1998 (3) TMI 320 - AT - Central Excise

Summary

Issues:
1. Inclusion of Modvat credit availed on inputs in the assessable value of final products.
2. Interpretation of Section 4(1)(b) of the Central Excise Act and Rule 6(b)(ii) of the Central Excise (Valuation) Rules.
3. Conflict between Tribunal decision in Dai-Ichi Karkaria case and Supreme Court decision in CCE, Bangalore v. Mysore Paper Mills Ltd.
4. Exclusion of duty paid on inputs from the assessable value of final products in job work basis manufacturing.

Analysis:

1. The Appellant filed price lists for LPG cylinders manufactured on job work basis without including Modvat credit availed on inputs. The Assistant Collector issued a Show Cause Notice for adding Modvat credit to the assessable value and demanding differential duty. The Collector of Central Excise upheld the order, leading to the present appeal challenging the decision.

2. The main argument by the Appellant's Counsel relied on the Tribunal's decision in Dai-Ichi Karkaria case, stating that Modvat credit should not be included in the assessable value under Section 4(1)(b) and Rule 6(b)(ii) of the Valuation Rules.

3. The Departmental Representative cited the Supreme Court decision in CCE, Bangalore v. Mysore Paper Mills Ltd., emphasizing that duty paid on inputs should not be excluded from the assessable value based on the duty paid on the final product, contradicting the Tribunal's decision in Dai-Ichi Karkaria case.

4. The Tribunal analyzed the Supreme Court judgment and clarified that the Mysore Paper Mills case concerned duty on the final product, not on inputs. In the present case, the assessable value was determined under Section 4(1)(b) and Rule 6(b)(ii) for goods produced on job work basis, where duty paid on inputs was not claimed for exclusion.

5. The Tribunal reiterated the relevance of the Dai-Ichi Karkaria decision, emphasizing that duty paid on inputs should not be included in the assessable value of final products manufactured on job work basis. The decision was based on the purpose of the Modvat scheme to avoid cascading taxation and reduce the total product cost.

6. The Tribunal concluded that the Dai-Ichi Karkaria decision applied to the present case involving goods manufactured on job work basis, as both scenarios fell under Section 4(1)(b) and Valuation Rule 6(b)(ii), leading to the setting aside of the impugned order and allowing the appeal.