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TMI Blog2009 (3) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the products manufactured by the appellant. On the question of limitation, held that- whatever duty is paid by the appellant is taken as credit by M/s. WIL. Definitely, there is revenue neutrality and this has a bearing on the question of invoking the longer period, because whatever duty is borne by the appellant will in turn be passed as cenvat credit to M/s. WIL. In these circumstances also, the longer period cannot be invoked thus allow the appeal with consequential relief. - E/659 and 564/2008 - 213-214/2008 - Dated:- 18-3-2009 - S/Shri T.K. Jayaraman, Member (T) and M.V. Ravindran, Member (J) Shri G. Shivadass, Advocate, for the Appellant. Ms. Sudha Koka, SDR, for the Respondent. [Order per: T.K. Jayaraman, Member (T)]. - This appeal has been filed against Order-in-Original No. 04/2007 dated 6-7-2007 passed by the Commissioner of Central Excise, Tirupathi. 2. Shri G. Shivadass, learned advocate appeared on behalf of the appellants and Mrs. Sudha Koka, learned SDR for the revenue. 3. We heard both sides. 4. The issue involved in this appeal is the correct valuation of the goods done on job work basis by the appellants for M/s. Wheels India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department was aware of the work being done on job work basis and the terms and conditions on which the purchase order was completed. It was also stated that while calculating the assessable value, the appellants included the value of entire quantity of blooms/billets supplied by WIL and the excise duty paid thereon. The scrap that was generated out of the raw materials conversion was again cleared on payment of duty. It is the contention of the appellant that the value of the scrap is already included in the assessable value because they had taken the entire quantity of value of the raw material received from WIL, hence, there was no need for including again the value of the scrap. However, the department did not agree with the contention of the appellant, therefore, proceedings were initiated which culminating in the Adjudication Order. 5.1 In the hearing before the Tribunal, the following submissions were reiterated by the learned advocate. The learned advocate stated that the same issue came up for consideration before the Hon'ble Tribunal of Mumbai in the case of Mahindra Ugine Steel Co. Ltd. v. CCE reported in 2003 (157) E.L.T. 435 (Tri.-Mumbai). The Tribunal relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l settled position in law that valuation of goods where no sale is involved has to be based on the principles laid down in CAS-4 as held by the Apex Court in the case of CCE v. Cadbury (I) Ltd , decided on 1-8-2006 reported in 2006 (200) E.L.T. 353 (S.C.). In terms of CAS-4 where a value can be attributed to scrap then the same has to be credited to the cost of production. In other words, the said value is to be reduced from the gross value of the raw material. Consequently, if the value towards scrap is reduced from the gross value of raw materials and then added to job charges, the assessable value would remain the same and no differential duty would be payable. 5.4 The learned advocate illustrated this by the following example. As per department 1. Total Qty. of Steel received for jobwork : 117.00 Kgs 2. Value of steel received : Rs.117.00 3. Jobwork charges : Rs.30.00 4. Value of scrap generated Cleared on payment of duty by appellant : Rs.15.00 5. Assessable value to be adopted for FG : Rs.162.00 [117.00+30+15] Method adopted by Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larified that the value of scrap would be included in the value of the final product only in case where it is shown that the conversion charges get depressed by the fact that the processor is allowed to keep and sell the scrap. It was stated that no evidence has been adduced to the effect that retention of scrap has depressed the conversion charges. The impugned order holds that as the purchase order clearly refers to the aspect of retention of wastages by the assessees, the conversion charges have been worked out after allowing the wastage to be retained by the job-worker. On the above assumption, the impugned order holds that the price has been affected by the sale value of the scrap and the wastage including rejects and irrecoverable wastages, if any, have been factored in the price mechanism. The mere fact that purchase order refers to the retention of wastages cannot be a ground to hold that the conversion charges have been depressed. It was pointed out by them that in their own case earlier WIL allowed certain waste and afterwards there was reduction in the wastage allowed, however, there was no change in the conversion charges. In other words, it was stated by them that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant's factory is known. 5.15 The Commissioner has held that there is no provision to allow a fixed percentage of raw materials as wastage. He has also concluded that there is no record available in respect of job work done by Sarita indicating the wastage occurred nor any literature supporting the material loss. 5.16 It was stated that the appellant kept the department informed of all the relevant facts. Moreover till 10-3-2005, the legal position as per the decisions of the Supreme Court and Tribunal was in favour of the party in view of the following decisions. Sl. No. Date of decision Citation 1. 10-5-2002 Hindustan Engineering - 2002 (144) E.L.T. 418 2. 2-9-2003 Mahindra Ugine - 2003 (157) E.L.T. 435 3. 25-9-2003 Union Carbide - 2003 (158) E.L.T. 15 (S.C.) 4. 