2017 (10) TMI 438 - AT - Central Excise

Valuation - validity of SCN - demand was paid alongwith interest - Held that - it is absolutely clear that appellant have not undervalued the goods, initially valuation was arrived at after considering the non levy of the customs duty due to supply in the nature of deemed export. When the World Bank has denied the loan to the PGCIL supply become normal and deemed export benefit was not available. The appellant admittedly on own their ascertainment duty amount of ₹ 23 lacs was paid alongwith interest and intimated to the department. In such case no show cause notice should have been issued in terms of Section 11A(2B) - all ingredient of non issuance of show cause notice such as appellant on their own ascertainment paid duty alongwith interest and intimated to the department. Therefore the appellant have made a fit case to invoke Section 11A(2B). Whether CVD amount should be included in the cost of final product? - Held that - appellant have availed Cenvat credit in respect of CVD therefore it cannot be said to be a cost of final product - In the case of Dai Ichi Karkaria Ltd 1999 (8) TMI 920 - SUPREME COURT OF INDIA , Hon ble Supreme Court clearly held that element of excise duty on which Cenvat credit was availed is not includible in the value of the manufactured goods - demand set aside. Appeal allowed in part.

Summary

Issues involved:
1. Inclusion of custom duty in the assessable value of goods
2. Applicability of Section 11A(2B) regarding duty payment
3. Cenvat credit on CVD and its impact on assessable value

Inclusion of custom duty in the assessable value of goods:
The case involved the appellant, engaged in manufacturing transformers for a project with a government undertaking. The issue arose when the appellant paid custom duty on imported goods used in the project. The department contended that the entire custom duty should be part of the assessable value, leading to a demand for excise duty. The appellant argued that they had paid the differential duty voluntarily, and penalties should not be imposed as there was no intention to evade payment. The Commissioner(Appeals) upheld the order, prompting the appeal.

Applicability of Section 11A(2B) regarding duty payment:
The appellant claimed that they had voluntarily paid the duty with interest, and the show cause notice was unwarranted under Section 11A(2B). This section allows the duty payer to pay the amount before receiving a notice and inform the authorities, preventing the issuance of a notice. The Tribunal agreed with the appellant, citing that all conditions of Section 11A(2B) were met, and the penalty corresponding to the paid duty was set aside.

Cenvat credit on CVD and its impact on assessable value:
Regarding the Central Value Duty (CVD), the appellant had availed Cenvat credit, leading to a dispute on whether it should be included in the final product's cost. Citing the Supreme Court's decision in the case of Dai Ichi Karkaria Ltd, the Tribunal ruled that excise duty on which Cenvat credit was availed should not be part of the product's value. Consequently, the demand for excise duty related to CVD was deemed unsustainable, and penalties and interest were set aside. The appeal was partly allowed based on this issue.

In conclusion, the Tribunal found in favor of the appellant on both the Section 11A(2B) issue and the Cenvat credit issue, setting aside penalties and demands related to these aspects. The judgment clarified the treatment of custom duty and CVD in the assessable value of goods, providing legal clarity on duty payments and assessable value calculations in such cases.