1996 (1) TMI 179 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of Modvat credit in the assessable value of the final product.
2. Conformity of the decision in Atic Industries Ltd. case with Incab Industries case.
3. Incidental points related to the inclusion of Modvat credit in the assessable value.

Summary:

1. Inclusion of Modvat Credit in the Assessable Value of the Final Product:
The appellant, a manufacturer of surface active agents and emulsifiers, did not include the element of excise duty/CVD paid on raw materials in the cost of production declared for captive consumption. The Assistant Collector issued a notice u/s 4(1)(b) of the Central Excises & Salt Act, 1944, demanding inclusion of excise duty paid on raw materials in the cost of intermediate products. The appellant argued that the duty paid on raw materials was "set off" under the Modvat credit scheme and should not be included in the cost of raw materials. Both the Assistant Collector and the Collector (Appeals) over-ruled the appellant's contention, leading to the present appeal.

2. Conformity of the Decision in Atic Industries Ltd. Case with Incab Industries Case:
The Division Bench referred the matter to a larger Bench due to perceived conflict between the decisions in Atic Industries Ltd. case (1992 (62) E.L.T. 321) and Incab Industries case (1990 (45) E.L.T. 342). The larger Bench found no divergence between the two decisions, noting that both dealt with cases u/s 4(1)(a) of the Act where the wholesale price was ascertainable, and neither involved captive consumption. Both decisions held that availing of Modvat credit does not directly affect or automatically reduce the assessable value. The decision in Atic Industries case was found to be in conformity with the decision in Incab Industries case.

3. Incidental Points Related to the Inclusion of Modvat Credit in the Assessable Value:
The main dispute revolved around whether the excise duty paid on input raw materials, for which Modvat credit was availed, should be included in the cost of raw materials for determining the assessable value of the intermediate product u/s 4(1)(b) of the Act and Rule 6(b)(ii) of Central Excise Valuation Rules. It was concluded that the duty paid on input in regard to which Modvat credit was availed is not includible in the assessable value of the final product under these provisions. The impugned orders were set aside, and the jurisdictional Assistant Collector was directed to pass a fresh order in accordance with the law and the principles laid down in this judgment.

Conclusion:
The appeal was allowed, and it was held that Modvat credit availed on inputs should not be included in the assessable value of the final product for captive consumption. The jurisdictional Assistant Collector is to pass a fresh order based on this principle.