2023 (10) TMI 1107 - AT - Central Excise

Recovery of short paid duty - job-work - rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - HELD THAT - A method of valuation for goods entrusted to be manufactured by job-worker was incorporated only with effect from 1st April 2007 in Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and. quite undubitably, to fill a necessary want in the context of transactions not fitting within the existing rules which provided alternatives to non-fitment within section 4(1) of Central Excise Act, 1944 owing to non-conformity with one or the other desiderata of transaction value for assessment - The incorporation, insofar as job-work is concerned, would have emerged from the imperative to handle a situation where the manufacturer, though a producer, is not the seller but does deliver to the buyer even though consideration for the goods is received by the seller. Essential to such framework arrangement is that inputs should be supplied by the seller. It is the imperative of a want in the transaction value of the assessee that is contemplated, by the rules intended by section 4(1)(b) of Central Excise Act, 1944, to stand in as alternative in the design of each of the methods of valuation in Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Thus, in the absence of sale , rule 4 is applicable, rule 5 when sale occurs beyond place of removal, rule 6 when the excisable goods are sold at a price that is not the sole consideration, rule 7 when sale takes place beyond both time and place of removal, rule 8 when goods are captively consumed by the assessee and rule 9 and 10 when clearance is not to independent person. A common characteristic of all of these, except where there is no sale, is sale by assessee - It would, thus, appear that the several rules, as originally included, were intended to make up for deficiencies in sale by assessee. Rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is certainly intended for sale but by person other than assessee. From a harmonious reading of section 4 of Central Excise Act, 1944 and of the attendant Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, it is abundantly clear that it is not the method of valuation that determines the applicability but that the method flows from the identification of the rule most apt for each transaction - Job work existed before April 2007 and incorporation effected thereafter was not intended to cover every job-worker as per common parlance but of specific situations contemplated in rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. That has not been demonstrated in the orders of the lower authorities. Appeal allowed.

Summary

Issues Involved
1. Applicability of Rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
2. Short-payment of central excise duty and recovery under section 11A of the Central Excise Act, 1944.
3. Imposition of penalties under section 11AC of the Central Excise Act, 1944 and Rule 26 of the Central Excise Rules, 2002.

Summary of Judgment

1. Applicability of Rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:
The central excise authorities argued that M/s Patel Profiles Pvt Ltd and M/s Excel Tech Engineers Pvt Ltd were 'job-workers' for M/s Siemens Ltd and thus Rule 10A was applicable. However, the Tribunal found that Rule 10A could not be triggered by an explanation or definition that is contextual to a transaction with a 'job-worker.' The Tribunal noted that 'job-worker' has no legal existence in central excise law other than as a manufacturer, and the lack of definition for 'principal manufacturer' further complicates the applicability of Rule 10A. The Tribunal concluded that the transactions in question were not covered by Rule 10A as the goods supplied by M/s Siemens Ltd were not sold on behalf of M/s Siemens Ltd but were part of a principal-to-principal transaction.

2. Short-payment of Central Excise Duty and Recovery under Section 11A of the Central Excise Act, 1944:
The central excise authorities alleged short-payment of duties by M/s Patel Profiles Pvt Ltd and M/s Excel Tech Engineers Pvt Ltd, resulting in demands for recovery under section 11A. The Tribunal held that the valuation adopted by the appellants was aligned with the transaction value and did not warrant the invocation of Rule 10A. Therefore, the demands for recovery of short-paid duties were not justified.

3. Imposition of Penalties under Section 11AC of the Central Excise Act, 1944 and Rule 26 of the Central Excise Rules, 2002:
The Tribunal found that the penalties imposed under section 11AC and Rule 26 were also not justified as the primary demand itself was not sustainable. The Tribunal noted that the transactions were on a principal-to-principal basis, and there was no evidence to support the claim that the appellants acted as 'job-workers' for M/s Siemens Ltd.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals and ruling that the demands and penalties imposed by the central excise authorities were not sustainable. The transactions in question were deemed to be on a principal-to-principal basis, and Rule 10A was not applicable to these transactions.