2017 (12) TMI 86 - AT - Central Excise

Valuation - includibility - whether the cost of free supply goods by the customer should be included in the assessable value of appellant s manufactured goods? - Held that - Rule 6 states that any goods supplied directly or indirectly by the buyer free of charge for use in connection with the production and sale of such goods to the extent that such value has not been included in the price actually paid or payable shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being value. As per this Rule, from 01.07.2000, the value of free supplied goods by the buyer which is used in connection with the production of the goods, to be sold to the buyer is includable in the assessable value - In the present case, the cenvat credit was availed by the buyer of the goods and not by the appellant. Therefore the landed cost of free supplied goods should be taken for inclusion in the assessable value, accordingly no deduction on account of excise duty of free supplied goods is permitted. No profit was added with reference to the addition of cost of free supplied goods. Therefore there is no question that excise duty is included in the cost of free supplied goods, accordingly cum duty price benefit cannot be extended in the peculiar facts of the present case. Revenue neutrality - Held that - the cenvat credit was not taken by the appellant, rather it was not available to them whereas the cenvat credit was admittedly taken by the buyer. Secondly, the appellant, due to crossing the exemption limit of ₹ 1 crore are required to pay duty on other goods also. Therefore, the revenue neutrality does not apply in the facts of the present case. Time limitation - Held that - the appellant have not disclosed the fact of receipt of free supplied goods and use thereof in the production to the department at any point of time. Therefore, there is a clear suppression of fact on the part of the appellant - extended period rightly invoked. Appeal dismissed - decided against appellant.

Summary

Issues:
- Inclusion of cost of free supplied goods in assessable value
- Availability of cenvat credit on goods supplied free of cost
- Revenue neutrality claim
- Benefit of cum-duty value extension
- Limitation period for disclosing free supplied goods

Analysis:

The main issue in this case was whether the cost of goods supplied free of charge by the buyer should be included in the assessable value of the appellant's manufactured goods. The appellant argued that the value of the motor and other parts supplied by the customer should not be included, citing various judgments. However, the Tribunal referred to Rule 6 of the Central Excise Valuation Rules 2000, which mandates the inclusion of the value of free supplied goods in the assessable value. The Tribunal clarified that excise duty of the input is reduced only if the assessee avails the cenvat credit, which was not done by the appellant in this case.

Regarding the cum-duty value benefit, the Tribunal found that the revenue included the net cost of the product supplied free of cost without adding any profit. As a result, the excise duty was not considered as part of the cost of the free supplied goods, leading to the denial of the cum-duty price benefit in this scenario.

The appellant claimed revenue neutrality, asserting that they were entitled to cenvat credit on the goods supplied free of cost by the customer. However, the Tribunal noted that the appellant did not avail the cenvat credit, which was taken by the buyer. Additionally, due to crossing the exemption limit, the appellant was required to pay duty on other goods, undermining the revenue neutrality argument.

In terms of the limitation period for disclosing free supplied goods, the Tribunal found that the appellant had not disclosed this fact to the department at any point, indicating a suppression of facts. Consequently, the Tribunal upheld the inclusion of free supplied goods in the assessable value, dismissing the appeal on the grounds of legality and justice.

In conclusion, the Tribunal affirmed the impugned order, stating that the inclusion of free supplied goods was lawful and did not warrant any intervention. The decision was pronounced on 30/11/2017.