2014 (6) TMI 721 - AT - Central Excise

Waiver of pre-deposit - Valuation - paper and paper boards - Job work - demand of duty on the price at which sheets were sold to the ultimate buyers - Held that - If the appellant had cleared the paper from their factory in sheet form, they would have been required to discharge the duty liability at the price at which the paper sheets were sold. Merely because the paper was initially cleared to the job-workers for conversion from reels into sheets and thereafter supplied/sold to the buyers, why should the duty liability be discharged on a lower value? If such a view is taken, it will be possible to easily shift the penultimate process of manufacture to a job worker and evade excise duty on the value addition which has significant ramifications. Further, manufacture includes any process incidental or ancillary to the completion of a manufactured product and cutting of paper from reels into sheets is a process incidental or ancillary to the completion of the paper sheet. As per Rule 10A of the Central Excise Valuation Rules, when goods are sent for job-work and the job-worked goods are sold from the job workers premises, duty liability has to be discharged on the sale price of the job-worked goods charged by the principal manufacturer. This change in the valuation Rules came with effect from 1st March 2007. Therefore, the stay orders pertaining to the previous period are not relevant or applicable as there is a change in the legal position. Therefore, the department s claim for discharge of duty on the price at which the goods were ultimately sold to the buyers had merits. - Conditional stay granted.

Summary

Issues:
1. Condonation of delay in filing appeal
2. Discharge of excise duty liability on paper clearance
3. Interpretation of Central Excise Valuation Rules

Condonation of Delay in Filing Appeal:
The appeal was filed against an order confirming a duty demand against the appellant. The appellant requested condonation of a 304-day delay in filing one of the appeals, explaining that they initially filed a composite appeal against two orders but were directed by the registry to file another appeal later. The delay was condoned by the tribunal based on the reasons provided by the appellant's consultant, considering them satisfactory.

Discharge of Excise Duty Liability on Paper Clearance:
The appellant, a paper manufacturer, cleared paper in reel form to job-workers for cutting into sheets. The department contended that duty should be paid based on the sheet price at which the goods were sold to buyers, not the lower reel value. The appellant argued that cutting reels into sheets does not constitute "manufacture," so duty should be based on the reel value. However, the tribunal held that the duty should be paid based on the sale price of the job-worked goods as per Rule 10A of the Central Excise Valuation Rules. The tribunal emphasized that shifting the manufacturing process to job-workers to evade duty is not permissible, and duty must be paid on the value addition. The tribunal directed the appellant to make a pre-deposit of the entire duty demanded within four weeks.

Interpretation of Central Excise Valuation Rules:
The tribunal noted that the change in valuation rules from 1st March 2007 necessitated duty payment based on the sale price of job-worked goods by the principal manufacturer. Previous stay orders were deemed irrelevant due to this legal change. The tribunal found merit in the department's claim for duty payment based on the goods' ultimate sale price to buyers. As the appellant failed to establish a prima facie case for granting a stay, the tribunal directed the pre-deposit of the entire demanded duty within a specified period, with the waiver of interest and penalty upon compliance and stay of recovery during the appeal's pendency.