Custom, Excise & Service Tax Tribunal
Cc&Ce, Bhopal vs M/S D.K. Electromech Corporation on 30 June, 2008
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST BLOCK-II, R.K. PURAM, PRINCIPAL BENCH, NEW DELHI, COURT NO. III
Excise Appeal Nos. 3886, 3887 & 3888 of 2004
[Arising out of Order-in-Appeal No. 289 290-CE/BPL/2004 dated 23.04.2004, O-I-A No. 276-277-CE/BPL/2004 dated 22.4.2004 & O-I-A No. 278-279-CE/BPL/2004 dated 22.4.2004 passed by the Commissioner (Appeals) Customs, Central Excise, Bhopal]
Date of hearing/decision 30.06.2008
Honble Mrs. Archana Wadhwa, Member [Judicial]
Honble Mr. M. Veeraiyan, Member [Technical]
1 Whether Press Reporters may be allowed to see 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 of the Order?
4 Whether Order is to be circulated to the Departmental authorities?
CC&CE, Bhopal Appellant
[Rep. by Mr. V.K. Agrawal, DR]
Vs.
M/s D.K. Electromech Corporation Respondent
[None on merit]
M/s Sigma Heavy Engineer Industries [Rep. by Mr. Z. U. Alvi,
M/s Narmada Equipments (P) Ltd., Advocate]
Coram: Honble Mrs. Archana Wadhwa, Member [Judicial]
Honble Mr. M. Veeraiyan, Member [Technical]
O R D E R
Per: M. Veeraiyan:
1.1 Excise Appeal No. 3886 of 2004 is by the Commissioner against the order of the Commissioner (Appeals) No. 289-290-CE/BPL/2004 dated 23.4.2004 in which M/s D.K. Electromech Corporation and another are respondents.
1.2 Excise Appeal No. 3887 of 2004 is by the Commissioner against the order of the Commissioner (Appeals) No. 276-277-CE/BPL/2004 dated 22.4.2004 in which M/s Sigma Heavy Engineer Industries and another are respondents.
1.3 Excise Appeal No. 3888 of 2004 is by the Commissioner against the order of the Commissioner (Appeals) No. 278-279-CE/BPL/2004 dated 22.4.2004 in which M/s Narmada Equipments (P) Ltd., and another are respondents.
1.4 All these appeals involve a common issue and, therefore, are being dealt with by a common order.
2. Heard both sides.
3. The relevant facts, in brief, are as follows:-
a) BHEL sent machined cast tubes under rule 57F(1)(ii) to the job workers , the respondent firms, for getting magnetic frame manufactured and received them back.
b) While clearing the cast tubes to the above job workers, BHEL has paid the excise duty; raised excise invoices indicating the value of the goods and indicating the duty amount paid; job workers have taken the cenvat credit of the duty paid by BHEL; they completed the job work and returned the magnet frame to BHEL; they paid duty partly using the cenvat credit and rest by payment in cash or through PLA.
c) Initially, BHEL was showing that they are bearing the excise duty; accounting pattern was changed and the excise duty paid by BHEL was taken as expenses (rightly so) by BHEL and the credit taken was shown as income by the job workers. In other words, the job charges were shown as increased to the extent of cenvat credit available.
d) The original authority held that the job workers are earning amount in the form of modvat credit; the job workers were getting the same over and above the job charges quoted by them; additional amount of benefit of modvat credit on the free-issue-material so received led to the lowering of the job charges. On the above findings, original authority demanded differential duties of varying amounts from the above job workers and also imposed personal penalties on the job-worker-firms and on the concerned persons of the job-worker-firms. Commissioner (Appeals) allowed the appeals by the parties both on merits and on limitation.
4. Learned DR submitted that the job workers suppressed the value of job charges while determining the value of the finished product. He seeks to set-aside the orders of the Commissioner (Appeals) and restoration of orders-in-original.
5. Learned Advocate for the respondents submits that there is no under valuation and supports the order of the Commissioner (Appeals).
6.1. We have carefully considered the submissions from both sides. The issue is more in the nature of a mathematical puzzle. The original authority has treated the amount of cenvat credit of duty paid by BHEL as additional consideration. There are many fallacies in considering the above amount as additional consideration. First of all, there is no sale of cast tubes by BHEL; as there is no sale there is no question of any sale consideration. The invoice raised is for excise purposes only. There is no payment from the job workers as sale consideration and there can be none. Whatever duty was paid by BHEL, while clearing the cast tubes, has gone to the account of the Government. This amount is being made available by way of credit for the purpose of using the same towards payment of duty on the final product which is expected to be higher than credit taken. The differential amount of duty payable by the job workers has also to come from BHEL. This is a mechanism to implement centvat scheme. The credit cannot be treated either as job charges or as income of the job worker. Since there was no sale consideration, the question of additional consideration does not arise. There is no flow back from the job workers. Whatever payments were made they were only from BHEL to the job workers.
6.2 If BHEL has not sent the cast tubes for job work but made the metal frame themselves, the duty becomes payable only on the metal frame. BHEL could have sent the cast tubes for the purpose of job work without paying duty and could have received the final product after the job work, with out the formalities of job worker taking the credit and the job worker paying duty on the enhanced value of the finished product. The duty liability would have discharged by BHEL.
6.3. Every profession follows certain peculiar practices. The accounting of excise duty paid as expenses by the BHEL and consequently as receipt by the job workers is one such practice. The money paid by BHEL has gone only to the Government account and therefore the recipient can not be the job workers. This accounting practice cannot make the said amount as part of the job charges. It is like a shop keeper wanting to sell a product at Rs. 100/- enhancing the price by Rs. 20/- and marking the price as Rs.120/- and allowing a discount of Rs. 20/- and finally selling the product at Rs 100/- and in the process making the customer feel happy.
6.4. We are convinced that there is no actual increase in job charges when the excise duty paid by BHEL is taken as credit by the job worker, even though the documents of BHEL might have shown this enhanced amount i.e.actual job charges plus cenvat credit of duty paid by BHEL as the notional job charges.
6.4 If the job workers have purchased the cast tubes and actually incurred the incidence of the excise duty, then also they would have taken the cenvat credit. The cenvat credit taken does not go into the landed cost of the product received as input. Even in such a situation, the excise duty component would not have been treated as additional consideration.
7. In view of above, we do not consider that the cenvat credit passed on by BHEL to the job workers as additional consideration flowing from the job worker to BHEL. We do not agree with the Departments contention that the job workers have reduced the job charges because of the additional benefit of modvat credit. They have used the modvat only for the purpose of paying the duty on the finished product as per scheme.
8. In view of the detailed reasons recorded by us we agree with the conclusion reached by the Commissioner (Appeals) and we do not find any reason to interfere with the order of the Commissioner (Appeals).
9. The appeals of Department are rejected.
[Dictated and pronounced in the open Court].
[Archana Wadhwa] Member [Judicial] [M. Veeraiyan] Member [Technical] [Pant]