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2024 (12) TMI 789 - AT - Central ExciseRecovery of Central Excise Duty with interest and penalty - non-inclusion of value of free supply material from prime manufacturer, while clearing the job worked goods on payment of duty - violation of provisions of Rule 6 and Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - invocation of extended period of limitation - suppression of facts or not. Applicability of Rule 4(5)(a) of the CENVAT Credit Rules and Rule 10A of the Central Excise Valuation Rules - HELD THAT - Rule 10 A was inserted vide Notification No 9/2007-CE (NT) dated 01.03.2007 with effect from 01.04.2007 in Central Excise Valuation (Determination of Price Excisable Goods) Rules, 2007, to provide definiteness to the manner of valuation of the goods manufactured and cleared by the job worker. The entire scheme of valuation of the goods manufactured on job work was introduced. The said rule was not under consideration of the Hon ble Supreme Court in the case of International Auto 2005 (3) TMI 132 - SUPREME COURT . As per sub-clause (iii) the valuation of the goods manufactured on job work basis which were not sold as such by the prime manufacturer from the premise of job worker or his premises, i.e. (i) and (ii) of the said rules than the value of said goods for valuation of the said goods will be by application of the valuation rules mutatis mutandis. From Rule 4 (5) (a) of the CENVAT Credit Rules, 2004, it is evident that the said rule is enabling rule and procedure for clearance of the goods by the person who avails the CENVAT Credit for processing of the said goods and procedure for maintenance of records and the return of said goods. Inclusion of the value of free-supplied materials in the assessable value for excise duty - benefit of N/N. 214/86-CE - HELD THAT - The assessable value of the goods for the purpose of payment of duty is to be determined as per section 4 of the Central Excise Act, 1944 read along with the Central Excise (Determination of Price of Excisable Goods) Valuation Rules, 2000. Rule 6 of the valuation rules has been reproduced in the impugned order which clearly provide for addition of any additional consideration received by the appellant in any form to the transaction value for arriving at the assessable value. In terms of the decision of the Hon ble Supreme Court in case of Ujjagar Prints Pawan Biscuits 1988 (11) TMI 106 - SUPREME COURT and similar other decisions the value of raw material supplied for job work should have been added to arrive at the assessable value. The determination of assessable value made under the Section matter, is not subjected to admissibility of CENVAT credit to the appellant in respect of free supply material - in absence of any specific compliance with the conditions and procedure laid down as per the Notification 214/86-CE, the benefit of same cannot be allowed as claimed by the appellant. Appellant in the present case have determined the value of job worked material by excluding the value of the material supplied to them for job work by the prime manufacturer. The have determined the value on the basis of the value of the material procured by them on their own account and the job charges. The manner in which the value has been determined goes contrary to the decision of Hon ble Apex Court in case of Ujaggar Prints and other similar decisions read with the provision of rule 6 Rule 10A of Central Excise valuation (Determination of Price of Excisable Goods) Rules, 2000. Extended period of limitation - suppression of facts or not - HELD THAT - Appellant have suppressed the value of the goods cleared in as much as they did not assess the value by not including value of materials, components, parts and similar items that were being received from the principal manufacturer and used in the manufacture of goods on job work basis for discharging the duty liability. They have also not disclosed these facts to the department. Thus the party suppressed the material facts from the department with intent to evade payment of Central Excise Duty. Hence, the extended time limit is invokable under the provisions of Section 11A (4) of the Central Excise Act, 1944. The demand of central excise duty demand for interest upheld and the penalties imposed under section 11AC of the Central Excise are justified in view of the decision of Hon ble Supreme Court in case of Rajasthan Spinning and Weaving Mill 2009 (5) TMI 15 - SUPREME COURT . There are no merits in the appeal - appeal dismissed.
Issues Involved:
1. Inclusion of the value of free-supplied materials in the assessable value for excise duty. 2. Applicability of Rule 4(5)(a) of the CENVAT Credit Rules and Rule 10A of the Central Excise Valuation Rules. 3. Invocation of extended limitation period under Section 11A(4) of the Central Excise Act. 4. Imposition of penalty under Section 11AC of the Central Excise Act. 5. Allegations of suppression of facts and intent to evade duty. Issue-wise Analysis: 1. Inclusion of the Value of Free-Supplied Materials: The core issue was whether the appellant should include the value of materials supplied free of cost by the principal manufacturer when assessing the value of goods for excise duty. The tribunal upheld the demand for duty, interest, and penalty, citing Rule 6 of the Central Excise Valuation Rules, which mandates the inclusion of any additional consideration, whether direct or indirect, in the assessable value. The tribunal referred to the Supreme Court's decision in Ujagar Prints and Pawan Biscuits, which emphasized that the value of raw materials supplied for job work should be included in the assessable value. 2. Applicability of Rule 4(5)(a) and Rule 10A: The appellant argued that Rule 4(5)(a) of the CENVAT Credit Rules allowed them to exclude the value of free-supplied materials from the assessable value. However, the tribunal clarified that Rule 4(5)(a) is an enabling provision for the movement of goods and does not exempt the job worker from paying duty. Rule 10A, introduced to provide clarity on job work valuation, requires the inclusion of free-supplied materials in the assessable value. The tribunal noted that the appellant's interpretation of these rules was incorrect and contrary to established legal principles. 3. Invocation of Extended Limitation Period: The tribunal upheld the invocation of the extended limitation period under Section 11A(4) of the Central Excise Act. It found that the appellant had suppressed material facts by not including the value of free-supplied materials in the assessable value, thereby intending to evade duty. The tribunal rejected the appellant's claim of a bona fide belief, noting that the appellant had not disclosed these facts to the department and had failed to comply with procedural requirements. 4. Imposition of Penalty: The tribunal justified the imposition of a penalty under Section 11AC of the Central Excise Act, citing the appellant's intentional suppression of facts and contravention of valuation rules. The tribunal referred to the Supreme Court's decision in Rajasthan Spinning and Weaving Mill, which held that penalties are warranted for deliberate deception with the intent to evade duty. 5. Allegations of Suppression and Intent to Evade Duty: The tribunal found that the appellant had intentionally suppressed information about the value of free-supplied materials, leading to an incorrect assessment of duty liability. The tribunal rejected the appellant's argument that the demand was vague, noting that the show cause notice and the impugned order clearly articulated the case against the appellant. The tribunal emphasized that the appellant's actions amounted to tax evasion, which cannot be condoned under the guise of tax avoidance strategies. In conclusion, the tribunal dismissed the appeal, upholding the demand for duty, interest, and penalty, and emphasized the need for strict compliance with valuation rules and procedural requirements.
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