9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (2) TMI 1068 - AT - Central ExciseValuation - inclusion of value of the scrap retained and sold by the appellants in the assessable value of the goods manufactured and cleared by the appellants on job work basis, in the assessable value - revenue neutrality - time limitation - HELD THAT - Any procedure under any statute requires to be followed and only then the benefits that accrue consequentially would be available. When the principal manufacturers of the appellant-job worker have not followed the procedure, any plea on the same would be only hypothetical. Moreover, as held by the Tribunal in the case of THERMAX BABCOCK AND WILCOX LTD., THERMAX LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2017 (12) TMI 266 - CESTAT MUMBAI has clarified that the applicability or otherwise of the said Rule has no bearing on the valuation of the goods cleared by the job worker.The issue before this Bench is to see whether the appellants were required to include the value of the scrap in the assessable value of the goods cleared by them after manufacture on job work basis on behalf of their principal manufacturers. The impugned orders have arrived at the assessable value correctly and that the sale proceedings of the scrap are required to be included in the assessable of the goods cleared by the appellant-job worker. The appellants have also taken the plea that whatever duty they would have paid, the principal manufacturers or the other buyers would have availed CENVAT credit and therefore to that extent the issue is revenue neutral. We find that this submission is far fetched and cannot be considered in a case where the payment of duty is by someone and availment of credit would be by somebody else. Such an averment would defeat the very scheme of CENVAT Credit and therefore, cannot be accepted. The impugned orders fail to take into account burning losses during the process of rolling and in their case the actual scrap available is only 4.25% as against the assumption of the department that the entire 10% of the allowance given by the principal manufacturer is available for sale in the hands of the appellant-job workers. The appellant submits that the actual details were available in the Form-IV register maintained by them; demand confirmed, if any, cannot related to the quantity representing the burning loss - Neither the Rules nor the judicial pronouncements mention about a notional value of any scrap retained by the appellants and about the includability of burning losses. Essential element that requires to be considered as additional consideration and thus, includable in the assessable value is the value / sale proceeds of scrap. Burning losses, if any, cannot be considered by any stretch of imagination as additional consideration in the hands of appellants, though it may constitute an amount of wastage or loss for the principal manufacturer - the inclusion of additional consideration should be restricted to the actual scrap generated and sold by the appellants. For the computation of the same, the issue needs to go back to the Commissioner, who shall recalculate the demand including only the value of actual scrap generated and sold by the appellants. Extended period of limitation - HELD THAT - When regular audit is conducted and the department fails to go through the accounts of the appellants with due diligence, the appellants cannot be faulted for the same. It cannot also be alleged that the appellants have suppressed any information with intent to evade payment of duty. Understandably, there were different opinions expressed in the judgments delivered during the relevant time, therefore, we find the contention of the appellant about existence of a bona fide belief that they are not required to include the value of the scrap in the assessable value is acceptable.It is not the case of the department that the appellants have not been filing returns periodically. Moreover, we find that show-cause notice dated 2.12.2008 and show-cause notice dated 11.2.2010, both invoke extended period - Revenue has not made any case for invocation of extended period - the demands need to be restricted to normal periods only. As intent to evade payment of duty is not established, imposition of penalties is also not justified, they are liable to be set aside. Revenue s contention that the value of scrap, retained by the appellants in respect of products manufactured and cleared by them on job work basis, as alleged in the various impugned show-cause notices, requires to be included in the assessable value in terms of Central Excise Valuation Rules, 2000. Quantification of scrap shall be on actual basis taking into account the burning losses, if any, as claimed by the appellants - demands shall be restricted to the normal period only as may be applicable during the relevant period of respective appeal - penalties imposed are set aside. Appeal allowed in part.
Issues Involved:
1. Inclusion of scrap value in the assessable value. 2. Applicability of Rule 4(5)(a) of CENVAT Credit Rules. 3. Revenue neutrality. 4. Invocation of extended period for demand. 5. Imposition of penalties. Detailed Analysis: 1. Inclusion of Scrap Value in Assessable Value: The primary issue contested is whether the value of the scrap retained and sold by the appellants should be included in the assessable value of the goods manufactured and cleared on a job work basis. The appellants argue that the assessable value was worked out on the principle of cost accounting and there was no need to include the cost of scrap, as they had already included a 10% profit margin, which was more than the value of the scrap. However, the department contends that the sale proceeds of the scrap constitute an additional consideration and must be included in the assessable value. The tribunal supports the department's view, referencing the Supreme Court's decision in General Engineering Works, which held that the value of scrap sold must be included in the assessable value as it affects the conversion charges. 2. Applicability of Rule 4(5)(a) of CENVAT Credit Rules: The appellants argue that no duty was payable as the principal manufacturers had the option to avail the procedure under Rule 4(5)(a) of the CENVAT Credit Rules. However, the tribunal finds that this argument is not relevant to the present case as the procedure under Rule 4(5)(a) was not followed. The tribunal cites the Larger Bench decision in Thermax Babcock & Wilcox Limited, which clarifies that Rule 4(5)(a) pertains to the removal of inputs to the job worker and has no bearing on the valuation of the goods cleared by the job worker. 3. Revenue Neutrality: The appellants claim that the issue is revenue neutral as the duty paid on the scrap would be available as CENVAT credit to the recipients. However, the tribunal rejects this argument, stating that such an assertion would defeat the very scheme of CENVAT Credit and cannot be accepted. 4. Invocation of Extended Period for Demand: The appellants contend that the entire demand of duty is beyond the normal period of limitation as the unit was regularly audited by CERA/EA-2000 and no objections were raised regarding the non-inclusion of scrap value in the assessable value. The tribunal agrees with the appellants, noting that regular audits were conducted and the department failed to raise the issue during these audits. The tribunal finds that the appellants had a bona fide belief that their method of valuation was correct, supported by judicial pronouncements. Consequently, the tribunal holds that the extended period cannot be invoked, and demands should be restricted to the normal period only. 5. Imposition of Penalties: Given that the tribunal finds the invocation of the extended period unjustified and that the appellants had a bona fide belief regarding their valuation method, the imposition of penalties is deemed unwarranted. The tribunal sets aside the penalties imposed on the appellants. Conclusion: The tribunal partially allows the appeals, holding that: - The value of scrap retained by the appellants must be included in the assessable value, but quantification should be based on the actual scrap generated, considering burning losses. - Demands should be restricted to the normal period applicable during the relevant period of each appeal. - Penalties imposed are set aside.
|
