2018 (11) TMI 899 - AT - Central Excise

Valuation - Inasmuch as the actual cost of the raw-material was not verified at the time of sending the goods by M/s.Asian Paints Ltd., such cost was being adopted on the basis of previous year s balance sheet - Revenue was of the view that there was escalation of the raw-materials subsequently and such escalated cost should have been taken into consideration - Held that - The appellant had already discharged the additional differential duty as also the fact that the duty paid by the assessee was being availed as credit by M/s.Asian Paints Ltd., thus leading to a revenue neutral situation. The legal issue also sands decided by the Hon ble Supreme Court in favour of the assessee, in the case of CCE, Pune Vs. Mahindra Ugine Steel Ltd., 2015 (4) TMI 351 - SUPREME COURT , where it was held that the provisions of Rule 8 of Central Excise Valuation (Determination of Prices of Excisable Goods) Rules, 2000, is not applicable to the valuation required to be done in respect of the goods manufactured under job works. Appeal allowed - decided in favor of appellant.

Issues:
1. Confirmation of demand of duty against M/s. Padmaja Laboratories under Section 11A(2) of the Act.
2. Imposition of penalty under Section 11AC of the Act.
3. Imposition of penalty upon M/s. Asian Paints Ltd.
4. Valuation of final product based on the cost of raw-materials plus manufacturing cost plus job work charges.
5. Consideration of escalated cost of raw-materials in the valuation.
6. Applicability of Rule 8 of Central Excise Valuation (Determination of Prices of Excisable Goods) Rules, 2000.
7. Legal issue regarding valuation of goods manufactured under job works.

Analysis:
1. The appeals arose from an impugned order confirming a demand of duty against M/s. Padmaja Laboratories and imposing penalties under Section 11A(2) and 11AC of the Act. The goods were manufactured through job work for M/s. Asian Paints Ltd., with the assessable value calculated based on raw-material cost, manufacturing cost, and job work charges. The revenue contended that the cost of raw-materials should have been verified at the time of sending goods, considering subsequent escalation. Despite the appellant recalculating the final product cost and paying differential duty, the adjudicating authority enhanced the value under Rule 8 of the Valuation Rules, leading to the confirmed duty.

2. The Tribunal noted that the appellant had already paid the differential duty and the duty paid was availed as credit by M/s. Asian Paints Ltd., resulting in a revenue-neutral situation. Citing the Supreme Court's decision in CCE, Pune Vs. Mahindra Ugine Steel Ltd., it was established that Rule 8 of the Valuation Rules does not apply to goods manufactured under job works. The Tribunal also referred to the decision in Rolastar Vs. CCE, Daman, supporting the same interpretation.

3. Given the legal issue was decided in favor of the assessee, the impugned order was set aside, and both appeals were allowed with any consequential relief. The judgment emphasized the inapplicability of Rule 8 to goods manufactured under job works, leading to the decision in favor of the appellant and the reversal of the demand of duty and penalties.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented, and the legal principles applied, resulting in the decision in favor of the appellant based on the interpretation of the Valuation Rules and relevant legal precedents.

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