2023 (12) TMI 523 - AT - Central Excise

Levy of Central Excise duty - clearance of goods received for job work - applicability of rule 10A read with Rule 8 of the Central Excise Valuation, (Determination of Price of Excisable Goods) Rules, 2000 in job-work - interest - penalty - extended period of limitation - HELD THAT - The first thing to be appreciated is that as per Section 3 of Central Excise Act, 1944, the excise duty is leviable on manufacture and the goods here are manufactured by the appellant so the liability to pay duty is that of the appellant. However, by virtue of the exemption notification no. 83/94, the liability of central excise duty has been shifted from the job worker to the principal manufacturer, however, subject to the conditions specified therein. In the present case, M/s Aditya being SSI unit is availing exemption from excise duty under notification no. 8/2003- CE, however the exemption under notification no. 83/94-CE is available only on furnishing of an undertaking by M/s Aditya to the proper officer having jurisdiction over the factory of the job worker, (a) that the specified goods received from the job worker will be used in the factory of the supplier in or in relation to the manufacture of specified goods which are exempt from the whole of the duty of excise leviable thereon under the small scale exemption notification or in terms of condition number (b) the SSI unit shall undertake to pay central excise duty, if any, payable on the said goods. However, it appears that the principal manufacturer has not furnished any such undertaking either in terms of condition number (a) or (b). Consequently, the liability to pay excise duty shall be on the job worker, i.e., the appellant herein. There are no infirmity on the findings arrived at by the authorities below. Computation of the aggregate value of the clearances in respect of the unit who are availing the SSI exemption - HELD THAT - The authorities below have rightly observed that in the present case, the valuation of the manufactured goods is to be determined under Rule 10A(iii), whereby Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 will be applicable, which provides Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufacture of such goods. Interest - penalty - Extended Period of Limitation - HELD THAT - In the present case, the appellant was also manufacturing the said goods on its own and were clearing the same on payment of excise duty but deliberately avoided paying duty on the goods manufactured on job work, knowing that the principal manufacturer has failed to comply with the condition of furnishing the undertaking. The evasion of duty came to the knowledge of the department only on audit. Thus, it being a clear case of suppression of facts with intent to evade payment of duty, the extended period of limitation is invokable and the appellant is liable to pay the interest as well as penalty under the Act. There are no infirmity in the impugned order and therefore the same deserves to be affirmed. The excise duty along with penalty and interest as determined is leviable on the appellant - appeal dismissed.

Summary

Issues Involved:
1. Justifiability of demand for central excise duty on goods received for job work.
2. Applicability of Rule 10A read with Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 in job work.
3. Computation of aggregate value of clearances for SSI exemption.
4. Levy of penalty and interest on the appellant.

Summary:

Issue 1: Justifiability of Demand for Central Excise Duty
The appellant, engaged in manufacturing and job work for M/s Aditya, claimed exemption from central excise duty under notification no. 83/94 CE dated 11.04.1994. However, M/s Aditya, the principal manufacturer, failed to register under the Central Excise Act and did not furnish the required undertaking. Consequently, the excise duty liability fell on the appellant. The Tribunal upheld the demand for central excise duty, stating that the exemption notification shifts the duty liability to the principal manufacturer only if the specified conditions are met, which were not fulfilled in this case.

Issue 2: Applicability of Rule 10A and Rule 8
The Tribunal noted that Rule 10A of the Central Excise Valuation Rules applies to goods produced by a job worker. Since the principal manufacturer did not furnish the necessary undertaking, the valuation of the manufactured goods was determined under Rule 10A(iii), invoking Rule 8. This rule stipulates that the value of excisable goods should be 110% of the cost of production or manufacture when the goods are not sold but used in further manufacturing processes. The authorities correctly applied this rule to determine the excise duty liability.

Issue 3: Computation of Aggregate Value of Clearances for SSI Exemption
The appellant argued that the total clearances by M/s Aditya should be considered for SSI exemption under notification no. 08/2003. However, the Tribunal disagreed, emphasizing that Rule 10A clearly determines the value of excisable goods produced by a job worker. The provisions of Rule 8 were correctly applied, and the appellant's argument was rejected.

Issue 4: Levy of Penalty and Interest
The Tribunal upheld the imposition of penalty and interest on the appellant, citing deliberate evasion of duty. The appellant was aware of the duty liability and selectively complied with conditions favorable to them while ignoring others. The Tribunal referenced the Supreme Court's decision in Chairman, SEBI Vs. Shriram Mutual Fund and Union of India Vs. Rajasthan Spinning and Weaving Mills, affirming that once the conditions for penalty under Section 11 AC are met, the imposition of penalty is mandatory. The extended period of limitation was invoked due to suppression of facts with intent to evade duty.

Conclusion:
The Tribunal dismissed the appeal, affirming the demand for excise duty, penalty, and interest on the appellant. The appellant's non-compliance with the conditions of the exemption notification and deliberate evasion of duty justified the authorities' actions. The impugned order was upheld in its entirety.