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2018 (7) TMI 1590 - AT - Central ExciseValuation - Manufacture of Mild Steel Drums on job work basis - Whether the appellant have taken correct cost of raw material i.e. CRS sheets for arriving at correct assessable value? - Held that - In order-in-original the adjudicating authority has taken different cost of raw material and the duty was re-quantified by enhancing from ₹ 75,40,706/-, which was originally confirmed to ₹ 2,31,30,925/. Firstly the unit cost per drum was given by the C.A. of BPCL and HPCL. The department has not adduced any evidence which is contrary to C.A. certificate provided by HPCL and BPCL therefore the unit per cost provided by BPCL and HPCL has to be accepted - it can be seen that it is appellant s appeal challenging the demand of ₹ 75,40,706/- therefore without filing an appeal by the department proposing enhancement of demand, appellant by filing an appeal cannot be in the worse position by which demand is increased therefore the demand of ₹ 75,40,706/- in any circumstance could not have been increased to ₹ 2,31,30,925/- - demand set aside. Whether the cost of bought out lid supplied along with drums is includible in the assessable value of drums? - Held that - For the manufacture of drum there is no role of lid. The drum is manufactured without lid. It is also noticed that in the previous occasion appellant had been supplying the drums without lid. It is also fact that in all cases of manufacture and supply of drums lid was not supplied. However, only in some cases and for limited period bought out lid was supplied along with drums - the cost of lid cannot be included in the value of drums - demand set aside. Whether the profit element appearing in balance sheet of the appellant is includible in the assessable value of the drum when the fabrication cost paid by the principle, M/s. BPCL and HPCL as already been included? - Held that - Profit which is appearing in the balance sheet is arrived out of receipt of fabrication charges which already included profit which is appearing in the balance sheet. There is no case of the department that appellant have received some additional consideration over and above the job charges received from the principals HPCL and BPCL, therefore profit appearing in the balance sheet which is part of the fabrication charges cannot be again included in the assessable value of the drum, demand to this extent is also not sustainable - demand set aside. Whether the value of the scrap retained by the appellant and realised proceeds by selling scrap in the market can be added in the assessable value of the drums? - Held that - The appellant have paid duty on the scrap value and the same value was sought to be included in the assessable value of drums. Once the value has suffered the duty, demand of duty on such value will amount to duplication of demand - demand set aside. Revenue neutrality - Held that - In one hand appellant was otherwise entitle for the manufacture and clearance the goods without payment of duty under Rule 4(5)(a) and if at all duty is payable the same is available as Cenvat credit to the BPCL and HPCL, therefore entire case is of revenue neutral. Demand do not sustain - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Correct cost of raw material (CRS sheets) for assessable value. 2. Inclusion of the cost of bought-out lids in the assessable value of drums. 3. Inclusion of profit element in the assessable value of drums. 4. Inclusion of the value of scrap retained and sold by the appellant in the assessable value of drums. Issue-wise Detailed Analysis: 1. Correct Cost of Raw Material (CRS Sheets) for Assessable Value: The adjudicating authority enhanced the demand from ?75,40,706/- to ?2,31,30,925/- by taking different costs for raw materials, which was not supported by any contrary evidence to the CA certificates provided by HPCL and BPCL. The Tribunal held that the unit cost per drum provided by HPCL and BPCL must be accepted as the department did not challenge the initial order. The enhancement of the demand was deemed illegal and without authority, as per the Bombay High Court's ruling in Su. Jewel Exim Pvt Limited vs UOI [2010(253)ELT 713(Bom)]. 2. Inclusion of Cost of Bought-Out Lids in the Assessable Value of Drums: The Tribunal found that lids were not essential for the manufacture of drums and had been supplied separately in some cases. Thus, the cost of lids cannot be included in the assessable value of drums. This was supported by previous judgments in Bombay Tubes & Container and A.Z. Metal Industries, where it was held that the price of bought-out components like plastic caps or lids should not be included in the assessable value of the final product. 3. Inclusion of Profit Element in the Assessable Value of Drums: The Tribunal ruled that the profit element appearing in the balance sheet, which is part of the fabrication charges, cannot be included again in the assessable value of the drums. The principle laid down in Ujagar Print and supported by judgments in Ravi Steel Industries, Advance Engineers, and Crown Tobacco Co. clarified that job charges already include the profit of the job worker, and no additional profit should be added. 4. Inclusion of Value of Scrap Retained and Sold by the Appellant in Assessable Value of Drums: The Tribunal stated that the appellant had paid duty on the scrap value, and including this value again in the assessable value of drums would amount to duplication. Previous judgments in Ad-Manun Packaging, Campco Chocolate Factory, and P.R. Rolling Mills supported the view that the value of scrap should not be added to the assessable value of job-worked goods if duty has already been paid on the scrap. Additional Considerations: - The Tribunal noted that the entire exercise was revenue-neutral as BPCL and HPCL, the recipients of the goods, availed Cenvat credit on the drums and discharged duty on their final products. - The Tribunal also mentioned that had the appellants followed the procedure under Rule 4(5)(a) of the Cenvat Credit Rules, 2004, no duty would have been payable on the job-worked goods, further supporting the argument of revenue neutrality. Conclusion: The Tribunal set aside the impugned order and allowed the appeals, concluding that the demand did not sustain on multiple grounds, including the incorrect enhancement of demand, improper inclusion of the cost of lids and profit elements, and the value of scrap. The Tribunal emphasized the principle of revenue neutrality and the alternative procedural compliance under the Cenvat Credit Rules.
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