2019 (4) TMI 1461 - AT - Central Excise

Valuation - body built vehicles - addition of transport cost and transit insurance in assessable value - HELD THAT - It is well settled that for the purpose of arriving at the assessable value at the job worker s end, the cost of transportation and the transit insurance will need to be added so as to arrive at the value in the hands of the job worker - thus, the transport cost as well as transit insurance are required to be added for payment of duty by Hyva. Whether it is required to add cess at the rate of .125% as well as an amount of ₹ 10,000/-? HELD THAT - The Hon ble Supreme Court in the case of COLLECTOR OF CENTRAL EXCISE, PUNE VERSUS DAI ICHI KARKARIA LTD. 1999 (8) TMI 920 - SUPREME COURT OF INDIA , has held that the cost of production of excisable product cannot include the element of duty paid on the raw material, but availed as modvat credit by the manufacturer - In this case, the automobile cess paid at the rate of .125% by TML is not availed as cenvat credit by Hyva and hence the same is required to be added to the value by Hyva. Whether the amount of ₹ 10,000/- paid by TML as additional BED on the chassis is required to be added? - HELD THAT - There is no dispute that the amount of ₹ 10,000/- has been availed as cenvat credit by Hyva. However, the adjudicating authority has still included this amount in the value with the findings that Hyva has extended a discount of ₹ 10,000/- on the body built price - since there is no dispute that Hyva has availed additional BED of ₹ 10,000/- as cenvat credit, there is no justification for addition of the same. Time Bar - HELD THAT - The Adjudicating Authority has not given any specific reason for coming to such conclusion other than a blank observation that the assessee short paid duty by way of suppression of valuation as well as suppression of facts of non-receipt of amount equal to additional BED at specific rate. It was very much within the knowledge of the Department that Hyva has carried out body building for TML and the manufactured vehicles were being paid duty in terms of Valuation Rules - invoking the suppression clause is without basis. Consequently, the demand for differential duty is to be restricted to normal time limit. The impugned order loading the assessable value with transport cost, transit insurance as well as automobile cess is upheld - the portion of the order for loading the assessable value with ₹ 10,000/- is et aside - demand restricted to normal period. Penalty on TML or on Hyva also set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Valuation of body-built vehicles for duty payment by Hyva.
2. Inclusion of transport cost and transit insurance in the valuation.
3. Inclusion of automobile cess and additional BED in the valuation.
4. Imposition of penalty on Hyva and TML.
5. Applicability of the extended period for demand (time bar).

Detailed Analysis:

1. Valuation of Body-Built Vehicles:
The core dispute revolves around the valuation of motor vehicles manufactured by Hyva by building bodies on chassis supplied by TML. Hyva determined the value based on the Supreme Court's decision in Ujagar Prints, which mandates that the assessable value should include the value of the raw material in the hands of the processor, plus job work charges, manufacturing profit, and expenses.

2. Inclusion of Transport Cost and Transit Insurance:
The Department argued that Hyva should include the transport cost and transit insurance incurred by TML in the assessable value of the chassis. Hyva contended that these costs should not be added based on the Ujagar Prints decision. However, the Tribunal concluded that the cost of transportation and transit insurance should be included to arrive at the value in the hands of the job worker, as supported by the Tribunal's decision in Goel Ispat Ltd. and CBEC Circular No. 643/34/2002-CX.

3. Inclusion of Automobile Cess and Additional BED:
The Tribunal agreed with the Department that the automobile cess paid by TML, which was not availed as cenvat credit by Hyva, should be added to the value. However, regarding the additional BED of ?10,000 paid by TML and availed as cenvat credit by Hyva, the Tribunal found no justification for its inclusion in the assessable value, citing the Supreme Court's decision in Dai Ichi Karkaria Ltd.

4. Imposition of Penalty:
The Tribunal found no justification for imposing penalties on TML or Hyva. It noted that penalties under Rule 26 of the Central Excise Rules, 2002, could only be imposed on natural persons, not companies, as held by the Larger Bench in Steel Tubes of India Ltd.

5. Applicability of Extended Period for Demand (Time Bar):
Hyva challenged the demand on the grounds of time bar, arguing that the extended period should not apply. The Tribunal agreed, noting that the Department was aware of Hyva's activities and that invoking the suppression clause was without basis. Therefore, the demand for differential duty was restricted to the normal time limit.

Conclusion:
The Tribunal upheld the inclusion of transport cost, transit insurance, and automobile cess in the assessable value but set aside the inclusion of the additional BED of ?10,000. The demand for differential duty was restricted to the normal time limit, and penalties on TML and Hyva were set aside. The appeal was partly allowed.