Custom, Excise & Service Tax Tribunal
Jemcon Industries vs Cce Kolhapur on 30 November, 2017
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
E/585/08
(Arising out Order-in-Original No. 04/CEX/2008 dated 03.04.2008 passed by the Commissioner of Central Excise, Pune II)
For approval and signature:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri Raju, Member (Technical)
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Seen
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
Jemcon Industries
Appellant
Vs.
CCE Kolhapur
Respondent
Appearance:
Shri V.B Gaikwad, Advocate for the appellant Shri N.N. Prabhudesai, Supdt. (AR) for the respondent CORAM:
Honble Shri Ramesh Nair, Member (Judicial) Honble Shri Raju, Member (Technical) Date of hearing : 13.11.2017 Date of decision : 30.11.2017 O R D E R No: ..
Per: Ramesh Nair The appellants are engaged in the manufacture of excisable goods namely concrete mixer plant and parts thereof falling under Chapter 84 of schedule to Central Excise Tariff Act, 1985. From the financial year 2001 onwards the appellant manufactured the goods Boom Drag Line Scrapper Cabin and Accessories falling under CSH 8474 9000 of Central Excise Tariff Act, 1985 and cleared to M/s. Schiwing Stetter (India) Pvt. Ltd.(Schiwing Stetter for short) The appellants are also availing SSI exemption up to the aggregate value of `1 crore. The appellants are selling the goods on transaction value on principal to principal basis. However, the buyer M/s. Schiwing Stetter (India) Pvt. Ltd. supplying to the appellant the goods Helical Geared motors and slew ring free of cost. The said parts are fitted with final product of the appellant i.e. Boom Drag Line Scrapper Cabin and sold to Schiwing Stetter. The appellant have not included the cost of said free supplied goods in the assessable value of their final product. Accordingly, demand of excise duty on the cost of such free supplied items was confirmed by the adjudicating authority also imposed a penalty of equal amount under Section 11AC. Being aggrieved by the Order-in-Original appellant filed the present appeal.
2. Shri V.B Gaikwad, ld. Counsel for the appellant submits that the goods manufactured by the appellant is complete and value of the motor and other parts supplied by the customer should not be included. He heavily relied upon the following judgment:
* International Auto Ltd. 2005 (183) ELT 239 (SC) * SRF Ltd. 2007 (220) ELT 201 (Affirmed by the Apex court in 2016 (331) ELT A-138 (SC) * Motherson Sumi Systems Ltd. 2002 (147) ELT 1121 (Affirmed by the Apex court in 2008 (228) ELT A64 (SC) * Ghatge Patil Inds. Ltd. 2015 (320) ELT 646 (Affirmed by the Apex court in 2015 (332) ELT A-28) (SC) * Menon & Menon ltd. 2006 (195)ELT 38 (Affirmed by the Apex court in 2015 (325) ELT 10 (SC)
3. He further submitted that alternatively the cost of free supplied goods was taken inclusive of excise duty whereas the excise duty should not be included while including the cost of free supplied goods. He relied on the judgment of Surya Conductors P. Ltd. 2005 (180) ELT 163.
4. He further submitted that if the appellant is liable to pay duty they were also entitled for the cenvat credit on the goods supplied free of cost by customer. Therefore the issue is of revenue neutrality. He further submitted that there is no malafide with intent to evade duty for reason that the entire case is of revenue neutrality, therefore extended period could not have been invoked. He placed reliance on the following judgments:-
* Uniworth Textiles Ltd. 2013 (288) ELT 161 (SC) * CCE vs. Royal Enterprises 2016 (337) ELT 482 (SC) * SRF Ltd. 2016 (331) ELT A-138 (SC) * Motherson Sumi Systems Ltd. 2008 (228) ELT A64 (SC) * Tenneco RC India Pvt. Ltd. 2015 (323) ELT A-299 (Mad)
5. He also submits that the benefit of cum-duty value was not extended. In this regard, he relied on the decision of CCE vs. Maruti Udyog ltd. 2002 (141) ELT 3 (SC)
6. On the other hand, Shri N.N. Prabhudesai, Ld. Supdt. (AR) appearing on behalf of the revenue reiterates the finding of the impugned order. He submits that the submission of revenue neutrality does not sustain for the reason that due to inclusion of the value of goods supplied by the customer the appellant have crossed threshold SSI exemption limit of `1 crore therefore they are liable to pay duty on all goods and not only the goods sold to Schiwing Stetter. Therefore the submission of revenue neutrality does not hold good. He further submitted that in this case whatever goods were supplied free of cost by the supplier the cenvat credit was already availed by the customer and therefore the credit was not available to the appellant. For this reason also there is no case of revenue neutrality.
