2015 (4) TMI 895 - AT - Central Excise

Demand of differential duty - Suppression of value of goods - Inclusion of cost of cement coating and epoxy coating - Held that - Cement coating had been got done by the appellant on job work basis through some job workers and the duty demand in respect of the value of cement coating has been dropped by the Commissioner himself and as such there is no dispute in respect of the same. - However, according to the appellant the epoxy coating had also been done through M/s Vipul Colour Coating outside the factory and hence, the value of this coating is not includible in the assessable value. However, on this point we find that Sh. K. G. Mantri, General Manager (Commercial) of the appellant company is his statement dated 16.02.2002 on being specifically asked, has stated that Cenvat Credit of the material used for coating was being availed by them. - value of the epoxy coating would be includable in the assessable value of the pipes, irrespective of whether the coating is done inside the factory or outside the factory. However, the Commissioner in the impugned order has not gone into this point for which, in our view, this matter would have to be remanded. If the appellant had availed cenvat credit in respect of the coating material and did not include the value of the coating in the assessable value of the pipes and this fact was not specifically intimated to the Department, it would amount to suppression of the relevant facts from the Department and extended period under proviso to section 11A(1) would be invokable. - Matter remanded back.

Issues:
1. Whether the cost of cement coating and epoxy coating should be included in the assessable value of the submerged arc welded pipes (SAW pipes).
2. Validity of the duty demands, interest, and penalties imposed by the Commissioner of Central Excise, Indore.
3. Admissibility of Cenvat credit for inputs and capital goods used in the manufacture of final products.
4. Application of the extended limitation period under proviso to section 11A(1) of the Central Excise Act, 1944.

Analysis:

1. The appellant manufactured SAW pipes and supplied cement coated and epoxy coated pipes to M/s Gujarat Water Supply and Sewerage Board. The Department issued a Show Cause Notice (SCN) demanding differential duty on the value of the coating, interest, and penalties. The Commissioner of Central Excise, Indore dropped certain demands but confirmed a duty demand on the epoxy coating. The appellant appealed against this order, arguing that the duty demand was time-barred and disputing the inclusion of the epoxy coating cost in the assessable value of the pipes.

2. The appellant's counsel contended that the duty demand on epoxy coating, confirmed by the Commissioner, was unsustainable. The Department defended the order, citing statements from company officials to support their claim that the coating was done in the factory. The issue of limitation was raised, with the Department asserting that the longer limitation period was correctly invoked due to the appellant's failure to inform the Department about the coating activities.

3. During the hearing, the appellant's counsel highlighted statements indicating that the epoxy coating was done outside the factory, thus challenging its inclusion in the assessable value. The Tribunal noted conflicting statements regarding the location of the coating process and the availing of Cenvat credit for coating materials. The Tribunal found that if Cenvat credit was indeed availed for the coating materials, the value of the epoxy coating should be included in the assessable value, regardless of the location of the process.

4. The Tribunal concluded that the matter required further examination and remanded it to the Commissioner for fresh adjudication. The Commissioner was instructed to verify whether Cenvat credit was taken for the coating materials and determine the inclusion of the epoxy coating value in the assessable value of the SAW pipes. The Tribunal emphasized the importance of disclosing relevant facts to the Department to avoid invoking the extended limitation period. The appeal was disposed of, setting aside the previous order for reevaluation based on the observations made.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments presented and the Tribunal's decision to remand the matter for further examination.

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