2014 (2) TMI 923 - AT - Central Excise

Waiver of pre-deposit - Valuation - Manufacture of wagons for Indian Railways - Inclusion of Free supplies - Rule 6 of valuation Rules - Held that - It is difficult to appreciate that M/s. Burn Standard Company, who are engaged in the manufacture of railway wagons, could not appreciate the new provisions prescribed under Section 4 of the CEA, 1944 and the Rules made thereunder, introduced from 01.07.2000. On a query from the Bench, whether the Applicant had approached the Department for any clarification regarding the includibility of the value of free issue materials in the assessable value of wagons, after introduction of the Transaction Value regime, the ld. Advocate expressed his inability to answer the same, as nothing is borne out from the record available with him. - Applicant could not able to make out a prima-facie case for total waiver of predeposit of the dues adjudged. - Stay granted partly.

Summary

Issues: Application seeking waiver of predeposit of duty and penalty under Section 11AC of the Central Excise Act, 1944 due to non-inclusion of value of free issue materials in assessable value of manufactured goods.

Analysis:

1. Non-inclusion of value of free issue materials: The Applicant received free issue materials from M/s. Indian Railways for manufacturing wagons but did not include their value in the assessable value of wagons for the period from March 2006 to October 2006. The Applicant argued that they believed under the Transaction Value regime, the value of free issue materials was not includible. However, the Revenue contended that the Hon'ble Supreme Court had previously held that free supply items should be included in the assessable value of manufactured wagons. The Tribunal found that under the Central Excise Valuation Rules, the value of free issue materials must be added to the value of manufactured goods as prescribed under Rule 6, which clarifies the inclusion of various items in the assessable value.

2. Limitation and bona-fide belief: The Applicant claimed that the demand was barred by limitation as no facts were suppressed, and they discharged duty based on transaction value. The Tribunal, however, noted that the law was settled by the Supreme Court in 1991 regarding the inclusion of free issue materials in assessable value. The Tribunal found that the Applicant failed to appreciate the new provisions introduced in 2000 and did not seek clarification from the Department regarding the inclusion of free issue materials. Despite citing judgments on suppression of facts, the Tribunal held that the Applicant's belief for non-inclusion was not bona fide, especially considering the past judgments against them.

3. Decision and directive: After considering both arguments, the Tribunal directed the Applicant to deposit 50% of the duty amount within eight weeks, failing which the appeal would be dismissed. The Tribunal emphasized the interest of revenue, financial hardship of the Applicant, and the settled legal principles in determining the waiver of predeposit. The balance dues would be waived upon the deposit, and recovery would be stayed during the appeal's pendency, as per the operative part of the order pronounced in court.

In conclusion, the Tribunal upheld the requirement to include the value of free issue materials in the assessable value of manufactured goods under the Central Excise Valuation Rules. The decision balanced the interests of revenue and the Applicant's financial situation while emphasizing the importance of complying with legal provisions and seeking clarification when in doubt.