2013 (9) TMI 651 - AT - Central Excise

Marketability and Excisability of Goods - Captive consumption - Whether the product non-woven fabrics was marketable and therefore excisable - Held that - Goods were capable of being marketed and were therefore excisable and dutiable - The goods do have some compactness/tensile strength/dimensional stability - Compactness/tensile strength/dimensional stability of non-woven fabrics cleared from factory was much more than that of goods - Appellants had not submitted any literature to show for marketability compactness,/tensile strength/dimensional stability should exceed a particular limit. Valuation of Goods - Held that - The goods were used Captively and were not comparable to goods cleared by them from their factory, value was to be determined as per Valuation Rules - Court directed the Commissioner to re-determine the value of goods as per Valuation Rules - While re-adjudicating the case, Commissioner should have considered issue of valuation of goods raised before Commissioner particularly when Department itself had determined the assessable value for the period on the basis 115% or 110% of cost of production under Valuation Rules - Commissioner should re-determine the duty liability after re-determining the value of impugned goods used captively as per Valuation Rules on the quantity of impugned goods equal to quantity of jute carpets cleared by them. Quantity of Fabrics - Held that - Commissioner was directed to re-determine the duty on quantity equal to quantity of jute carpets cleared by them. Penalty - Held that - Imposition of penalty to be considered by the Commissioner afresh after re-determination of duty - since duty amount was to be re-determined by the Commissioner on account of valuation as well as quantity of fabrics, imposition of penalty will depend on the duty re-determined. Commissioner will consider the imposition of penalty afresh after re-determination of duty - Commissioner had taken a view that assesses had withheld the fact that goods had dimensional stability which was sole criterion to be tested for marketability of goods in view of direction of CESTAT - This view of the Commissioner was not correct in as much as CESTAT had not given any such direction - case was remanded back to Commissioner for decision after affording an opportunity of hearing to the assesses - Appeal was disposed off by way of remand.

Issues Involved:
1. Marketability and excisability of "non-woven fabrics."
2. Valuation of the intermediate goods.
3. Quantity of fabric on which duty is demanded.
4. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Marketability and Excisability of "Non-Woven Fabrics":

The primary issue was whether the intermediate product "non-woven fabrics" used captively by the appellants for manufacturing jute carpets is marketable and therefore excisable. The appellants argued that the "non-woven fabrics" lacked dimensional stability and were not marketable. They contended that the goods sold as "non-woven fabrics" on payment of duty were different from the intermediate product in question. The Commissioner, however, decided based on the manufacturing process and the affidavit of Shri Patwardhan, General Manager, that the impugned goods were capable of being marketed and hence excisable. The Tribunal agreed with the Commissioner's finding that the impugned goods had some degree of compactness/tensile strength/dimensional stability and were therefore marketable and dutiable.

2. Valuation of the Intermediate Goods:

The appellants challenged the valuation of the captively consumed intermediate goods. The Commissioner had rejected their plea on the grounds that this issue was not raised in earlier proceedings. The Tribunal noted that since the matter was remanded for de novo adjudication, the Commissioner should have considered the valuation issue. The Tribunal directed the Commissioner to re-determine the value of the impugned goods as per Valuation Rules, considering the Department's method of determining assessable value based on 115% or 110% of the cost of production for the period July 2002 to December 2004.

3. Quantity of Fabric on Which Duty is Demanded:

The appellants contended that the quantity of "non-woven fabrics" on which duty was demanded exceeded the quantity of jute carpets manufactured. Specifically, for the last eight show-cause notices, duty was demanded on 10,45,712.03 square meters, while the quantity of jute carpets manufactured was only 1,69,504.96 square meters. The Tribunal agreed with the appellants and directed the Commissioner to re-determine the duty based on the quantity of jute carpets cleared.

4. Imposition of Penalty:

The appellants argued that no penalty should be imposed as the extended period of limitation was dropped, indicating no suppression of facts or misdeclaration on their part. The Tribunal noted that the Commissioner's view that the appellants withheld information about the dimensional stability of the impugned goods was incorrect. The Tribunal directed that the imposition of penalty should be reconsidered by the Commissioner after re-determining the duty amount, based on the valuation and quantity issues.

Conclusion:

The Tribunal held that duty on the impugned goods used captively is leviable. The Commissioner was directed to re-determine the duty liability after considering the valuation as per Valuation Rules and the quantity of jute carpets cleared. The imposition of penalty was to be reconsidered after re-determination of duty. The case was remanded back to the Commissioner for a decision after affording an opportunity of hearing to the appellants.

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