1989 (1) TMI 258 - AT - Central Excise

Summary

Issues Involved:

1. Inclusion of raw material cost in the value of clearances for job work.
2. Applicability of the extended period of limitation for show cause notices.

Issue-wise Detailed Analysis:

1. Inclusion of Raw Material Cost in the Value of Clearances for Job Work:

The central issue was whether the cost of raw materials supplied by customers should be included in the value of clearances for goods manufactured on a job work basis. The respondent, a manufacturer of filters and filter elements, claimed exemption under Notification No. 105/80 for the year 1981-82, arguing that their clearances were below the Rs. 30,00,000/- limit. The Superintendent of Central Excise contended that adding the cost of raw materials to job work charges would exceed this limit, leading to demands for unpaid duties.

The Assistant Collector's view was that exemptions under Notifications No. 89/79 and 105/80 should be computed based on the value ascertainable under Section 4 of the Central Excises and Salt Act, 1944, making the invoice value irrelevant. The respondent's appeal to the Collector of Central Excise (Appeals) was allowed, citing earlier judgments favoring the respondent's interpretation.

However, the Tribunal noted that the Supreme Court's judgment in Empire Industries Ltd. v. Union of India (1985) and subsequent rulings had overruled these earlier judgments. The Supreme Court held that the value for assessment under Section 4 must include the intrinsic value of the processed goods, not just the job work charges. The Tribunal, following this precedent, concluded that the cost of raw materials supplied by customers must be included in the value of clearances for calculating exemptions under Notification No. 105/80. Consequently, the Tribunal set aside the Collector of Central Excise (Appeals)'s order on this point.

2. Applicability of the Extended Period of Limitation for Show Cause Notices:

The respondent also contested the validity of one show cause notice dated 17th June 1982, arguing it was barred by limitation. The demand pertained to the period 29th September 1980 to 31st March 1981, and the respondent claimed there was no suppression of facts to justify the extended period of limitation.

The Tribunal examined the grounds of appeal and the show cause notice, finding no allegations of suppression of facts. The Tribunal held that the extended period of limitation could not be invoked, making the demand for Rs. 1,04,279.98 time-barred. However, the demands in the other two show cause notices dated 28th September 1981 and 10th February 1982 were within the permissible time limit.

Conclusion:

The Tribunal partially allowed the revenue's appeal. It upheld the inclusion of raw material costs in the value of clearances for job work, in line with the Supreme Court's judgments. However, it also ruled that the demand in the show cause notice dated 17th June 1982 was time-barred due to the absence of any suppression of facts. The revenue authorities were directed to give consequential effect to the Tribunal's order.