2018 (9) TMI 1732 - HC - Service Tax

Maintainability of Appeal - Section 35G of the Central Excise Act, 1944 - Imposition of penalty on accepting valuation is the issue - Held that - The Appeal as filed does not relate to valuation of excisable goods for the purpose of assessment. The valuation issue is concluded issue and accepted by the Appellant. The Appeal as being pressed only restricts itself to imposition of penalty on accepting the valuation as found by the Tribunal in the impugned order. The Appeal is maintainable under Section 35G of the Act before this Court - Appeal admitted to decide the issue of penalty imposed u/s 11AC of CEA.

Summary

Issues Involved:
1. Interpretation of royalty as part of costs of production under Cost Accounting Standard 4.
2. Inclusion of royalty not paid for captively used goods in costs of production.
3. Precedential value of Tribunal decisions on royalty in costs of production.
4. Bar under Section 11A(1) for demand made pursuant to show cause notice.
5. Imposition of penalty under Section 11AC for certified costs of production.

Analysis:
1. The appellant challenged the Tribunal's decision on the inclusion of royalty in costs of production under Cost Accounting Standard 4. The appellant questioned whether royalty payable to AIF should be considered in costs of production when it does not form part of production costs. However, the appellant withdrew this issue during the hearing, focusing solely on the penalty imposition under Section 11AC.

2. Another issue raised was the inclusion of royalty for goods captively used but not actually paid in the costs of production. The appellant contested this inclusion, specifically for yarn cleared from one factory to another. This issue was also withdrawn during the proceedings, leaving only the penalty imposition issue for consideration.

3. The appellant disputed the Tribunal's reliance on a previous decision regarding royalty in costs of production. The appellant argued that the Tribunal erred in following a specific case precedent and should have considered a different decision upheld by the Apex Court. However, this issue was not pursued further during the hearing.

4. The appellant questioned the timeliness of the demand made following a show cause notice dated 22nd March 2005, citing a potential bar under Section 11A(1) of the Act. This issue was not pressed during the proceedings, as the focus shifted to the penalty imposition matter.

5. The primary issue retained for consideration was the imposition of a penalty under Section 11AC despite the appellant's declaration of costs of production certified by an independent accountant. The appellant contended that the penalty should not be imposed given the certified nature of the production costs. This issue was accepted for further review by the Court, leading to the admission of the appeal solely on this substantial question of law.

In conclusion, the Court admitted the appeal based on the penalty imposition issue under Section 11AC, as the other issues regarding royalty inclusion, timeliness of demand, and precedent reliance were either withdrawn or not pursued. The focus remained on the imposition of the penalty despite certified production costs, setting the stage for a detailed examination of this specific legal aspect.