2005 (11) TMI 113 - AT - Central Excise

Valuation (Central Excise) - Cenvat/Modvat - the intermediate purchaser is not liable to pay duty on the inputs supplied since it had not taken the credit of Modvat in respect of inputs and therefore cannot be called upon to pay duty in respect of those inputs, nor can the value of the inputs be added to the assessable value of the final products

Summary

Issues: Duty demand on free supply items, penalty imposition, confiscation of assets, redemption fine

In the present case, the Appellate Tribunal CESTAT, Mumbai, addressed the duty demand of Rs. 45,77,673/- confirmed against the appellants due to the inclusion of the value of items supplied free by M/s. BEML in the assessable value of wagons cleared by the appellants to M/s. BEML. The penalty imposed was equal to the duty amount, and the appellant's assets were ordered to be confiscated, with the option of redemption upon payment of a fine of Rs. 10 lakhs. The Tribunal considered the Commissioner's reliance on the decision in Burn Standard Co. Ltd. v. Union of India [1992 (60) E.L.T. 671 (S.C.)] and noted that the Burn Standard case had been distinguished by the Apex Court in International Auto Ltd. v. Commissioner of Central Excise, Bihar [2005 (183) E.L.T. 239 (S.C.)]. The Apex Court in the latter case held that the manufacturer of the final product could adjust credit on inputs supplied to intermediate purchasers and was entitled to credit for duty paid by the intermediate purchasers on its products. It was established that the intermediate purchaser was not liable to pay duty on inputs supplied without taking Modvat credit, and the value of inputs could not be added to the assessable value of final products. Consequently, the impugned order was set aside, and the appeal was allowed.

This judgment dealt with the issue of duty demand arising from the inclusion of free supply items in the assessable value of goods. The Tribunal considered the legal precedent set by the Apex Court in distinguishing previous decisions and establishing the entitlement of manufacturers to adjust credits on inputs supplied to intermediate purchasers. The decision clarified the liability of intermediate purchasers regarding duty payment on inputs and emphasized the inadmissibility of adding input values to the assessable value of final products. By following the ratio of the Apex Court decisions, the Tribunal set aside the duty demand and penalty imposed, providing relief to the appellants.

Furthermore, the judgment addressed the imposition of a penalty equal to the duty amount and the confiscation of the appellant's assets. The Tribunal allowed the redemption of the confiscated assets upon payment of a fine of Rs. 10 lakhs. This aspect of the judgment highlighted the consequences of non-compliance with duty regulations and the corresponding penalties and confiscation measures. The Tribunal's decision to allow redemption upon payment of the specified fine balanced the enforcement of duty requirements with the opportunity for remediation by the appellants.