Custom, Excise & Service Tax Tribunal
Automotive Stampings And Assemblies ... vs Cce Pune I on 17 May, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
REGIONAL BENCH - COURT NO. 02
Excise Appeal No. 292 of 2010
(Arising out of Order-in-Appeal No. P-I/VSK/245/2009 dated 24.11.2009
passed by Commissioner of Central Excise (Appeal), Pune-I)
M/s Automotive Stampings and .....Appellant
Assemblies Ltd.
Gate No. 427, Medankarwadi, Taluka: Khed,
Dist: Pune-410501
VERSUS
Commissioner of Central Excise .....Respondent
Pune-I 41/A, ICE House, Opp: Wadia College, Sasoon Road, Pune - 411001 Appearance:
Ms. Anjali Hirawat, Advocate for the Appellant Shri N.N. Prabhudesai, Authorized Representative for the Respondent CORAM:
Hon'ble Mr. S.K. Mohanty, Member (Judicial) Hon'ble Mr. C.J. Mathew, Member (Technical) FINAL ORDER NO. A/85922 / 2019 Date of Hearing: 18.01.2019 Date of Decision:17.05.2019 Per: S.K. MOHANTY This Appeal is directed against the impugned order dated 24.11.2009 passed by the Commissioner (Appeals), Central Excise, Pune-I.
2. Brief facts of the case are that the appellant is engaged in the manufacture of motor vehicle parts, falling under Chapter sub-heading No. 87089900 of the First Schedule to the Central Excise Tariff Act, 1985. During the disputed period, the 2 Appeal No. E/292/2010 appellant was manufacturing and supplying goods to M/s Tata Motors, Pune (principal manufacturer) on job work basis. For undertaking the job work activities, the principal manufacturer had provided steel items free of cost to the appellant and only paid the job charges to the appellant. After completion of the assigned job work, the goods were cleared by the appellant on payment of central excise duty. It was noticed by the department that scrap generated out of free supply raw material was sold by the appellant and the proceeds were retained with them. It was further noticed that the appellant had not included amortized value of the moulds/dies received free of cost from principal manufacturer in the job charges and central excise duty liability was not discharged thereon. Accordingly, the department had contended that proper duty liability was not discharged by the appellant in accordance with Section 4 of the Central Excise Act, 1944 read with Rule 6 of the Valuation Rules, 2000. The department initiated show cause proceedings against the appellant, seeking for recovery of short paid central excise duty along with interest and for imposition of penalty. The matter was adjudicated vide order dated 31.08.2009, wherein the original authority had confirmed central excise duty demand of Rs.46,36,869/- along with interest and also imposed equal amount of penalty. An amount of Rs.15,79,550/- deposited by the appellant during the course of adjudication was appropriated in the said order against the confirmed demand. On appeal, the Learned Commissioner (Appeals) vide the impugned order dated 24.11.2009 has upheld confirmation of the adjudged demand and rejected the appeal filed by the appellant.
3. The Learned Advocate appearing for the appellant submitted that the entire cost of raw materials supplied by principal manufacturer were taken into account by the appellant, while determining the assessable value of the goods manufactured by them. He further submitted that the appellant 3 Appeal No. E/292/2010 had retained the scrap generated out of job work activities and sold the same on payment of duty based on the transaction value. He also submitted that the parts supplied by the appellant were further used by the principal manufacturer in the manufacture of vehicles, which were cleared on payment of duty by them. With regard to demand of duty on removal of scrap items, he submitted that in terms of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, the principal manufacturer was permitted to follow the procedures of sending raw material on job work basis and receipt of the semi-finished job worked goods without payment of duty; thus, under such circumstances, the question of demanding the differential duty would not arise. He has relied upon the decision of this Tribunal in the case of P.R. Rolling Mills Pvt. Ltd. Vs. CCE-2010 (249) ELT 232 (Tri.-Bang.), affirmed by Hon'ble Supreme Court, reported in 2010 (260) ELT A84 (SC), to support its stand that no differential duty can be confirmed on sale of scrap items by the appellant, especially in view of the fact that on clearance of the same, appropriate central excise duty liability was discharged by the appellant. He has also relied upon the judgment of Hon'ble Supreme Court, in the case of International Auto Ltd. Vs CCE-2005 (183) ELT 239 (SC) and the decision of this Tribunal in the case of Lawkim Ltd. Vs CCE-2007 (218) ELT 142 (Tri.-Mum.) and SRF Ltd. Vs CCE-2007 (220) ELT 201 (Tri.-Chennai), affirmed by Hon'ble Supreme Court, reported in 2016 (331) ELT A138 (SC), to strengthen the stand of the appellant that no duty demand can be confirmed on sale of scrap items by the appellant.
