9911796707
TMI Blog1998 (1) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... oses of both the appeal and the cross-objection. 2. Respondent is a job worker who had received LDPE granules from M/s. Karnataka Milk Federation for the purpose of manufacture of plastic film for packing of milk. Respondent was paying duty on the basis of value declared in invoices. That value was arrived at as the aggregate of the cost of raw materials and labour charges. It was the allegation in the show cause notice that the cost of materials was mis-declared by not including (i) the duty paid on the LDPE granules which had been taken as Modvat credit, (ii) the value of the material lost in the manufacturing process and (iii) the cost of transport of the raw material to the respondent's factory. It was further alleged that, on the basis of the proposed increased price, respondent had crossed the ceiling provided under the exemption notification for availing the concessional rate of 15% earlier than the date applied by them and hence was liable to pay the normal rate of duty from such earlier date. The notice was resisted by the respondent but the Collector, while agreeing with the contentions raised by the respondent regarding the additions proposed being part of the pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty demand for the full amount of duty of Rs. 15,82,986/- as mentioned in the show cause notice (as against the sum of Rs. 5,35,237/- confirmed by the Collector) the department has not taken care to file the enclosures to the show cause notice and the statement showing the required particulars like cost of the input material, duty paid thereon, job charges, quantity of input material wasted during the process of manufacture, transport charges incurred in respect of the input and the duty reckoned to be payable. We, however, find that the respondent has filed certain statements showing the reworking of assessable value and the differential duty involved. This had been submitted by the respondent and accepted by the Collector while passing the impugned order. This shows the duty amount of Rs. 5,35,237.06. A copy of another statement which is written by hand (Annexure to the show cause notice) showing the amount of duty of Rs. 15,82,986/- has also been enclosed in the papers filed by the respondent along with the cross-objection. The headings of the various columns are not readable at all. Hence we are not in a position to appreciate the correctness of the duty amount due according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay any duty from their own funds. This in fact is what was stated by Shri M.K. Mehta of the respondent company vide his statement dated 5-5-1993 when he stated that the burden of duty on the product was not passed on to the Federation and that they utilise the Modvat credit of duty paid on the plastic granules. It is also seen from a statement produced by the respondent that the total Modvat credit for the period in question November 1991 to March 1993 was Rs. 40,16,733.47 while the duty paid was Rs. 23,43,992.56 leaving unutilised balance of nearly Rs. 17 lakhs. Hence no adverse inference can be drawn against the respondent on the ground that the job charges were less than the duty paid on the final product. 7. The following two grounds for enhancement of the assessable value of the final product by raising the cost of the raw material by adding - (1) the cost of transport of the raw material from the supplier's godown to the respondent's factory, and (2) the cost of the raw material wasted during the manufacturing process, have, inter alia, been urged in the appeal. This has been countered by the respondent stating that the cost of transport has been taken i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, respondent has relied upon the Larger Bench decision of the Tribunal in Dai Ichi Karkaria Ltd. v. Collector of Central Excise, 1996 (81) E.L.T. 676. It was held by the Bench in the said case that duty paid on input in regard to which Modvat credit is availed of by a manufacturer is not includible in the assessable value of the final product under Section 4(1)(b) of the Act and Rule 6(b)(ii) of the Rules. In coming to such a finding the Bench took note of the following : (i) Letter dated 25-9-1976 of the Ministry of Finance, Department of Revenue on the effect of [Rule 56A] which granted the benefit of proforma credit. The Ministry while dealing with an objection taken by the Comptroller and Auditor General of India considered the opinion given by the Ministry of Law and clarified that "while arriving at the cost of assessable value of a finished product, credit in respect of duty paid materials/components availing the facility provided under Rule 56A will have to be deducted. (ii) The speech of the Finance Minister delivered on 28-2-1986 (1986 speech) regarding the purpose of Modvat scheme. He stated that the vexations problem of taxation of inputs and cascading eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of duty payable at the time of removal of the article chargeable with duty and held that it would be clear from the explanation itself that, while computing the assessable value, the deduction has to be allowed of the amount of duty payable at the time of removal of the article chargeable with duty and the article concerned being pump which had an electric motor which was duty paid, what was deductible while determining the assessable value was merely the excise duty payable on the pump and not the excise duty already paid on the electric motor which was merely a component. 10. We thus find that the aforesaid decision was rendered with reference to the Explanation under Section 4 providing for the exclusion of the duty payable on the goods chargeable with duty. Further the assessee in that case had insisted on his right to recover the duty on the Electric motor paid by him and recover the same in the form of duty and not by way of the cost of the material. In the present case, the appellant was not selling the goods but carrying out job work using the material provided by the customer and collecting job charges. No excise duty was also being collected neither that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice and not to be assessable value has been the approach taken in a number of decisions taken by the Tribunal. Appellant's consultant referred to the Tribunal decision in Indian Oxygen Ltd. v. Collector of Central Excise, Bhubaneshwar - 1997 (89) E.L.T. 557. 12. The matter was considered in detail by the Tribunal in Collector of Central Excise v. VST Industries - 1991 (52) E.L.T. 59. It was observed therein that the judgments cited by Revenue for the proposition that extra accrual should be added to the assessable value should be interpreted to mean that assessable value should be calculated after adding the extra accrual to the sale price. The judgment of the Supreme Court in Hindustan Polymers v. Collector - 1989 (43) E.L.T. 165 was referred to wherein, it was inter alia, pointed out that the measure of excise duty is price and not value. The Tribunal held that a harmonious construction of Section 4 and Rule 5 of Valuation Rules can lead to only one conclusion that the extra accrual should be added to the wholesale price and the assessable value worked back after allowing admissible deduction. It was then held that addition of such extra accruals to the assessable value wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessable value itself. This will bring down the duty demand further. The only addition will be on account of the cost of input wasted which has to be calculated properly afresh on the lines indicated in paragraph 7 supra. 13. For the foregoing reasons, we dismiss the department's appeal. The cross-objection filed by the respondent is allowed on the question of non- inclusion of the amount of duty paid on the input in the cost thereof for arriving at the assessable value of the final product subject to our observations in paragraph 10 supra and the non-addition of the freight expenses on the inputs. The cost of wastage of inputs is to be calculated afresh as indicated by us and such cost will be added to the cum-duty price and the duty involved should be calculated from such cum-duty price. We accordingly remand the matter to the adjudicating authority for such recalculation of duty. The order of the Collector is set aside and the matter remanded for fresh decision on the aforesaid limited question after granting hearing to the appellant. The quantum of penalty may be decided by the adjudicating authority commensurate with the redetermined quantum of duty. The cross-obje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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