2017 (11) TMI 1245 - AT - Central Excise

Valuation - job-work - Revenue entertained a view that the duty is required to be paid by the appellant not only on job charges but by including the value of the raw materials/inputs supplied by the principal manufacturer or their customers - Held that - if the appellant is following the due procedure for undertaking the job work for other manufacturer, who were using the said intermediate goods in the manufacture of their final products, the appellant is entitled to benefit of the job work scheme in terms of Rule 4(5)(a) of Cenvat credit Rules, even though they were, inadvertently, discharging their duty liability - matter needs verification - appeal allowed by way of remand.

Summary

Issues:
1. Duty liability on job work for different types of customers.
2. Requirement to pay duty on the full value of goods including materials supplied.
3. Applicability of job work scheme under Rule 4(5)(a) of Cenvat Credit Rules.
4. Verification of facts by lower authorities and remand of the matter.

Analysis:
1. The appellant, engaged in manufacturing cold rolled profiles and providing galvanization services, faced demands from the Revenue for payment of duty on job charges and raw materials supplied by customers. The appellant contended that duty was mistakenly paid, especially for customers in Himachal Pradesh enjoying exemption, and that duty was not required as the goods were used by the principal manufacturers in their final products.

2. The appellant's advocate acknowledged the duty liability if goods were manufactured independently or on behalf of customers, but argued that duty payment was not necessary in their case. The advocate highlighted that lower authorities did not address this argument adequately, leading to a confirmation of demands amounting to around ?10 lakhs. The appellant emphasized following due procedures under Rule 4(5)(a) of Cenvat Credit Rules.

3. The Tribunal, after hearing arguments, found that if the appellant adhered to the job work scheme's procedures for manufacturing goods used by other manufacturers in their final products, they were entitled to benefit under Rule 4(5)(a) of Cenvat Credit Rules. The Tribunal noted that if duty was not required to be paid, the confirmed differential duty based on higher assessable value would not be sustainable, emphasizing the need for lower authorities to verify the facts.

4. The Tribunal remanded the matter to lower authorities for verification, clarifying that the appellant did not contest the assessable value calculation for clearances to Himachal Pradesh-based units or the issue of limitation. The authorities were directed to re-quantify the demand accordingly, ensuring a thorough review of the appellant's compliance with the job work scheme and duty payment requirements.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal regarding duty liability on job work, the inclusion of material costs in duty calculation, the application of the job work scheme, and the need for verification by lower authorities before confirming demands.