Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S. Ankur Packaging Pvt. Ltd on 8 January, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. E/664/05-MUM
[Arising out of Order-in- Appeal No. PIII/218/ 04 dtd. 21/11/2004 passed by the Commissioner(Appeals-III) of Central Excise Pune]
For approval and signature:
Honble Mr. P. K. Jain, Member(Technical)
Honble Mr Ramesh Nair, Member(Judicial)
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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 :
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?
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Commissioner of Central Excise, Pune-III
:
Appellant
VS
M/s. Ankur Packaging Pvt. Ltd.
:
Respondent
Appearance
Shri. V. K. Agarwal, Addl. Commissioner(A.R.) for the Appellants
Shri. S. Narayanan, Advocate for the Respondent
CORAM:
Honble Mr. P. K. Jain, Member (Technical)
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 8/1/2015
Date of decision 8/1/2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in- Appeal No. PIII/218/ 04 dtd. 21/11/2004 passed by the Commissioner (Appeals-III), Central Excise, Pune, wherein the Ld. Commissioner (Appeals) set aside the order-in-original dated 11/5/2004 and allowed the appeal of the respondent with consequential relief. The fact of the case is that on the visit by the Central Excise Officers to the respondent factory, it was observed that the value to the extent of scrap generated during the manufacturing process has to be added back to the assessable value the goods manufactured on the job work basis, since sale proceeds of such goods was allowed to be retained by the respondents. It was contention of the department that the value of job work gets reduced to the extent of scrap value allowed to be retained on its sale. Accordingly, the respondent paid the differential duty amounting of Rs. 1,13,759/- alongwith the interest of Rs. 30,620/- without any protest. The respondent later on realized that they were not supposed to pay excise duty on the value of the scrap, they filed refund claim for the amount of duty and interest paid by them. The refund claim was rejected by the adjudicating authority on the ground that the act of raising an objection by the departmental authorities, payment of duty alongwith interest by the appellant at the instance of such objection, is complete transaction in itself and can not be reversed by claiming the refund of the amount so paid. Aggrieved by the said order in original, respondent filed appeal before the commissioner (Appeals) which was allowed vide the impugned order. Hence, the Revenue is before us.
2. Shri. V. K. Agarwal, Ld. Addl. Commissioner (A.R.) appearing for the Revenue submits that the respondent paid excise duty on the objection of the department. When the sale proceeds of the scrap good generated during the course of job work, retained by the respondent, job worker received an extra consideration over and above the job work charges received by them, therefore the extra consideration would attract excise duty and accordingly the respondent paid the excise duty and interest thereupon correctly and legally. Therefore there is no question of refund of the said amount. He submits that as regard the judgment of [2003(157) E.L.T. 435] Mahindra Ugine Steel Co. Ltd. Vs. CC Ex. Pune relied upon the by the Ld. Commissioner(Appeals), the appeal has been set aside by the Honble Supreme Court and the matter was remanded to the Tribunal for rehearing. Therefore Mahindra Ugine Steel Co. Ltd. case of this Tribunal does not exist, hence reliance on the same is incorrect. Shri. V. K. Agarwal, Ld. A.R. also placed reliance on the case of [2014(303) E.L.T. 282 (Tri-Del.)] Mech & Fab Industries Vs. CC Ex., Bhopal. He submits that the order passed by the Ld. Commissioner (Appeals) suffered by the serious infirmity and the same is not sustainable.
3. On the other hand, Shri. S. Narayanan, Ld. Counsel appearing for the respondent submits that valuation of job work was strictly done in accordance with the principle laid down by the Honble Supreme Court in the case of Ujjagar Prints. The value was computed by taking total cost of raw material supplied by principal and job charges actually received from the principal. It is his submission that this method of valuation is correct and legal and therefore no loading over and above this value, on account of sale of scrap can be made. He, referring to Charted Accountant certificate, submits that the cost of the job work goods was arrived by following the cost accounting principles as required under CAS 4, wherein the realizable value of scrap was reduced. Therefore the value arrived at in respect of job work goods is correct. It is his submission that the sale value of the scrap also suffered the excise duty therefore the element which has already suffered duty cannot be levied duty twice. He placed reliance on following judgments:
(a) CCE, Nagpur Vs. Lloyds Industries Limited [2007(213) E.L.T. 339(S.C.)]
(b) CCE Vs. Cadbury (I) Ltd.
