2023 (6) TMI 99 - AT - Central Excise

Valuation - inclusion of amortised cost of the dies/moulds supplied free of cost to the appellant by their customers in the assessable value - Rule 6 of CVR - period July 2004 to March 2009 - extended period of limitation - HELD THAT - Section 3 of the Central Excise Act, 1944, provides for the levy and collection of the duty of central excise. It is a levy on all excisable goods, other than salt, produced or manufactured in India. Section 4 of the Act lays down the valuation principles by reference to which the duty of central excise is to be assessed on all excisable goods. As per section 4(1)(a) the normal price is the transaction value, when it is the sole consideration for the sale of goods, otherwise the value is to be determined as per section 4(1)(b) as per which, if the price was not ascertainable as per section 4(1)(a) then, the nearest equivalent thereof had to be determined in terms of the Valuation Rules. The demand raised by Revenue is on the ground that the money value of the additional consideration by way of free supply of moulds and dies received by the appellant from their customers, has not been included in the price of aluminum die-castings sold to the said customers, for the purpose of arriving at the assessable value for discharge of central excise duty as required by Rule 6 of CVR. The price of goods in the normal course includes the cum-duty value of inputs both fixed and variable among other things that goes into its manufacture. Just because these inputs i.e. dies and moulds have discharged central excise at the time of their manufacture, it will not absolve their aggregate final price, inclusive of duty s paid, from being taken into consideration for the purpose of determining the assessable value of aluminum die-castings. By applying Rule 6 of CVR to the impugned goods it is seen that the value of the aluminum die-castings shall be deemed to be the aggregate of its transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee, which in this case is the free supply of dies and moulds. Considering that the duty paid on inputs cause a cascading effect on the final price of the goods, government had introduced the MODVAT scheme to be later replaced by the CENVAT credit schemes so as to permit set-off of central excise duties paid by manufacturers on the inputs including capital goods purchased by them against the central excise duty payable on the final excisable goods manufactured and cleared by them. The benefit of credit under the schemes were in the nature of a concession given which could be availed only in the manner and in the circumstances mentioned in the respective rules. The appellant has referred to the Hon ble Mumbai Tribunal s judgment in the case of Mega Rubber Technologies 2016 (1) TMI 157 - CESTAT MUMBAI , where in it was held that when Central Excise duty is paid on moulds at one time or recovered by amortizing the cost of goods produces it is the same. Whereas Revenue has relied on the Larger Bench judgment passed in the case of Mutual Industries Ltd. 2000 (3) TMI 74 - CEGAT, COURT NO. I, NEW DELHI , wherein the Hon ble Tribunal held that additional value of the moulds must necessarily go in assessing the duty payable on the finished product under excise law. We find that although the larger bench decision of the Hon ble Mumbai in Mutual Industries Ltd. was brought to the notice of the Hon ble Tribunal in the case of Mega Rubbers, the same was not discussed in the order. The amortized cum-duty cost of the dies/moulds supplied free of cost to the appellant by their buyer-customers should be included in the assessable value of the aluminum die-castings. No deduction on account of excise duty of free supplied goods is permitted. Extended period of Limitation - HELD THAT - The lower authority has not examined the submissions of the appellant that the issue on non-amortization of the mould cost have been raised by CERA and Internal Audit and were known to the department - this issue impacts the duty and interest demanded along with the penalty imposed and hence feel it proper that the appellant may place these facts and their replies on the audit objections, before the Commissioner (Appeals) who shall, there after examine the issue of limitation/time-bar, and pass a reasoned order as per law. The impugned order is upheld on merits - with regard to the issue of show cause notice being time barred, matter remanded to the Hon ble Commissioner (Appeals) on this limited issue, for passing a fresh order - appeal allowed by way of remand.

Summary

Issues Involved:
1. Inclusion of the cost of moulds and dies in the assessable value of aluminum die-castings.
2. Whether the demand is barred by the limitation of time.

Summary:

Issue 1: Inclusion of the Cost of Moulds and Dies
The primary issue was whether the cost of moulds and dies manufactured by the appellant and sold to their customers should be included as an amortised cost when used in the appellant's factory for manufacturing aluminum die-castings for those customers. According to Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (CVR), the value of such goods includes the transaction value and the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. The Tribunal concluded that the amortised cum-duty cost of the dies/moulds supplied free of cost to the appellant by their buyer-customers should be included in the assessable value of the aluminum die-castings. The Tribunal also referenced the Larger Bench judgment in Mutual Industries Ltd., which held that the additional value of the moulds must be included in assessing the duty payable on the finished product under excise law.

Issue 2: Limitation of Time
The second issue was whether the demand is hit by the limitation of time. The appellant argued that the issue of non-amortization of the mould cost had been raised by CERA in June 2004 and by the internal audit party in September 2006, and both objections were settled. The Tribunal noted that the lower authority had not examined these submissions and that this issue impacts the duty and interest demanded along with the penalty imposed. Therefore, the Tribunal remanded the matter to the Commissioner (Appeals) to examine the issue of limitation/time-bar and pass a reasoned order as per law.

Conclusion:
The impugned order was upheld on merits, confirming that the amortised cost of moulds and dies should be included in the assessable value of aluminum die-castings. However, the matter was remanded to the Commissioner (Appeals) to determine whether the show cause notice was time-barred.