2025 (1) TMI 675 - AT - Central Excise

Demand of duty short paid under Section 11A(1) of Central Excise Act, 1944 along with interest and penalty under Section 11AA and 11AC of the Act respectively - whether the value of sprouts sold by the appellant is to be included in the assessable value of the Malt and the duty is payable while clearing the same to UBL ? - HELD THAT - Both the Authorities observed that the sprouts arose during the processing of Barely‟ for manufacture of Barely Malt‟, which was sold by the appellant and the sole proceeds were retained by them. The profit earned on the sale of sprouts, therefore, has been part of the value of the Barley Malt‟ manufactured and cleared by the appellant on job work to the principal manufacturer. In view of the decision of the Supreme Court in UJAGAR PRINTS ETC. ETC. VERSUS UNION OF INDIA OTHERS 1989 (1) TMI 124 - SUPREME COURT also the clarification issued by the CBEC in Circular No.619/10/2002-CX dated 19.02.2002, where the Tribunal had rejected the appeal of the appellant on the issue of inclusion of the value of the sprouts, the Adjudicating Authority had confirmed the demands. There are no reason to interfere with the impugned order and hence, the same is affirmed - appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the value of sprouts sold by the appellant should be included in the assessable value of "Malt" for the purpose of calculating excise duty when the "Malt" is cleared to the principal manufacturer, M/s. United Breweries Limited (UBL), during the specified period.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework involves the interpretation of Section 11A(1) of the Central Excise Act, 1944, concerning the demand of duty short paid, along with Sections 11AA and 11AC, which pertain to interest and penalties. The Central Excise Valuation Rules, 2000, and the precedent set by the Supreme Court in M/s. Ujagar Prints Ltd. are also relevant. Additionally, a CBEC Circular No.619/10/2002-CX and a previous Tribunal decision in the appellant's case are considered.

Court's interpretation and reasoning:

The court examined the Malt Agreement dated 18.02.2011, specifically paragraph 6, which states that thin and sprout by-products accrue to the benefit of the manufacturer (the appellant). The court reasoned that since the appellant retained the proceeds from the sale of sprouts, these proceeds should be included in the value of the "Malt" for excise duty purposes. The court relied on the Supreme Court's decision in M/s. Ujagar Prints Ltd., which supports the inclusion of additional values in the assessable value for excise duty.

Key evidence and findings:

The key evidence includes the cost certificates provided by the cost accountants, which did not initially include the value of sprouts in the cost of production. The court also considered the Malt Agreement, which explicitly allowed the appellant to benefit from the sale of sprouts. The Tribunal's previous decision against the appellant on a similar issue was also a significant factor.

Application of law to facts:

The court applied the legal principles from the Central Excise Act and relevant precedents to the facts, determining that the appellant's retention of proceeds from the sale of sprouts constituted a value addition to the "Malt." Therefore, this value should be included in the assessable value for excise duty calculation.

Treatment of competing arguments:

The appellant did not appear for the hearing, and no competing arguments were presented in their absence. The court proceeded to decide the case based on the appeal papers and the Authorized Representative's submissions for the Department, which supported the inclusion of the sprout value in the assessable value.

Conclusions:

The court concluded that the value of sprouts sold by the appellant must be included in the assessable value of the "Malt" for excise duty purposes. The appeal was dismissed, affirming the decision of the lower authorities.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"By considering the overall facts and circumstances of the case, we are of the view that appellant has sold the sprouts outside to the third party and retained the sale proceeds, then the value is required to be added to that of the goods, the malt supplied to the principal manufacturer and it attracts excise duty."

Core principles established:

The judgment reinforces the principle that any value addition or profit retained by a manufacturer from by-products or ancillary sales should be included in the assessable value for the purpose of calculating excise duty.

Final determinations on each issue:

The court affirmed the lower authority's decision to include the value of sprouts in the assessable value of "Malt" and dismissed the appeal, upholding the excise duty demand along with interest and penalties.

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