2017 (12) TMI 709 - AT - Central Excise

Valuation - includibility of certain costs - whether the valuation of the goods manufactured and supplied by the appellants for execution of turnkey project is correct and legal and whether the deduction claimed from the value is proper and legal? Held that - the cost of manufacture should be based on the CAS-4 certificate which was certified by the Cost Accountant and not by the cost details submitted by the Managing Director. Cost of rubber rings - includibility - Held that - rubber rings supplied by the appellant but it does not take part in or in relation to the manufacture of pipes manufactured by the appellants. The rubber rings is use for jointing of pipes at site which is an activity of laying of pipes, therefore the same cannot be attributed to manufacturing of pipes - cost not includible in the assessable value. Transportation cost - includibility - Held that - the fact is not under dispute that there is no sale of goods through the depot. The clearance of goods is made from the factory gate of appellant to the pipeline site of the customer - the valuation should be done on the basis of cost of manufacture notional profit therefore the transportation in such valuation method cannot be included - the cost of transportation given in this case cannot be included. Written off cost on account of theft or other loss - Held that - there is no dispute of quantity of pipes cleared by the appellant. Certain quantity of pipe is on account of theft or rejection which has taken place after removal from the factory - After removal if there is any shortage the same cannot be deducted from the overall value of the goods cleared - the value of written off goods cannot be deducted from the value. CENVAT credit - denial on the ground that clearance of goods effected prior to Central Excise Registration - Held that - only for this reason CENVAT credit cannot be denied. If it is found that the duty paid inputs were used in the manufacture of excisable goods on which the excise duty is payable, the credit is admissible irrespective of whether the clearance of goods took place before or after Registration - the Adjudicating Authority needs to re-quantify the demand. Matter remanded to the Adjudicating Authority for re-quantification of duty - appeal allowed by way of remand.

Summary

Issues: Valuation of goods for turnkey project, inclusion/exclusion of costs, CENVAT credit denial

In this case, the main issue revolves around the correct valuation of goods manufactured and supplied for a turnkey project and the legality of deductions claimed from the value. The appellants, engaged in manufacturing PSC pipes for a project, were alleged to have undervalued their products. The dispute centered on whether the valuation should be based on the data provided by the Managing Director or the CAS-4 certificate by the Cost Accountant. The tribunal agreed that the cost of manufacture should be based on the certified CAS-4 certificate. Regarding the inclusion of rubber rings' cost, used for jointing pipes at the project site, it was held that such costs should not be included in the assessable value as they are not part of the manufacturing process. Similarly, transportation costs were deemed inapplicable to the valuation as the goods were cleared directly from the factory gate to the customer's site, aligning with Central Excise Valuation Rules. The tribunal ruled that transportation costs should not be included in the valuation. Concerning written-off costs due to theft or loss, it was decided that such deductions are not permissible after the goods are removed from the factory, and duty must be charged on the removed goods. The tribunal also addressed the denial of CENVAT credit based on the timing of goods clearance vis-a-vis Central Excise Registration, emphasizing that credit should be allowed if duty-paid inputs were used in manufacturing excisable goods, regardless of the clearance timing. The tribunal allowed the appeal by remanding the matter to the Adjudicating Authority for re-quantification of duty, directing compliance with natural justice during the process. The appellant was deemed entitled to CENVAT credit of ?7,71,765.