7. We have carefully considered the submission made by both sides. We find that the main issue is whether the cost of free supply goods by the customer should be included in the assessable value of appellants manufactured goods. Ld. Counsel heavily relied upon various judgements which were given with reference to the old Central Excise Valuation Rules 1975. However as per the new Central Excise Valuation Rules 2000, the following Rule 6 was incorporated.
RULE 6. Where the excisable goods are sold in the? circumstances specified in clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee.
[Provided that where price is not the sole consideration for sale of such excisable goods and they are sold by the assessee at a price less than manufacturing cost and profit, and no additional consideration is flowing directly or indirectly from the buyer to such assessee, the value of such goods shall be deemed to be the transaction value.] [Explanation 1] - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely : -
(i) value of materials, components, parts and similar items relatable to such goods;
(ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods;
(iii) value of material consumed, including packaging materials, in the production of such goods;
(iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods.
[Explanation 2. - Where an assessee receives any advance payment from the buyer against delivery of any excisable goods, no notional interest on such advance shall be added to the value unless the Central Excise Officer has evidence to the effect that the advance received has influenced the fixation of the price of the goods by way of charging a lesser price from or by offering a special discount to the buyer who has made the advance deposit.
Illustration 1. - X, an assessee, sells his goods to Y against full advance payment at Rs. 100 per piece. However, X also sells such goods to Z without any advance payment at the same price of Rs. 100 per piece. No notional interest on the advance received by X is includible in the transaction value.
Illustration 2. - A, an assessee, manufactures and supplies certain goods as per design and specification furnished by B at a price of Rs. 10 lakhs A takes 50% of the price as advance against these goods and there is no sale of such goods to any other buyer. There is no evidence available with the Central Excise Officer that the notional interest on such advance has resulted in lowering of the prices. Thus, no notional interest on the advance received shall be added to the transaction value.]
8. From the above Rule, it is explicitly clear that any goods supplied directly or indirectly by the buyer free of charge for use in connection with the production and sale of such goods to the extent that such value has not been included in the price actually paid or payable shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being value. As per this Rule, from 01.07.2000, the value of free supplied goods by the buyer which is used in connection with the production of the goods, to be sold to the buyer is includable in the assessable value. As regards the submission of ld. Counsel that the cost of free supplied goods was taken inclusive of duty. In this regard, we find that the excise duty of the input is reduced only in case where the assessee avails the cenvat credit. In the present case, the cenvat credit was availed by the buyer of the goods and not by the appellant. Therefore the landed cost of free supplied goods should be taken for inclusion in the assessable value, accordingly no deduction on account of excise duty of free supplied goods is permitted.
9. As regards cum-duty value, we find that the revenue has included the net cost of the product supplied free of cost. No profit was added with reference to the addition of cost of free supplied goods. Therefore there is no question that excise duty is included in the cost of free supplied goods, accordingly cum duty price benefit cannot be extended in the peculiar facts of the present case.
10. As regards the submission of revenue neutrality made by the ld. Counsel, we find that the cenvat credit was not taken by the appellant, rather it was not available to them whereas the cenvat credit was admittedly taken by the buyer. Secondly, the appellant, due to crossing the exemption limit of `1 crore are required to pay duty on other goods also. Therefore, the revenue neutrality does not apply in the facts of the present case.
11. As regards the limitation, we find that the appellant have not disclosed the fact of receipt of free supplied goods and use thereof in the production to the department at any point of time. Therefore, there is a clear suppression of fact on the part of the appellant.
12. As per our above discussion, inclusion of free supplied goods is just and legal; it does not require any interference. Accordingly, the impugned order is upheld. The appeal is dismissed.
(Pronounced in Court on ..............................) (Raju) Member (Technical) (Ramesh Nair) Member (Judicial) //SR
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