Customs, Excise and Gold Tribunal - Tamil Nadu
Jay Engineering Works Ltd. vs Commissioner Of C. Ex. on 23 December, 1996
Equivalent citations: 1997(93)ELT492(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. These three appeals involve common issues and are therefore taken up together for disposal. The issues in all these appeals relate to the Computation of the assessable value under Rule 6(b) of the Valuation Rules framed under Section 4 of the Central Excise Act, 1944. The issues framed by the Learned Lower Authority in his order are as under :-
(i) Whether the amount of duty paid on the raw materials is to be included in the assessable value of the final product.
(ii) Whether scrap' retained and sold by the appellants who are job workers forms additional consideration and the duty is demandable in respect of the same. So far as the first issue is concerned both the sides agree that the same stands covered by the ratio of the decision of the Larger Bench of the Tribunal in the case of Dai Ichi Karkaria reported in 1996 (81) E.L.T. 676. Inasmuch as, therefore, one of the issues is prima facie covered as above and the second issue lies in a short compass, by dispensing with the pre-deposit of duty and penalty as ordered under the impugned order, we take up the appeals themselves with the consent of both the parties for disposal.
2. As mentioned above, so far as the issue No. 1 (i.e.) -whether the duty element attributable to the inputs which was taken as Modvat credit is required to be taken into reckoning towards the cost of the raw materials in terms of Rule 6(b). The Larger Bench of the Tribunal in the decision referred to supra has ruled that once the Modvat credit of duty is taken, this element of duty is not required to be taken into reckoning towards the cost of the raw materials for purposes of Rule 6(b) of the Valuation Rules. Following, therefore with respect to the ratio of the decision of the Tribunal, we hold that Learned Lower Authority was in error in having included the duty element for the purpose of arriving at the assessable value. In view of the above, we allow the plea of the appellants for excluding of this element in terms of the decision referred to supra.
3. In regard to the second issue, the Learned Lower Authority is held that, inasmuch as the scrap generated out of the raw materials supplied by the customers has been retained by them and the sale proceeds of the same have been realised by the appellants, this constitute an additional consideration and which therefore should form the part of the assessable value.
4. The Learned Advocate Shri V.J. Sankaram for the appellant has pleaded that the appellants had been finding Part II price lists and the value declared by them for their own goods manufactured out of their own raw material and out of the raw material supplied by the customers was the same. He has therefore pleaded that the assessment could not have been done on the basis of Rule 6(b) of Valuation Rules. The Learned JDR, Shri Arulswamy has pleaded that the prices declared by the appellants were under Part II price lists which were for supply of goods to Industrial Consumers and the same therefore could not form the basis for arriving at the assessable value in respect of the goods which were manufactured on job work basis. He has pleaded the authorities had therefore had to have resort to Rule 6(b) of the Valuation Rules.
5. We have considered the pleas made by both the sides. We observe that it is not denied that except in a few cases where the scrap generated out of the raw materials supplied by the customers for manufacture of goods on job work basis was returned, the appellants had retained the scrap and sold the same and the sale proceeds of the same were retained by them. The sale proceeds therefore clearly have a bearing on the job work charges which were realised by the appellants and is an additional consideration in respect of the job work done by them. The same therefore have to be reckoned towards the assessable value. We in the circumstances hold that in all those cases where the scrap has been retained and the sale proceeds of the same retained by the appellants, the sale proceeds have to be taken as additional consideration to be reckoned towards job work charges and therefore have to be added for consumption of the assessable value.
6. At this stage, the learned advocate pleaded that longer period of limitation could not have been invoked. On a query from the Bench he fairly concedes that so far as the retention of the scrap and realisation of the sale proceeds by the appellants is concerned, the same was not reflected in the price list nor they have furnished any information in regard to the same. The appellants had also did not produced the contract between the job workers and wherein the status of the scrap for the purpose of return or retention may have been set out. We observe that the appellants are major manufacturer and they are expected to be aware of the provisions of Law. No reason has been adduced as to why this fact regarding retention of scrap was not brought to the notice of the authorities. The consideration that the appellants get for job work by way of cash or kind has to be taken into reckoning for arriving at the assessable value. The scrap retained by them and which they sold later, was a consideration in kind for the job work done. The amounts appropriated by sales of scrap were required to be reckoned towards the job charges for arriving at the assessable value. The appellants were duty bound under the Law to furnish the facts in this regard to the same to the authorities. There is no explanation for not doing so, we under the circumstances hold this was done with the intention to evade payment of duty. In this background, we hold that there is no force in the plea of the appeals in regard to limitation and we hold that larger period is invokable. The duty demanded in respect of the amounts realised for scrap sold taken into reckoning for arriving at the assessable value is payable. Duty demanded in this regard is therefore upheld.
7. Taking into consideration the facts and circumstances of the case, we reduce the penalty levied in Appeal No. 1744/96 to Rs. 20,000/- in respect of Appeal No. 1715/96 of Rs. 2 Lakhs reduced to Rs. 80,000/- and Appeal No. 1716/96 penalty is reduced to Rs. 2,000/-. The appeals are therefore decided in the above terms.