2016 (4) TMI 279 - AT - Central Excise

Duty liability and imposition of penalty - Moulds manufactured and captively used - Demand is for payment of duty on the various invoices raised by the appellant to receive payment from the buyers in respect of such moulds - Moulds not cleared out of the appellant s unit - Held that - in view of the decision of Tribunal in the case of Elcon Clipsal India Ltd. vs CCE, Ahmedabad 2002 (9) TMI 140 - CEGAT, COURT NO. II, NEW DELHI , the exemption for captive consumption cannot be denied if the capital goods are used within the factory or production. The ownership of the goods is not relevant. The only criteria for grant of exemption is the capital goods manufactured in a factory are used within the factory of production which is being satisfied. It should be noted that on the first part of notice the demand is not for amortization of mould s cost, and hence, not giving any finding on that aspect. Therefore, the demand of duty on moulds is not sustainable and the penalties imposed based on such demand are also not sustainable. - Decided partly in favour of appellant

Summary

Issues: Duty liability on moulds manufactured and captively used by the appellants, applicability of exemption under Notification No. 67/95-CE, inclusion of additional value of plastic parts due to amortization cost of moulds in assessable value.

In this case, the main issue revolved around the duty liability on the moulds manufactured and captively used by the appellants, who were engaged in the manufacture of plastic molded parts and moulds for automobiles and household items. The Revenue alleged that the appellants had not paid Central Excise duty for the moulds they manufactured, even though they issued invoices and received payment for them. The Original Authority confirmed a demand for duty and imposed penalties on both the main appellant and the Managing Director. The Commissioner (Appeals) upheld the demand for duty, except for a minor amount, and reduced the penalty on the Managing Director. The appellants challenged this decision in appeal.

The appellant argued that the moulds, for which duty was demanded, were not cleared out of the factory and were eligible for exemption under Notification No. 67/95-CE. They contended that as long as the moulds were used in further manufacturing of plastic parts, they should be exempt from duty. The appellant accepted the duty liability for the additional value of plastic parts due to the amortization cost of the moulds, stating that the amount had already been paid.

The Revenue, on the other hand, relied on a Tribunal decision in Mutual Industries Ltd. to support their claim that additional consideration received for moulds should be included in the assessable value for duty calculation. After hearing both sides and examining the records, the Tribunal deliberated on the duty liability issue. They noted that the demand was based on invoices raised by the appellant, even though the moulds were not cleared out of the factory. Citing precedents, the Tribunal emphasized that exemption for captive consumption should not be denied if capital goods are used within the factory or production, irrespective of ownership. In this case, the condition for exemption was deemed satisfied as the capital goods were used within the factory. The Tribunal concluded that the demand for duty on moulds was not sustainable, and the penalties based on that demand were also unsustainable. The appeals were allowed, except for the duty on the addition of amortization cost involved in the second part of the demand.