2016 (2) TMI 864 - AT - Central Excise

Valuation of machineries cleared to the job-workers - duty liability by the appellant as the value after availing benefit of depreciation - Held that - As it is undisputed that the appellant has cleared the machineries to their job-workers from whom they got the goods manufactured. Such manufactured goods were brought to their factory for use and final products were cleared on payment of appropriate duty. It is responsible statement of the learned counsel, that the machineries subsequently returned back to the appellant, though this position is not forthcoming from the records. In our considered view that the discharge of duty liability by the appellant as the value after availing benefit of depreciation seems to be correct for more than one reason. The machinery being manufactured in the year 1996 was disputed by the first appellate authority in his impugned order while we find from the adjudication order that the adjudicating authority has recorded that it is claimed by the assessee that the machinery was manufactured in 1996, but the said claim of the assessee is not controverted in anyway in the adjudication order. The first appellate authority was hearing the appeal filed by the assessee could not have come to a conclusion that the said machineries were indeed not manufactured in 1996, without any evidence. Secondly, we find that C.B.E.C. in Circular No. 643/34/2002-CX. dated 1.7.2002 at point No. 14 while accepting the discharge of duty liability in respect of capital goods on which Cenvat credit has been taken and put to use cleared for subsequently, categorically stated that in respect of capital goods adequate depreciation may be given as per the rates fixed in letter F. No. 495/16/93-Cus-VI dated 26.5.1993, issued on the Customs side. From the above, clarification, it is clear that if any capital goods on which Cenvat credit has been availed and put to use and subsequently removed, depreciation needs to be given as per the clarification of C.B.E.C - Decided in favour of assessee

Summary

Issues: Valuation of machineries cleared to job-workers, duty liability, depreciation benefit, penalty under Section 11AC of the Central Excise Act, 1944.

In the case, the issue revolved around the valuation of machineries cleared by the appellants to job-workers and the duty liability associated with it. The Revenue authorities contended that duty liability should be discharged on the machineries cleared to job-workers, challenging the appellant's claim of availing depreciation benefit to calculate the assessable value. The adjudicating authority confirmed a differential duty liability and imposed a penalty under Section 11AC of the Central Excise Act, 1944. The first appellate authority upheld this decision. However, the Tribunal found errors in the appreciation of law by the lower authorities. It was established that the machineries were cleared to job-workers who manufactured goods for the appellant, and the machineries were subsequently returned to the appellant. The Tribunal noted that the appellant correctly discharged duty liability by availing depreciation benefit, as the machineries were used in manufacturing final products and the depreciation claim was in line with the law and relevant circulars issued by C.B.E.C.

The Tribunal highlighted two key reasons for its decision. Firstly, the machinery was manufactured by the appellant in 1996 and was used in their factory premises before being sent to job-workers in 2002-03. The Tribunal noted discrepancies in the findings of the first appellate authority regarding the manufacturing year of the machinery. Secondly, referring to Circular No. 643/34/2002-CX, the Tribunal emphasized that depreciation should be granted for capital goods on which Cenvat credit was availed and subsequently removed. Since the machineries were used in manufacturing final products and depreciation was claimed in line with the circular, the Tribunal concluded that the appellant's actions were in accordance with the law. Therefore, the impugned orders were deemed unsustainable and set aside, with the appeal being allowed.