1997 (7) TMI 501 - AT - Central Excise

Summary

Issues:
Whether the benefit of Modvat credit taken by the appellants on duty paid inputs utilized in the final product should be included in the value of goods sold.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Kolkata centered around whether the Modvat credit claimed by the appellants on duty paid inputs used in manufacturing television sets should be factored into the value of the goods sold. The appellants declared a sale price of Rs. 6,670 for their television sets, claiming an approved assessable value of Rs. 4,995 after deducting the element of duties. The original authority contended that the duty suffered by inputs must be included in the value, resulting in a higher assessable value exceeding Rs. 5,000. The Revenue argued that the duty paid on inputs should be part of the sale price as it is a benefit earned by the appellants. They relied on a Supreme Court judgment emphasizing the inclusion of excess duty suffered by inputs in the final product's value.

The respondents, on the other hand, relied on a larger Bench judgment of the Tribunal in Dai-Ichi Karkaria Ltd. v. Collector of Central Excise, Pune, which held that duty paid on inputs with Modvat credit availed by a manufacturer should not be included in the assessable value of the final product. They argued that Modvat credit does not automatically reduce the assessable value under Section 4(1)(a) of the Central Excises and Salt Act, 1944, which is based on normal price valuation. The Tribunal referred to the reasoning in the judgment, emphasizing the objective of limiting the cascading effect of taxation and avoiding duty on duty by reimbursing or crediting excise duty paid on inputs.

After considering both arguments and the relevant judgments, the Tribunal concluded that the matter was squarely covered by the larger Bench judgment in Dai-Ichi Karkaria. They distinguished the Supreme Court judgment cited by the Revenue, stating it was not relevant to the current controversy. The Tribunal highlighted that the case of Mysore Paper Mills, cited by the Revenue, involved different circumstances regarding the inclusion of duty on wrapping paper, which was not applicable to the present case concerning the duty on television sets. Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the appellants' approach of deducting the duty paid on inputs from the sale price, as per Section 4(4)(d)(ii) of the Act.