2018 (4) TMI 1230 - AT - Central Excise

Valuation - The raw materials are supplied by the principal manufacturer BIL to the appellants. After carrying out the manufacturing activity, the goods are cleared back to BIL who used such goods for further manufacture at their end - Rule 10 A (i) and (ii) of the Central Excise Valuation Rules - Held that - Since this is not a case of the principal manufacturer immediately selling the goods manufactured by the appellants, Rule 10A of the Central Excise Valuation Rules will have no application in the facts of the present case. The landed cost of the raw materials at the appellant s premises will include the cost of freight and insurance from the principal manufacturer to the appellant. But the appellant has claimed that the value taken by the principal manufacturer for payment of duty on the raw material includes the cost of such freight and insurance - the correct landed cost of the raw materials will need to be worked out with the support of the certificate of the authorized/qualified Cost Accountant. Revenue neutrality - Held that - Any duty paid by the appellant will be available to the principal manufacturer as Cenvat credit, since the entire manufactured goods are returned to them - the entire exercise is Revenue neutral. Extended period of limitation - Held that - the allegation of suppression made by the Revenue is not sustainable - demand of duty made by invoking the extended period set aside. Matter remanded to the original adjudicating authority for denovo adjudication after obtaining the cost of the raw materials duly supported by a CA Certificate - appeal allowed by way of remand.

Summary

Issues Involved:
Valuation of excisable goods manufactured and supplied by the appellant as a job worker to the principal manufacturer, determination of assessable value for payment of duty, applicability of Central Excise Valuation Rules, justification of adding notional amount towards freight and insurance, revenue neutrality of the exercise, allegation of suppression by Revenue for invoking extended period of limitation.

Analysis:

Valuation of Goods:
The appeal concerns the determination of the valuation of excisable goods manufactured and supplied by the appellant to the principal manufacturer as a job worker. The issue revolves around the application of Rule 10A of the Central Excise Valuation Rules. The appellant argues that Rule 10A (i) and (ii) are not applicable as the goods were not consumed by the principal manufacturer or the job worker. Instead, they contend that Rule 10A (iii) should apply, necessitating valuation as per Rule 11. The appellant relies on the decision in Ujagar Prints Ltd. Vs. UOI to support their stance.

Addition of Notional Amount:
The adjudicating authority added a notional amount of 1.14% of the raw materials cost towards freight and insurance in the valuation of goods. However, the appellant asserts that the cost certificate provided already includes such notional amount. The Tribunal notes that the correct landed cost of raw materials should be determined with the assistance of a qualified Cost Accountant to resolve this issue.

Revenue Neutrality and Allegation of Suppression:
The appellant argues that the exercise is revenue neutral since any duty paid by them will be available as Cenvat credit to the principal manufacturer. Therefore, they contest the allegation of suppression by the Revenue for invoking the extended period of limitation under Section 11A. The Tribunal agrees with the appellant's stance, setting aside the demand made under the extended period and limiting it to the normal time period.

Decision and Remand:
The Tribunal sets aside the impugned order and remands the matter to the original adjudicating authority for fresh adjudication. The authority is directed to ascertain the correct landed cost of raw materials supported by a certificate from a qualified Cost Accountant. The demand for duty is restricted to the normal limitation period, and no penalty is imposed in this case.

In conclusion, the Tribunal's decision revolves around the correct valuation of goods, the addition of notional amounts, revenue neutrality, and the allegation of suppression by the Revenue. The matter is remanded for fresh adjudication with specific directions regarding the determination of the landed cost of raw materials.