2000 (12) TMI 318 - AT - Central Excise

Summary

Issues:
Calculation of differential duty based on landed cost of bought out yarn, inclusion of notional profit in assessable value, entitlement to Modvat credit, determination of assessable value for duty calculation.

1. Calculation of Differential Duty:
The case involved a dispute regarding the calculation of the differential duty on cotton yarn purchased from the market compared to yarn manufactured by the appellant. The authorities calculated the duty based on the landed cost of the bought out yarn being higher than the yarn produced internally. The appellant argued for benefits like freight, insurance, and other charges to be considered in the landed cost. The issue was whether the duty should be levied based on the total cost of both purchased and manufactured yarn. The tribunal upheld the authorities' decision, emphasizing that duty was payable on the warped and wound yarn, treating both bought out and internally manufactured yarn as raw materials for duty calculation.

2. Inclusion of Notional Profit in Assessable Value:
The appellate tribunal reviewed a case where the Collector (Appeals) had reduced the notional profit from 10% to 1% for inclusion in the assessable value of the yarn. The appellant contested this decision, arguing that since duty was paid on the final product (processed fabrics), the process of warping and winding should be considered intermediate, allowing for Modvat credit on bought out yarn. The tribunal rejected this argument, stating that the value determination was solely for calculating duty on the warped and wound yarn, not for clearance purposes. The tribunal emphasized that no reduction for freight and insurance should be allowed in this context.

3. Entitlement to Modvat Credit:
The appellant claimed entitlement to Modvat credit for duty paid on the bought out yarn, citing precedents from Navyug Laminates and Hindustan Safety Glass cases. The appellant argued that since duty was paid on the final product, Modvat credit should be permissible. However, the tribunal disagreed, stating that the duty calculation was specific to the warped and wound yarn, and the appellant's argument for Modvat credit was not applicable in this context.

4. Determination of Assessable Value for Duty Calculation:
The tribunal emphasized that the assessable value and duty calculation were correctly determined by the authorities based on the price and quantity of both bought out and internally manufactured yarn. The tribunal rejected the appellant's attempt to introduce new arguments at the appellate stage, affirming that the authorities had appropriately calculated the duty based on the relevant factors. Consequently, the tribunal rejected the appeal of the assessee.