2013 (11) TMI 1153 - AT - Central Excise

Cost of Waste/Scrap to be included in the value of goods manufactured by the job worker or not - The applicant sold the scrap in the market Revenue was of the view that the value of the scrap had not been included in the assessable value - Held that - CCE Nagpur Vs Lloyds Steels Industries Ltd. 2005 (3) TMI 17 - SUPREME COURT OF INDIA - Cost of materials and conversion charges are different elements - if by retaining scrap/waste, conversion charges get reduced, then value of scrap/waste would be includible in the assessable value - The contention of ld. advocate that there is no evidence in so far the value was depressed by non-inclusion of value of waste and scrap would be looked into at the time of appeal hearing at length the applicant failed to make out a prima facie case for waiver of pre-deposit of entire amount of tax and penalty along with interest appellant directed to submit Rupees Ten lakhs as pre-deposit upon such submission rest of the duty to be submitted till the disposal Partial stay granted.

Summary

Issues:
- Duty on conversion charges
- Inclusion of scrap value in assessable value
- Application of Supreme Court decisions
- Waiver of predeposit

Analysis:

1. Duty on Conversion Charges:
The case involves the issue of duty payment by the applicants for the manufacture of tractor parts on a job work basis. The dispute arises from the demand of duty amounting to Rs.30,54,136/- along with interest and penalty, as the revenue claims that the applicants did not include the value of scrap generated during the manufacturing process in the conversion charges. The applicants argue that they paid duty based on the cost of material and conversion charges, citing relevant Supreme Court decisions to support their position.

2. Inclusion of Scrap Value in Assessable Value:
The Revenue contends that by excluding the value of scrap from the assessable value, the applicants artificially reduced the assessable value. They argue that since the scrap was sold in the market, its value should have been included in the assessable value. The Revenue relies on a Supreme Court decision to support their argument, emphasizing that if retaining scrap reduces conversion charges, the value of scrap should be considered in the assessable value.

3. Application of Supreme Court Decisions:
The Tribunal, after considering arguments from both sides and reviewing the records, notes that the applicants, as job workers, processed castings supplied by M/s. TAFE Ltd. and sold the scrap in the market. Referring to a Supreme Court decision, the Tribunal highlights that the cost of materials and conversion charges are distinct elements. The Tribunal indicates that if the retention of scrap reduces conversion charges, the value of scrap should be included in the assessable value. The Tribunal directs the applicants to deposit a specified amount while considering the evidence regarding the alleged depression of value due to non-inclusion of scrap value for further review during the appeal hearing.

4. Waiver of Predeposit:
The Tribunal rules that the applicant failed to establish a prima facie case for the waiver of the entire amount of tax and penalty along with interest. Consequently, the Tribunal orders the applicant to deposit a specific sum within a stipulated period. Upon compliance with the deposit requirement, the predeposit of the remaining tax, interest, and penalty is waived, and the recovery is stayed during the appeal process.

This detailed analysis of the judgment covers the key issues of duty payment, inclusion of scrap value in the assessable value, application of relevant Supreme Court decisions, and the Tribunal's decision on the waiver of predeposit.