4. On the other hand, the Learned AR appearing for the Revenue has reiterated the findings recorded in the impugned order. He has relied upon the judgment of Hon'ble Supreme Court in the case of General Engineering Works Vs. Commr. Of C. Ex. Jaipur-2007 (212) ELT 295 (SC) and the decisions of this Tribunal in the case of Jaemcon Industries Vs. CCE, Kolhapur 4 Appeal No. E/292/2010 (Order No. A/910616/2017 dated 30.11.2017), Commissioner of Central Excise, Pune - III Vs. Ankur Packaging Pvt. Ltd. - 2015 (320) ELT 482 (Tri.-Mum.) and also the decision of this Tribunal in appellant's own case, reported in 2015-TIOL-836-CESTAT- MUM to support the stand of Revenue that confirmation of the adjudged demand is in conformity with the statutory provisions.
5. Heard both sides and perused the records.
6. In the present case, it is an undisputed fact that the steel items received by the appellant from M/s Tata Motors (principal manufacturer) were duty paid; that the appellant had availed Cenvat Credit of the central excise duty paid on such steel items and had passed on the Cenvat benefit to the principal manufacturer and that the goods manufactured on job work basis, out of the steel items supplied were entirely cleared to the principal manufacturer and the receipt particulars were recorded in the Cenvat records. In terms of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, the manufacturer of final product is permitted to take credit on inputs received in its factory and send the same to the job worker for the manufacture of intermediate product, for use in the manufacture of the ultimate final product. In such a situation, the job worker who manufactures the intermediate product is not liable to pay any duty. Thus, the principal manufacturer M/s Tata Motors could have followed the procedure prescribed under Rule 4(5)(a) ibid and the appellant could have manufactured the finished product out of the inputs supplied on job work basis and return the same without payment of duty. In such eventuality, the differential duty cannot be demanded in terms of the procedures prescribed under the Cenvat statute.
7. The issue regarding demand of differential duty on sale of scrap has been settled in favour of the appellant by the decision 5 Appeal No. E/292/2010 of this Tribunal in the case of P.R. Rolling Mills (supra), which has been affirmed by the Hon'ble Supreme Court (supra). In the said case, the Tribunal by relying upon the judgment of Hon'ble Supreme Court in the case of General Engineering Works (supra) has held that P.R. Rolling Mills and raw material supplier could have followed the procedure prescribed under Rule 4(5)(a) ibid, under which no duty was required to be paid by the raw material supplier. Accordingly, the appeal was decided in favour of the said appellant, holding that value of scrap need not be included in assessable value of the product and cleared by the job worker.
8. The ratio of the judgment of Hon'ble Supreme Court in the case of General Engineering Works (supra) relied upon by the Learned AR for Revenue is not applicable to the facts of the present case inasmuch as the same had not dealt with the implication of Rule 4(5)(a) ibid in context with the job work activities. The Tribunal in the case of P.R. Rolling Mills (supra) has considered the said judgment delivered by the Hon'ble Apex Court and held that value of scrap need not be included as per the procedures set out in the Cenvat statute. The order of the Tribunal in the case of Jemcon Industries (supra) is entirely on different set of facts inasmuch as the job worker was availing SSI exemption by not including the value of free supplied material by the principal supplier and the issue involved therein does not relate to demand of differential duty on sale of scrap. Hence, reliance placed on the said decision of the Tribunal is not relevant to the present case. Similarly, the ratio of the decision in the case of Ankur Packaging (supra) and appellant's own case (supra) is also not applicable to the facts of the present case inasmuch as the said decision does not deal with the situation of availability of the procedures laid down under Rule 4(5)(a) ibid, which had been specifically dealt with by the Tribunal in the case P.R. Rolling Mills (supra).
6Appeal No. E/292/2010
9. With regard to the issue of inclusion of the amortized value of moulds and dies in the job charges, we find from the impugned order that the appellant had accepted the duty liability and not contested the duty demand confirmed against it. Further, we also find that the appellant has not specifically urged any ground to contest such demand confirmed against it. Therefore, we are of the view that the duty demand on such ground has been rightly confirmed by the authorities below.
10. In view of the above discussions and analysis, we do not find any merits in the impugned order, so far as it upheld confirmation of adjudged demand of duty, interest and penalty on the appellant on sale of scrap items. Accordingly, the impugned order to such extent is set aside and the appeal is allowed in favour of the appellant. However, the impugned order sustains, to the extent, it upheld confirmation of demand on account of inclusion of amortized value of moulds and dies in the job charges.
11. In the result, the appeal is partly allowed in favour of the appellant.
(Order pronounced in the open court on 17/05/2019) (S.K.Mohanty) Member (Judicial) (C.J.Mathew) Member (Technical) HK