2019 (2) TMI 759 - AT - Central Excise

Valuation - inclusion of the value of free supplied goods by the customer s needs in assessable value - Cum duty benefit - extended period of limitation - Held that - As regard inclusion of value of free supplied goods by the buyer is undisputedly includable in the assessable value, therefore, the demand on merit on this issue is clearly sustainable. Limitation - cum-duty price - Held that - Tribunal dealing with the identical set of facts and legal issue in the case of Jimcon Industries 2018 (7) TMI 1503 - SUPREME COURT OF INDIA held that in case of inclusion of cost of free supplied material, the landed cost has to be added, therefore, there is no question of cum-duty price. In the same case it was held that invocation of the extended period is correct for the reason that free supplied goods and non inclusion of value thereof was not disclosed by the appellant to the department - Therefore, the demand on this count is clearly sustainable. CENVAT Credit - duty paying invoices - endorsed invoice - Held that - Though the invoice was issued in favour of principle on whose behalf the appellant have manufactured the excisable goods but the facts remains that such invoices were endorsed in favour of the appellant by the principle. The receipt, use of the goods of the said endorse invoice by the appellant is not under dispute. So long the goods on which Cenvat Credit was availed have been used in the manufacture of goods on behalf of principle the credit is correctly available to the appellant - the demand on the issue of Cenvat credit is set aside. Penalty imposed on the director of the company - Held that - The issue of non-inclusion of value of free supplied goods is technical issue for which the malafide intention on part of the director cannot be attributed - in this nature of case penalizing director is not proper - the penalty imposed on director is set aside. Appeal allowed in part.

Summary

Issues involved:
1. Inclusion of value of free supplied goods in assessable value of excisable goods.
2. Availability of cum-duty value benefit for free supplied goods.
3. Sustainability of demand for extended period.
4. Entitlement for Cenvat Credit on endorsed invoices.

Analysis:
1. The issue of whether the value of free supplied goods should be added to the assessable value of excisable goods is acknowledged to be legally includable. The appellant concedes the inclusion but argues against the sustainability of the demand for the extended period due to lack of suppression of facts. The benefit of cum-duty price is sought, which would reduce the duty liability.

2. The appellant contends that the director of the company, not well-versed in legal provisions, should not be penalized for the interpretation of valuation provisions. Regarding Cenvat Credit availed on endorsed invoices, the appellant argues for allowance, citing legal admissibility based on endorsed invoices used in the manufacturing process.

3. The Revenue reiterates the inclusion of cost of free supplied goods in the assessable value, with no dispute raised by the appellant. The Revenue argues against the deduction of cum-duty price, citing a precedent upheld by the Supreme Court. The limitation period is deemed justified due to non-disclosure of the use of free supplied material by the appellant.

4. The Tribunal finds the inclusion of value of free supplied goods in the assessable value to be sustainable. The demand for the extended period and cum-duty price deduction are upheld based on legal precedents. However, regarding Cenvat Credit on endorsed invoices, the Tribunal rules in favor of the appellant, setting aside the demand, interest, and penalty. The penalty imposed on the director is also overturned, considering the technical nature of the issue.

5. Ultimately, the appeal of the company is partly allowed, while the appeal filed by the director is fully allowed. The decision was pronounced in open court on 01.02.2019.