2018 (8) TMI 537 - AT - Central Excise

Validity of SCN - cylinders procured for manufacture of the goods - the appellant have neither manufactured nor supplied the packing material to M/s ICI Ltd - Held that - In the SCN the demand was straightaway issued on the debit notes raised towards the cost of cylinder to M/s ICI Ltd. The SCN has not brought out any details of the final product manufactured and supplied to M/s ICI Ltd, therefore, the demand raised on the cylinder cannot be sustained for the reason that the cost of the cylinder can at the most be included as an amortization cost in the manufacture of final product, when admittedly no goods using this cylinder were manufactured by the appellant neither the amortization cost can be included, nor the demand on the cost of cylinder can be raised, therefore, the demand confirmed on cost of cylinders does not sustain. Since the appellant is not contesting the demand of ₹ 8687/- the same stand upheld. Appeal allowed in part.

Summary

Issues: Demand of duty on the value charged in the debit note for procurement of printing cylinders not used in manufacturing goods for M/s ICI Ltd.

Analysis:
1. Background: The appeal was filed against the Order in Appeal by the Commissioner (Appeals) regarding the demand of duty on the value charged in the debit note for printing cylinders procured but not used due to the cancellation of the order by M/s ICI Ltd.

2. Appellant's Argument: The appellant, represented by Sh. S.J. Vyas, did not contest the demand of ?8,687. The remaining amount was disputed on the grounds that no goods were manufactured for M/s ICI Ltd, hence the cylinders' value was recovered through debit notes. As the cylinders were not utilized in production, no duty demand should be applicable.

3. Revenue's Position: Sh. L. Patra, Assistant Commissioner (AR) for the Revenue, supported the findings of the impugned order regarding the demand raised on the cylinders.

4. Tribunal's Decision: After reviewing the submissions and records, the Tribunal noted that the demand was solely based on the debit notes for cylinder costs without evidence of final product manufacture. Since no goods were produced using the cylinders, the demand could not be justified. The cost of the cylinder could only be considered as an amortization cost if used in manufacturing, which was not the case here. The Tribunal upheld the appellant's non-contested demand of ?8,687 and set aside the remaining demand, interest, and penalty. The appeal was partly allowed based on these findings.