2018 (12) TMI 1470 - AT - Central Excise

Valuation - includibility - inclusion of automobile cess in their input value - demand of duty short paid - CENVAT Credit - extended period of limitation. Held that - The issue is squarely covered by the decision of Apex Court in case of Daichi Karkaria 1999 (8) TMI 920 - SUPREME COURT OF INDIA , where it was held that In determining the cost of an excisable product covered by the Modvat scheme under Section 4(1)(b) of the Act read with Rule 6 of the Valuation Rules the excise duty paid on raw material also covered by the Modvat scheme is not to be included. The issue in the present case is not in respect of manner of collection of automobile cess but is in respect of the admissibility of Cenvat Credit on the said automobile cess. Automobile cess is a cess collected by the department of labour in the Ministry of Industries and is levied under Industries (development and Regulation), Act, 1951 read with Automobile Cess Rules, 1984 - Since automobile is not Cenvatable, in view of the decision of the Apex Court in case of Dai Ichi Karkaria, the same needs to be added for determining the assessable value of the finished goods cleared by the appellant. CENVAT Credit - automobile cess - Held that - In terms of Rule 3 of the Credit Rules, a manufacturer is entitled to avail Cenvat credit only of excise duty as mentioned under the Excise Act, specified additional duties and also of education cess, national calamity contingency duty, etc. Cenvat credit is also available on all of the above duties paid during the time of import. However, the cess levied under various other acts, though collected as in manner similar to excise duty in the respective acts, is not in the list of duties eligible for Cenvat credit - None of the authorities cited by the appellant have stated in respect of admissibility of CENVAT Credit in respect of the automobile cess. Thus the submission of the appellant in this respect is not tenable. Time Limitation - Held that - The issue of inclusion of the taxes and fees which were not Cenvatable has been decided by the Apex Court in case of Dai Ichi Karkaria in the year 1999. After the said decision, there can be no justification for non inclusion of the same in assessable value. Appellant cannot claim that they were under bonafide belief that the said automobile cess was not includable after the decision of the Apex Court - Further all these details were not made available to the department while filling the returns. Hence there was suppression of material facts from the revenue with the intention to evade, accordingly demand of duty short paid by invoking extended period of limitation cannot be faulted in the present case - thus, extended period of limitation has been correctly invoked for demanding the duty short paid. Demand of Interest and penalty - Held that - Demand for interest is natural consequence of the delay in payment of the duty from the due date. Since the duty as determined under Section 11A(2) has been short paid on the due date, demand for interest under Section 11AB cannot be faulted with - Since we have held that necessary ingredients to invoke extended period of limitation are present in the case, penalty under Section 11AC read with rule 25 of the Central Excise Rules, 2002 justified - interest and penalty upheld. The benefit of proviso to Section 11AC extended to them for discharging the liabilities adjudged against them in respect of duties, interest and penalty. Appeal allowed in part.

Issues Involved:
1. Inclusion of Automobile Cess in Assessable Value
2. Applicability of Extended Period of Limitation
3. Justification for Interest and Penalty

Issue-wise Detailed Analysis:

1. Inclusion of Automobile Cess in Assessable Value:
The appellants argued that the automobile cess, being a form of excise duty, should not be included in the assessable value of the final product. They contended that the decision of the Supreme Court in Dai Ichi Kakaria was not relevant to their case. However, the tribunal held that the automobile cess, not being eligible for CENVAT credit, must be included in the cost of production of the final product. The tribunal referred to the Supreme Court's decision in Dai Ichi Kakaria, which stated, "the excise duty paid on raw material also covered by the Modvat scheme is not to be included" in the cost of the final product. Since automobile cess is not Cenvatable, it must be added to the assessable value of the finished goods.

2. Applicability of Extended Period of Limitation:
The tribunal found that the appellants had suppressed material facts by not including the automobile cess in the assessable value, thus justifying the invocation of the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944. The tribunal cited the Supreme Court's decision in Dai Ichi Kakaria and noted that after this decision, the appellants could not claim a bona fide belief that the automobile cess was not includable. The tribunal also referenced the case of Air Cell Digi link India Ltd., where it was held that suppression of material facts justifies the invocation of the extended period of limitation.

3. Justification for Interest and Penalty:
The tribunal upheld the demand for interest under Section 11AB, as it is a natural consequence of the delay in payment of duty. The tribunal also upheld the penalty under Section 11AC read with Rule 25 of the Central Excise Rules, 2002, citing the Supreme Court's decision in Rajasthan Spinning and Weaving Mills, which held that penalty under Section 11AC is justified in cases of deliberate deception with intent to evade duty. The tribunal extended the benefit of the proviso to Section 11AC to the appellants, allowing them to discharge their liabilities by paying a reduced penalty within 30 days from the date of the communication of the order.

Conclusion:
The appeal was partly allowed, with the tribunal extending the benefit of the proviso to Section 11AC to the appellants for discharging their liabilities in respect of duties, interest, and penalty.

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