[2006(200) E.L.T. 353 (S.C)]
(c) CCE, Navi Mumbai Vs. Amar Bitumen & Allied Products Pvt. Ltd.
[2006(202)E.L.T. 213 (S.C.)]
(d) CCE, Pune Vs. Tata Engineering and Locomotives Co. Ltd.
[2003(158) E.L.T. 130(S.C.)]
(e) Birla Corporation Ltd. Vs. CCE [2005(186) E.L.T. 266 (S.C.)]
4. We have carefully considered the submissions made by both the sides and perused the records.
5. The respondent paid the excise duty on the realized value against sale of the scrap retained by them, which was generated during the course of processing of job work goods. It is undisputed fact that for the purpose of job work the respondent has received free of cost raw material from the principal. After processing finished goods, it was returned to the principal. However, the scrap generated during the course of manufacture in the job work basis has been retained by the respondent. The said scrap was sold in the market by the respondent and realized value. For the purpose of job work, the respondent is paid particular job work charges by the principal. We agree that as per the principle laid down by the Honble High Court in Ujjagar print and various other judgments, the valuation of job work goods should be done by taking the cost of raw material plus job charges. However, in any valuation, if there is any extra consideration flowing to the manufacturer, the same should be added in the assessable value of the goods. In the present case the respondent is getting job work charges plus realized value against sale of scrap. Therefore both the element should be added in the cost of raw material and total sum of cost of raw material plus job charges plus realized value of scrap sale, shall be the correct assessable value. As regard the contention of the Ld. Counsel for the respondent that value of the scrap is reduced for arriving at the cost of the product in terms of costing principle. We are of the view that method of costing according to the CAS4 will apply only when the goods is sold by the owner of the goods whereas in the present case the goods is not owned by the job worker but it is owned by the principal. For this reason, realized value of the scrap is additional consideration flowing to the job worker towards the overall job work activity. Therefore the contention of the Ld. Counsel will not be of any help to the respondent. In the case of CCE, Nagpur Vs. Lloyds Industries Limited(supra) The Honble High court has held as under:
4. This clearly indicates that the value of Conversion Charges is affected by the fact that the Respondents retain the scrap and sell it.
5. The Tribunal has, in the impugned Judgment, noted that conversion costs may get depressed. Yet the Tribunal then erroneously assumes; that if such a value is included, it would have to be deducted from the cost of raw material. The Tribunal erroneously holds that if that is not done such a charge would be included twice over.
6. As has been set out in greater detail in the Judgment delivered today in M/s, General Engineering Works case the cost of the raw material is one element. Whatever is the quantity of raw material used, its value will have to be taken into account. Conversion charges is a second element. If by retaining scrap/waste the conversion charges get reduced, then the value of the scrap/waste will have to be added to the conversion charges. By so doing there is no inclusion of same charge twice over as erroneously held by the Tribunal.
7. Accordingly, on the principles laid down in General Engineering Works case, we set aside the impugned judgment and allow the appeal. The order of the adjudicating authority dated 7th October, 2002 gets restored. There shall be no order as to costs.
From the above judgment, it is clear that if the scrap is retained by the job worker and sale of the same will affect the conversion charges towards job work, the same should be included in the assessable value of the job work goods. We agree with the submission made by Ld. A.R. that though the Ld Commissioner (Appeals) heavily relied on judgment of [2007(211)E.L.T. 73 (Tri-Mum)] Mahindra Ugine Steel Co. Ltd. but subsequently said Tribunal judgment was set aside and matter was remanded back to the Tribunal. The impugned order of the Ld. Commissioner, based on the judgment which does not exist presently, cannot be sustained. From the facts, our observation is that against overall activity of job work, the respondent job worker is getting the consideration in two forms, one job work charges and second realized value of scrap sale. In other words total sum of both these element will form the total consideration received by the respondent towards job work. Therefore the sale value of scrap is includible in the assessable value of job work goods. Therefore, differential excise duty and interest thereupon paid by the respondent is correct and legal and the question of refund of said amount does not arise. In view of the above discussion and considering legal position we are of the considered view that order of the Ld. Commissioner (Appeals) is not sustainable and same is set aside. The appeal of the Revenue is allowed.
,, (Operative part of the order pronounced in the Court) P. K. Jain Member (Technical) Ramesh Nair Member (Judicial) sk 7