2017 (3) TMI 991 - AT - Central Excise

Valuation - clearance to sister unit - CENVAT credit - demand of duty was on the ground that the differential customs duty paid by the MUL to the Customs constituted additional consideration in the hands of appellants - Held that - The assessment at the material time was done in terms of Rule 8 of the Central Excise Valuation Rules, 2000 and in terms of Rule 8 the appellant had included the cost of the said machine in the form of leased rentals in the assessable value. In terms of Rule 8, the cost of the machine of the appellant did not change as a result of the payment of differential duty by MUL to the Customs. The cost for the appellant remained the lease rental originally fixed. In view of the above, it cannot be said that there was any flow of additional consideration to the appellant or there was an enhanced cost of the appellant - it was the liability of MUL to fulfill the export obligation under EPCG scheme, the expenses on account of non fulfillment of the export obligation were not the liability of the appellant. CENVAT credit - denial on the ground that the invoices issued by MUL is neither a supplementary invoices nor a original invoice for the capital goods and therefore is not a valid document - Held that - it is not in challenge that the said capital goods were installed and used by the appellant in their factory. That being the case, non-filing of declaration and not accounting the same in RG-23 Part-I register is only the procedural defect for which credit cannot be denied. The ground that MUL was never in possession of capital goods and hence should not have been issued the invoices is without merit and not legal practice and, therefore, is discarded. The ground that the credit under Rule 3 of the Cenvat Credit Rules can be taken only in respect of the goods received in the factory on or after 1.3.2002 is misplaced in so far as in the instant case, the credit has been taken on supplementary invoices, which is a valid document in terms of Rule 7(1)(b) of the Cenvat Credit Rules, 2002. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demands on account of redetermination of value of goods cleared to sister concern
2. Denial of CENVAT Credit on certain capital goods
3. Imposition of penalties under Section 11AC of the Central Excise Act, 1944

Issue 1: Confirmation of Demands on Account of Redetermination of Value of Goods Cleared to Sister Concern:
The appellant, a manufacturing company, appealed against the confirmation of demands due to the redetermination of the value of goods cleared to their sister concern. The duty was paid based on the cost of production in different factories, and credit was taken accordingly. The dispute arose regarding the duty paid, denial of CENVAT Credit, and penalties imposed under Section 11AC of the Central Excise Act, 1944. The appellant argued that the duty was paid on the cost of production, and the credit taken was legitimate.

Issue 2: Denial of CENVAT Credit on Certain Capital Goods:
The dispute revolved around the denial of CENVAT Credit on capital goods related to a lease agreement and import of equipment under the EPCG scheme. The appellant purchased capital goods from a third party and took credit based on supplementary invoices issued by the buyer. The Commissioner sought to deny the credit, citing the nature of the invoices and the duty paid by the buyer. The appellant contested this denial, arguing that the credit was legitimate and had been allowed in similar circumstances in the past.

Detailed Analysis:
The Tribunal analyzed the circumstances surrounding the import of capital goods, the lease agreement, and the obligations under the EPCG scheme. It was established that the duty paid by the buyer did not constitute additional consideration for the appellant. The responsibility for fulfilling export obligations and related expenses rested with the buyer, absolving the appellant of any liability in this regard. The Tribunal referred to Rule 6 of the Central Excise Valuation Rules, 2000, to determine the validity of the demand for duty and concluded that the demand was not sustainable.

In a similar vein, the denial of CENVAT Credit on capital goods was scrutinized, with the Tribunal referencing past judgments and legal provisions. The Tribunal highlighted that the procedural defects raised by the Commissioner did not warrant the denial of credit, especially considering the legitimate use of the capital goods by the appellant. The Tribunal emphasized the validity of the supplementary invoices and the applicability of Rule 7 of the Cenvat Credit Rules, 2002, in allowing the credit on capital goods received.

Ultimately, the Tribunal allowed the appeals, overturning the decisions that confirmed demands on redetermined goods value and denied CENVAT Credit on capital goods. The judgments were pronounced in court on 28.02.2017 by the members of the Tribunal, highlighting the thorough analysis and legal reasoning behind the decisions.

This detailed analysis of the legal judgment showcases the complexities involved in the disputes over demands, CENVAT Credit denial, and penalties under the Central Excise Act, 1944. The Tribunal's meticulous examination of the facts, agreements, and legal provisions resulted in the favorable outcome for the appellant, emphasizing the importance of legal interpretations and precedents in resolving such matters.