2017 (2) TMI 313 - AT - Central Excise

Valuation - demand of duty on value of tools - Department is of the view that the appellant has neither paid the duty on the value of the tools nor amortised the cost of the tools in the value of the motor vehicle parts manufactured and supplied to Eicher Motors - Held that - It is settled position that excise duty is payable only on the clearance of the goods from the factory of the manufacturer. However, it is also a settled law that the amortisation cost has to be apportioned in the value of the component manufactured when the tools is belonging to the principal manufacturer. The tools were used for manufacture of components under job work in terms of Rule 4(5)(a). In such case no excise duty is payable. Therefore, no question of inclusion of amortisation cost of the tools arise. However, the adjudicating authority has not given any finding on the issue of job work under Rule 4(5)(a). Therefore, the matter needs to be remanded to the original authority - appeal allowed by way of remand.

Issues:
1. Time limitation for issuing demand notice.
2. Duty payment on tools used in manufacturing motor vehicle parts.
3. Inclusion of amortisation cost in the value of manufactured parts.
4. Job work under Rule 4(5)(a) of Cenvat Credit Rules, 2004.
5. Remand to the original authority for fresh order.

Issue 1: Time limitation for issuing demand notice
The appellant argued that the demand is time-barred as the audit report was issued beyond one year from the date of conducting the audit. The appellant contended that the department was aware of their activities during the audit, making the notice untimely. The appellant also highlighted that they were engaged in manufacturing components under Rule 4(5)(a) of Cenvat Credit Rules, 2004, where no duty was paid. The appellant relied on legal precedents to support their argument.

Issue 2: Duty payment on tools used in manufacturing motor vehicle parts
The revenue contended that the appellant received the value of tools used to manufacture motor vehicle parts, and it is established practice to include the amortisation cost of such tools in the value of manufactured goods. The revenue argued that the demand was not time-barred due to the suppression of facts by the appellant. Legal judgments were cited to support this argument.

Issue 3: Inclusion of amortisation cost in the value of manufactured parts
The Tribunal found that while excise duty is payable only upon clearance of goods from the factory, the amortisation cost of tools must be included in the value of components when the tools belong to the principal manufacturer. However, in this case, the tools were used for job work under Rule 4(5)(a) of Cenvat Credit Rules, 2004, where no excise duty is payable. The Tribunal noted that the adjudicating authority did not address the job work issue, leading to a remand for a fresh order considering this aspect.

Issue 4: Job work under Rule 4(5)(a) of Cenvat Credit Rules, 2004
The Tribunal observed that the tools were used for manufacturing components under job work as per Rule 4(5)(a), where no excise duty is payable. Therefore, the inclusion of amortisation cost does not apply in this scenario. The matter was remanded to the original authority for a fresh order considering this finding.

Issue 5: Remand to the original authority for fresh order
The impugned order was set aside, and the appeal was allowed by way of remand to the adjudicating authority for a fresh order, taking into account the Tribunal's observations regarding job work under Rule 4(5)(a) of Cenvat Credit Rules, 2004.

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