2023 (11) TMI 160 - AT - Central Excise

Recovery of Central Excise Duty alongwith interest and penalty - including value of scrap arising from job-work in the assessable value as additional consideration from the principal for undertaking such work - HELD THAT - Though the value adopted for discharge of duties in clearances effected by the assessee in GENERAL ENGINEERING WORKS VERSUS COMMR. OF C. EX., JAIPUR 2005 (3) TMI 16 - SUPREME COURT is not incorporated therein, it would appear from the illustrative computation of the decision that cost of raw materials was in dispute therein and not of conversion charges not reflecting the true consideration; hence the corollary of establishing that it was depressed. There is no finding of such nature in the impugned order, in the appeal of jurisdictional Commissioner of Central Excise before the first appellate authority or in the show cause notice. Therefore, reliance placed in the impugned order on the said decision is not appropriate; the outcome therein is, thus, jeopardized. Here too, it is not in dispute that the landed cost of raw materials is not doubted and that the impugned scrap has been generated from such raw material. That value, having been included once, is not required to added once again for assessment to duty. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
The limited issue in the appeal is the correctness of including the value of 'scrap' arising from 'job-work' in the assessable value as additional consideration from the principal for undertaking such work.

Comprehensive Details:

Issue 1: Inclusion of 'scrap' value in assessable value:
The appellant undertakes 're-rolling' of 'mild steel billets and ingots' supplied by another company under an agreement ensuring quality in the finished goods returned to the principal. Central excise authorities argued that the residue of up to 10% of material supplied should be treated as concealed consideration, leading to the inclusion of 'scrap' value in the assessable value. The appellate authority referred to Supreme Court decisions and highlighted the duty liability of job-workers in certain scenarios.

Issue 2: Contention and Plea of the Appellant:
The appellant contested the finding, arguing that the decision in General Engineering Works applies only when there is a concurrent depression of 'conversion charge' in the transaction. They further contended that duty liability on 'scrap' sold could be asserted under a particular contingency in the Central Excise Valuation Rules.

Issue 3: Dispute over Value Calculation:
The value adopted for duty discharge in clearances by the assessee was questioned, with the appellant emphasizing that the cost of raw materials and conversion charges should be considered. The Tribunal noted discrepancies in the impugned order and emphasized the importance of accurate value determination.

Precedent and Conclusion:
Referring to a similar case, the Tribunal highlighted the importance of following legal formulas for duty computation. It was emphasized that once the landed cost of raw materials is included, 'scrap' value need not be added again for duty assessment. Consequently, the impugned order was set aside, and the appeal was allowed.

*(Order pronounced in the open court on 01/11/2023)*