2016 (1) TMI 763 - AT - Central Excise

Demand of differential duty on account of non-inclusion of AED (T&TA) in the cost of Grey Fabrics for excise purposes - inclusion of AED (T&TA) in the cost of Grey Fabric is sent for job work when the same is available as credit to the appellant - Held that - It is clear that in the case under consideration of CCE, Pune vs. Dai Ichi Karkaria Ltd 1999 (8) TMI 920 - SUPREME COURT OF INDIA the assessee can utilize the credit taken to pay excise duty on the finished product, as such, the Hon ble Apex Court observed in such situation the duty which was already credited and which can be used for discharging duty on final product need not be included in the cost. In the present case we find the appellant though availed the credit as permissible by the law, cannot utilize the same as the finished product Grey Fabric is not liable to AED (T&TA). As such, the said duty paid on inputs will become cost to the appellant, which cannot be passed on by way of utilization of the said credit for discharging the duty on finished product. This much is clear from appellant s own treatment of the said credit as expenditure in the balance sheet for the year 2003-2004. Their not showing the said duty as expenditure in the next year will not affect the fact the AED paid has to be observed as a cost in view of the fact that they are not able to utilize the same - Decided against assessee.

Summary

Issues:
- Inclusion of Additional Excise Duty (AED) in the cost of Grey Fabrics for excise purposes when availed as credit by the appellant.

Analysis:
The case involved the appellants engaged in manufacturing Grey Fabrics, PV Grey Fabrics, and Polyester Grey Fabrics, availing Cenvat credit of Basic Excise Duty (BED), Special Excise Duty (SED), and Additional Excise Duty (AED) paid on inputs. The dispute arose as the appellants did not include the component of AED in the cost of Grey Fabrics for excise purposes. The Original Authority and the Commissioner (Appeals) confirmed the demand of differential duty. The appellant contended that since they rightfully availed the credit of AED, it should not be included in the cost of production of Grey Fabrics. They relied on the decision of the Hon'ble Supreme Court in a specific case and a Board Circular. The key issue was whether AED should be included in the cost of Grey Fabrics when it is available as credit to the appellant.

The Tribunal examined the appeal records and the Supreme Court's decision cited by the appellant. The Supreme Court's ruling emphasized that if excise duty paid on raw material is permissible as credit, it should not be included in determining the cost of production of excisable goods. However, the Tribunal noted that in the present case, the appellant could not utilize the AED credit for discharging duty on the finished product Grey Fabric, as it was not liable to AED. Therefore, the AED paid on inputs would become a cost to the appellant, as observed from their treatment of the credit as an expenditure in the balance sheet. The Tribunal concluded that since the appellant could not utilize the credit, the AED paid had to be considered as a cost, affirming the lower authority's order and dismissing the appeal.

In summary, the judgment clarified that even though the appellant availed the AED credit as permissible by law, it could not be used for discharging duty on the finished product that was not liable to AED. As a result, the AED paid on inputs had to be considered a cost to the appellant, as they were unable to utilize the credit. The decision highlighted the importance of considering the specific circumstances and applicability of credits in determining the cost of production for excisable goods.