2023 (8) TMI 700 - AT - Central Excise

Method of Valuation - Rule 8 of the Valuation Rules, 2000 applicable or not - activities carried on job-work basis - intent to evade duty or not - revenue neutrality - time limitation - HELD THAT - In the present case, it is seen that the appellant has adopted the value based on the costing given by the principal. Based on this costing the appellant has adopted their assessable value. During many months, the value adopted by them is more than 110% value arrived at by the department. This itself shows that the appellant had no intention to evade any excise duty. Further as submitted by the appellant, the entire excise duty paid by the appellant is available as Cenvat Credit to their principal, M/s. Tata Steels Ltd.. Therefore this has resulted in a revenue neutral situation - In various cases, it has been held that in such cases the demands do not survive both on merits as well as on the point of limitation. In the case of CCE AHMEDABAD-II VERSUS M/S RECLAMATION WELDING LTD. 2014 (8) TMI 186 - CESTAT AHMEDABAD , the Tribunal observed that No evidence has been introduced by the Revenue as to how job worker and the raw material supplier are related persons for the purpose of attracting Rule 8 of the Central Excise Valuation Rules, 2000. Even if any additional duty was payable the same was also available as credit to the recipient of goods. It is an exercise entirely covered by the concept of revenue neutrality, as per the case laws relied upon by the respondent. Secondly, in the event of credit being admissible to the recipient of the same group of companies it cannot be held that there could be any intention on the part of the respondent to evade payment of duty and accordingly extended period is not attracted in the present demands. The appeal allowed both on merits as well as on the point of limitation.

Summary

Issues involved:
The issues in this case involve the application of Rule 8 of the Valuation Rules, 2000 for arriving at the assessable value, the correctness of the value adopted by the appellant, the invocation of extended period for demanding excise duty, and the concept of revenue neutrality in relation to job-work activities.

Application of Rule 8 of the Valuation Rules, 2000:
The appellant, a job-worker for M/s. Tata Steel Ltd., was required by the Department to adopt Rule 8 for determining the assessable value. The appellant contended that they correctly followed the cost + 10% method for valuation, supported by a Chartered Accountant's Certificate. The Department's approach of adding VAT/CST/Freight Charges was deemed erroneous as these elements should be excluded. The appellant's value was often higher than the department's 110% cost, indicating no intention to evade duty.

Invocation of Extended Period:
The appellant argued against the invocation of the extended period for demanding excise duty, citing that all transactions were properly reflected in monthly returns and the duty paid accrued as Cenvat Credit to M/s. Tata Steel Ltd. The appellant maintained that the demand for the extended period should be dismissed due to the absence of suppression and the revenue-neutral nature of the transactions.

Revenue Neutrality in Job-Work Activities:
The appellant emphasized the revenue-neutral nature of their activities, as per the agreement with M/s. Tata Steel Ltd. where full excise duty on job-worked products was reimbursed. The Cenvat credit paid by the appellant was available to the principal, resulting in a neutral revenue situation. Citing relevant case laws, the Tribunal found in favor of the appellant on both merit and limitation grounds, allowing the appeal and potential consequential relief as per law.

This judgment highlights the importance of correctly applying valuation rules, addressing extended period demands, and understanding revenue neutrality in job-work scenarios, ultimately leading to a favorable outcome for the appellant based on merit and limitation considerations.