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2023 (5) TMI 328 - AT - Central ExciseMethod of Valuation - stock transfers made by the appellant to other parts distribution centres - stock is reversed under Rule 3(5) of Cenvat Credit Rules, 2004 - Revenue was of the view that, since appellant has undertaken certain processes amounting to manufacture they were required to pay duty on the value determined in respect of the goods which were cleared to other PDCs on the value as determined under Rule 8 of the Central Excise Valuation Rules - adjustment of the amounts paid by the appellant at the time of clearance of the impugned goods, which as per the revenue was paid under erroneous interpretation of law - demand for interest and penalty. HELD THAT - It is quite obvious that the impugned goods on the basis of the processes undertaken by the appellant prior to packing, repacking etc., were the same as they were thereafter, for the application of the Section 2 f (iii) of the Central Excise Act, 1944, they would not fall within the definition of manufacture as understood in terms of the various pronouncements made by the Hon ble Supreme Court. Plain reading of Section 2 f (iii), makes it clear that as end result of these processes the goods should be marketable to the consumers. In the instant case, the goods were cleared by the appellant to other PDC on the stock transfer after reversal of the CENVAT Credit taken as per the Rule 3 (5) of the CENVAT Credit Rules, 2004. It is an admitted fact that the goods were not cleared for sale to the consumers on the basis of Retail Sale Price declared. It is only under Third Schedule of the Central Excise Act that Section 2(f)(iii) of the Central Excise Act is applicable declaring these processes undertaken to be the process of manufacture. Admittedly in the present case demand has not been made on the value as determined under Section 4A of the Central Excise Act. The impugned goods are undisputedly notified under Section 4 A (1) of the Central Excise Act, 1944. Since the goods were subjected to valuation under Section 4A they could not have been subjected to valuation in terms of Section 4 (1) (b) which provides for determination of value in the manner prescribed as per the Valuation Rules. Rule 8 under which the impugned order determines duty liability is part of the said Valuation Rules and would determine the value under Section 4 and not under section 4 A. In the present case, treating as the activity undertaken by the appellant did not amount to manufacture, appellant cleared the goods on reversal of the Cenvat credit taken by them in respect of these goods. The fact that the appellant had reversed the Cenvat credit as per Rule 3 (5) is not disputed. Revenue has also admitted the fact of reversal of CENVAT Credit as per Rule 3 (5), as per the report submitted to this Tribunal - the appellant has reversed more amount than the duty that has been sought to be demanded by the impugned order. The demand for duty if was to be made should have been made after adjusting the same against the credit amount reversed as has been held in M/S JINDAL STEEL POWER LIMITED VERSUS CCE, RAIPUR 2016 (10) TMI 870 - CESTAT NEW DELHI . There are no merits in the demand of duty made, the demand for interest and penalty imposed also cannot be upheld - appeal allowed.
Issues Involved:
1. Whether the demand of duty made by determining the value as per Rule 8 of the Valuation Rules, 2000, in respect of goods notified under Section 4A(1) of the Central Excise Act, 1944, is proper. 2. Whether revenue is bound to allow the adjustment of amounts paid by the appellant at the time of clearance of the impugned goods, which were paid under erroneous interpretation of law. 3. Whether the demand for interest and penalty imposed can be upheld. Summary: Issue 1: Demand of Duty and Valuation The Tribunal examined whether the demand of duty made by determining the value as per Rule 8 of the Valuation Rules, 2000, was appropriate for goods notified under Section 4A(1) of the Central Excise Act, 1944. The Tribunal noted that the impugned goods were subjected to valuation under Section 4A and could not be subjected to valuation under Section 4(1)(b). The processes undertaken by the appellant did not render the goods marketable to the end consumer, thus the demand made by invoking Rule 8 of the Central Excise Valuation Rules was not sustainable. Issue 2: Adjustment of Amounts Paid The Tribunal considered whether revenue should allow the adjustment of amounts paid by the appellant at the time of clearance of the impugned goods. It was found that the appellant had reversed the CENVAT credit as per Rule 3(5) of the CENVAT Credit Rules, 2004, and the fact of reversal was not disputed. The Tribunal cited several precedents to support the view that the demand for duty should have been made after adjusting the credit amount reversed by the appellant. Issue 3: Demand for Interest and Penalty Given that the demand for duty was not upheld, the Tribunal found no merit in the demand for interest and penalty. The Tribunal concluded that all three questions framed were answered against the revenue, and the impugned order lacked merit. Conclusion: The appeal was allowed, and the Tribunal did not uphold the demand for duty, interest, or penalty. The order was pronounced in the open court.
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