2018 (2) TMI 359 - AT - Central Excise

Valuation of job-worked goods - the Department noticed that the appellant did not include the process loss/burning loss of the raw-materials while determining the assessable value of such goods - demand of differential duty - Held that - the cost of raw-materials supplied to the job-worker is to be included along with the processing charges as well as the element of profit for the job-worker. It is seen from record that the appellant has included only the cost of raw-materials contained in the finished products as has been held by the authorities below. But to arrive at the proper value, the cost of entire raw-materials consumed in the manufacture is to be added - the assessable value of the job-worked goods needs to be re-worked to include the value of raw-materials attributable to the burning loss which has escaped. Time limitation - Held that - The demand pertains to the period March 2001 to July 2004 for which show-cause notice stands issued only on 31.03.2006 which is beyond the normal period of limitation - demand hit on the ground of time bar. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Valuation of job-worked goods
Time-bar for demanding the differential duty

Analysis:
The appellant, engaged in manufacturing aluminum products, also undertakes job-work for converting raw materials into ingots. The dispute arose when the Department demanded differential duty for job-worked goods, claiming that the appellant did not include process loss/burning loss of raw materials in the valuation. The appellant argued that valuation was done as per Supreme Court guidelines and the demand was time-barred, citing precedents. The Department contended that the cost of entire raw materials used should be considered. The Tribunal noted that the assessable value should include the cost of all raw materials, not just those contained in finished products. The demand was found to be justified on merit, but the issue of time-bar was considered crucial.

Regarding the time-bar issue, the appellant's unit had been audited periodically, and it was argued that the demand was beyond the normal period of limitation. Citing precedents, the appellant asserted that the demand should be set aside due to the delay in issuing the show-cause notice. The Tribunal referred to various judgments, including those of the High Court and the Apex Court, emphasizing that in cases where audits did not reveal any discrepancies, the extended period of limitation could not be invoked. The Tribunal concluded that the demand was indeed hit by the time-bar, setting aside the impugned order and allowing the appeal.

In summary, the judgment addressed the valuation of job-worked goods and the time-bar issue for demanding differential duty. While the demand was deemed justified on merit, the Tribunal ruled in favor of the appellant on the grounds of time-bar, highlighting the importance of adherence to the period of limitation in such cases.