value on which the job worker reversed 8% - Held that - the goods were manufactured by the job worker being a manufacturer they have reversed 8% under Rule 6(3)(b). Therefore, no differential duty if any can be raised against the appellants. Therefore, this demand and its corresponding penalty does not sustain, hence the same are set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Interpretation of valuation provisions under Rule 6(3)(b) for manufactured steel pipes
2. Liability of appellants for differential amount under Rule 6(3)(b) for goods manufactured by job workers

Analysis:
1. The case involved the appellants engaged in manufacturing steel pipes and undertaking works contracts. The department contended that for their own manufactured pipes, the appellants should reverse 8% of the value under Rule 6(3)(b) based on the total contract price minus works contract sales without deducting other elements like sales tax or freight. The department demanded a differential amount for goods manufactured by job workers, which was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals).

2. The appellant's counsel argued that for their own manufactured pipes, the total value should be considered towards the entire works contract. They also contended that any short payment should be recovered from the job worker, not the appellants. On the other hand, the revenue representative reiterated the findings of the impugned order.

3. The Member (Judicial) carefully considered both sides' submissions. Regarding a small demand of approximately ?5000, the counsel did not contest it, and the penalty under Section 11AC was set aside due to the issue involving interpretation of valuation provisions. For the demand of a differential amount of 8%, it was noted that the job worker, as the manufacturer, had already reversed 8% under Rule 6(3)(b). Therefore, no additional duty could be raised against the appellants, leading to the setting aside of this demand and corresponding penalty.

4. Consequently, the impugned order was modified, and the appeal was partly allowed based on the above considerations. The decision clarified the application of Rule 6(3)(b) in the valuation of manufactured goods and determined the liability of the appellants for the differential amount in a scenario involving job workers' manufacturing activities.