2014 (6) TMI 681 - AT - Central Excise

Waiver of pre-deposit of duty - Valuation of goods - Job work - applicants are not including the value of waste and scrap retained by them in the value of finished products for the purpose of payment of duty - Held that - Major portion of the demand is in respect of the goods manufactured on behalf of Steel Authority of India Ltd. The applicants are paying duty at the sale price of Steel Authority of India Ltd. as per the provisions of Rule 10A of the Valuation Rules. In this situation, the value of waste and scrap retained by the applicant cannot be considered as additional consideration - In respect of the goods manufactured on behalf of KEC International Ltd., in similar situation in the case of Sanvijay Rolling & Engineering Ltd. vide order dated 15-11-2011, the Tribunal directed the assessee to pre-deposit part amount of duty and the Hon ble Bombay High Court set aside the order passed by the Tribunal. In view of the above, the applicant has made out a strong case, therefore pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.

Issues:
1. Waiver of pre-deposit of duty, interest, and penalty for job work undertaken.
2. Treatment of waste and scrap retained by the applicant in the value of finished products for duty payment.
3. Comparison with the principle laid down by the Hon'ble Supreme Court in the case of Ujagar Prints.
4. Assessment of additional consideration for waste and scrap retained by the job worker.
5. Pre-deposit requirement for goods manufactured on behalf of KEC International Ltd.
6. Application of Rule 10A of the Central Excise Valuation Rules for determining duty payment.

Analysis:
1. The applicant sought a waiver of pre-deposit of duty, interest, and penalty amounting to Rs. 64,22,006 for job work undertaken for Steel Authority of India Ltd. The demand was contested on the grounds that the value of waste and scrap retained by the applicant was not included in the finished product's value for duty payment. The applicant argued that they were paying duty based on the sale price of Steel Authority of India Ltd. as per Rule 10A of the Valuation Rules, thus asserting that the scrap's value should not be considered as additional consideration.

2. Regarding the job work for KEC International Ltd., the applicant relied on the principle established by the Hon'ble Supreme Court in the Ujagar Prints case. Additionally, reference was made to a similar case involving Sanvijay Rolling & Engineering Ltd., where the Tribunal's decision to demand a partial amount of duty was overturned by the Hon'ble Bombay High Court. This comparison was crucial in demonstrating that the demand in the present case was not sustainable.

3. The Revenue contended that the waste and scrap retained by the applicant, as a job worker, should be considered as additional consideration and added to the assessable value of the manufactured goods. However, the Tribunal noted that the significant portion of the demand pertained to goods manufactured for Steel Authority of India Ltd., where duty was paid based on Steel Authority's sale price as per Rule 10A. Consequently, the scrap's value retained by the applicant could not be deemed as additional consideration in this context.

4. In light of the above analysis, the Tribunal found that the applicant had a strong case for waiver of the pre-deposit requirement, especially concerning the goods manufactured for KEC International Ltd. The Tribunal referenced a previous case involving Sanvijay Rolling & Engineering Ltd., where a similar pre-deposit requirement was set aside by the Hon'ble Bombay High Court. Consequently, the Tribunal granted the waiver and stayed the recovery of dues during the appeal's pendency, thereby allowing the applicant's stay petition.

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