11-11-2003 Llyods Steel - 2003 (163) E.L.T. 128 5.17 It was also stated that duty paid by the appellants on the excisable goods manufactured would be available as Cenvat credit for WIL. Therefore, complete exercise of demanding duty on the scrap would be revenue neutral. Reliance was placed on the following de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Central Excise, Jaipur cited supra. Moreover, it was pointed out that availability of Modvat credit to an assessee by itself is not conclusive or decisive consideration for invoking the proviso to Section 11A of the Central Excise Act, 1944, though it may be one of the relevant considerations for deciding it. This was held by the Supreme Court in the case of CCE, Mumbai v. Mahindra and Mahindra Ltd. - 2005 (179) E.L.T. 21 (S.C.). Our attention was also pointed to another decision of the Tribunal in the case of Crompton Greaves Ltd. v. CCE, Arungabad - 2004 (177) E.L.T. 1032 (Tri.-Mumbai) wherein it was held that once the issue of suppression is separately dealt with in facts and circumstances of a case and the decision arrived at, modvat credit availed by sister unit on inputs received from assessee is of no help to them. It was also held that when prima facie suppression on part of the assessee established, plea of revenue neutrality would not come to rescue him from the charges of suppression of facts. 6. We have considered carefully the records of the case. The issue is whether the value of the scrap has to be included in the value of the goods cleared by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the vale of the assemblies. 6.2 The above decision of the Hon'ble Apex Court was followed by Mumbai Bench in the case of M/s. Lawkim Ltd. v. CCE, Pune-2 (supra). The charge against M/s. Lawkim Ltd. was that they did not include the cost of material supplied free by M/s. Tecumseh Products India Pvt. Ltd. and did not include sale proceeds of scrap generated during the course of manufacture and retained by the assessee, in the assessable value of goods cleared for M/s. Tecumseh Products India Pvt. Ltd. for purpose of payment of Central Excise duty. Relying on the International Auto case, the Bench held that the intermediate product manufactured by job worker is not liable to pay duty in terms of Rule 4 (5)(a) of the Cenvat Credit Rules. The observations of the Tribunal in Para 5-8 are reproduced below. "5. It is not in dispute that the inputs for stator laminations and stator stacks manufactured by the assessee and cleared to M/s. Tecumseh Products India Pvt. Ltd. were duty paid and that they were purchased by M/s. Tecumseh Products India Pvt. Ltd. and supplied to the assessees directly from the manufacturers of the raw material. It is also not in dispute that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the intermediate product if it is not used further in the manufacture of final product and does not require the job worker to pay duty on the intermediate product. The same position prevailed under the erstwhile Central Excise Rules as seen from Rule 57F(4) irrespective of the fact that the goods manufactured by the job worker out of inputs received under Rule 57F(4) were not covered under Notification 214/86-C.E., dated 25-3-1986 as amended. In the case of International Auto Ltd. cited supra, the apex court held that when inputs on which credit is taken are removed under Rule 57F(2)(b) of the Central Excise Rules, 1944, which is similar to Rule 4(5)(a), to the job worker in the manufacture of intermediate product, then the intermediate product manufactured by the job worker is not liable to duty in terms of the rule. The above decision also disposes of Civil Appeal Nos. 4086-87 of 2001 of Jay Yuhshin Ltd. Jay Yuhshin Ltd. was engaged in the manufacture of floor plates, parts and accessories of goods falling under Chapters 83, 84 and 87 of the schedule to the CETA, 1985 and in respect of some of the items manufactured by them, they received components from M/s. Maruti Udyog Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question was whether the items which were supplied free by the Railway Board to the assessee could be included in the value of the wagons. This Court came to the conclusion that it could. The first distinguishable feature is that this Court in that case was neither concerned with the Modvat scheme, nor with the provisions of Rule 57F(2)(b). Furthermore, the Court was not considering a situation where the question was of the liability of an intermediate product being subjected to excise duty. What was in consideration was the final product, namely, wagons. 7. In this appeal as we have already noted, the final product was the excavator. According to the Modvat scheme, it is the Modvat of such final product which would have to include the cost of the inputs and in respect of which Modvat credit could be taken at the time of clearance of the final product. The Tribunal having misconstrued the provisions of Rule 57F(2)(b), its decision cannot stand. The decision of the Tribunal is accordingly set aside and the appeal is allowed. In C.A. Nos. 4086-87/2001: 8. For the reasons elaborated by us in the judgment delivered in C.A. No. 176/2000 (M/s. International Auto Ltd. v. Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of scrap does not arise at all. 6.4 The Kolkata Bench in the case of Orissa Industries Ltd. v. CCE, Bhuvaneswar (supra) have also relied on the International Auto case and held that the job worker (intermediate manufacturer) need not pay differential duty by taking value inclusive of cost of raw materials, as raw materials supplier would be entitled to credit or Intermediate goods could be returned without payment of duty under Rule 57F procedure. If the intermediary product is not liable for duty, the question of adding the value of scrap does not arise at all. In these circumstances, in our view, the value of scrap need not be included in the assessable value of the products manufactured by the appellant. 6.5 Moreover, we do not find any justification for invoking the longer period. The show cause notice itself is relying on various documents which were submitted by the appellant to the department. If the department had scrutinized the records properly, they could have issued the show cause notice well in time. Therefore, the longer period is not applicable. 6.6 Another point to be noted is that whatever duty is paid by the appellant is taken as credit by M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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