Custom, Excise & Service Tax Tribunal
Skanda Machine Tools Pvt Ltd vs Commissioner Of Central Tax, Bangalore ... on 23 April, 2026
Central Excise Appeal No. E/20057/2018
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2
Central Excise Appeal No. 20057 of 2018
(Arising out of Order-in-Appeal No. 356/2017 CT dated 24.10.2017 passed by the
Commissioner of Central Tax (Appeals - II), Bangalore.)
M/s. Skanda Machine Tools Private Limited
46, 4th Main, 3rd Phase,
Peenya Industrial Area,
Peenya,
Bengaluru - 560 058. ..........Appellant(s)
VERSUS
Commissioner of Central Tax,
North West Commissionerate,
Bengaluru. ........Respondent(s)
APPEARANCE:
Mr. Prateek. M, Chartered Accountant (CA) for the Appellant. Mr. Vinod Kumar Garhwal, Superintendent (AR) for the Respondent.
CORAM:
HON'BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL) HON'BLE MR. PULLELA NAGESWARA RAO, MEMBER (TECHNICAL) Final Order No. 20563 /2026 Date of Hearing: 29.10.2025 Date of Decision: 23.04.2026 PER: P.A. AUGUSTIAN The issue in the present appeal is while manufacturing intermediate products, if Appellant received the goods from the customer as a job worker, whether the Appellant is liable to include the cost of such free supply of goods in the assessable value.
2. The brief facts are on scrutiny of the documents, it is observed that for the period from August, 2010 to August, 2013, the Appellant Page 1 of 8 Central Excise Appeal No. E/20057/2018 has not included the value of parts /components /accessories supplied by their customer for computing the assessable value for payment of central excise duty which are used by them in the activity of designing, manufacturing and clearance of excisable goods like 'CNC machines' and 'Grinding' machines of various types. Thus, alleging undervaluation, proceedings were initiated and show cause notice dated 12.08.2014 was issued demanding duty and proposing penalty under various provision of law. Thereafter, Adjudication authority as per Order-in- Original dated 29.05.2015 confirmed the demand rejecting the transaction value and confirmed the demand by adding the cost of such parts and spares. The Adjudication authority also confirmed demand of interest and imposed penalty. Aggrieved by said order, an appeal was filed before the Commissioner (Appeals) and Commissioner (Appeals) as per the impugned order dated 24.10.2017 rejected the appeal filed by the Appellant. Aggrieved by said order, present appeal is filed.
3. When the appeal came up for hearing, the Learned Chartered Accountant (CA) for the Appellant submits that the issue is no more res integra and covered by the judgment of the Hon'ble Supreme Court in the matter of M/s. International Auto Ltd Vs. CCE, Bihar -2005 (183) E.L.T 239 (SC). In the said matter, the Tribunal held that value of such goods should be included in the value of floor plate assembly manufactured by the job worker. However, in appeal the Hon'ble Supreme Court held that:-
"6. We are of the view that the submission of the appellant is correct. The Tribunal appears to have been confused between the manufacture of the final product, namely, excavators and the manufacture of the intermediate product, namely, the floor plate assemblies. The scheme of Modvat permits the person who clears the ultimate final product to take the benefit of the Modvat scheme at the time of clearance of such final product. The manufacturer of the final product, in this case TELCO, would therefore, be entitled not only to adjust the credit on the inputs supplied by it to the intermediate purchaser such as the appellant Page 2 of 8 Central Excise Appeal No. E/20057/2018 but also to the credit for the duty paid by the intermediate purchaser on its products. The reliance on the decision in Burn Standard Company Ltd. (supra) by the Tribunal was misplaced. That case has no doubt held that the value of the free inputs were to be included in the final product. In that case, the final product was wagons and the question was whether the items which were supplied free by the Railway Board to the assessee could be included in the value of the wagons. This Court came to the conclusion that it could. The first distinguishable feature is that this Court in that case was neither concerned with the Modvat scheme, nor with the provisions of Rule 57F(2)(b). Furthermore, the Court was not considering a situation where the question was of the liability of an intermediate product being subjected to excise duty. What was in consideration was the final product, namely, wagons.
7. In this appeal as we have already noted, the final product was the excavator. According to the Modvat scheme, it is the Modvat of such final product which would have to include the cost of the inputs and in respect of which Modvat credit could be taken at the time of clearance of the final product. The Tribunal having misconstrued the provisions of Rule 57F(2)(b), its decision cannot stand. The decision of the Tribunal is accordingly set aside and the appeal is allowed".
3.1. Learned CA submitted that though the above decision is with reference to the erstwhile Rule 57F(4), the ratio of the above decision applies even to Rule 4(5) of Cenvat Credit Rules 2004 in as much as the Rule 4(5) (a) of Cenvat Credit Rules, 2004 is pari materia with the provisions of Rule 57F(4) of erstwhile Central Excise Rules, 1944 (Essar Steels Ltd Vs. C C Ex -2016 (341) ELT 134 (Tri. Del)).
4. Learned Chartered Accountant (CA) also submits that as per the finding in the impugned order, it is alleged that Appellant had manufactured final products. However, there is no allegation in the show cause notice that the intermediate product manufactured by the Page 3 of 8 Central Excise Appeal No. E/20057/2018 Appellant is final product. In this regard, the Learned Chartered Accountant (CA) relied on the judgment of the Hon'ble Madras High Court in the matter of M/s. Madura Coats Pvt. Ltd Vs. CESTAT - 2023 (7) CENTAX 144 (Mad) wherein it is held that Appellate Authority cannot go beyond the proposals made in the show cause notice.
5. The Learned CA further submits that when job worker clears the goods from their factory under Rule 4(5) of CENVAT Credit Rules, it is not necessary to follow the procedure laid down under Notification No. 214/86-CE dated 25.03.1986. The Appellant placed reliance on the decision of the Tribunal in the matter of M/s. Trico Process Pvt. Ltd Vs. CCE -2005 (189) E.L.T (126) for the above preposition. Reliance is also placed on following decisions:-
a. Noorani Textile Mills 2000 (122) ELT 744;
b. M.Tex & D.K. Processors Pvt. Ltd. Vs. CCE 2001 (136) ELT 73 approved by Hon'ble Supreme Court in 146 ELT A309 (SC).
6. As regards the demand by including the value of goods covered under non-returnable gate pass, Learned CA draws our attention to the relevant gate pass and submits that the items mentioned in the document dated 31.08.2010 are components which are required to be incorporated in the work done by the Appellant for M/s. TVS Motors. Learned CA submits that on perusal of the documents what was given to the TVS Motors is drawing and not the components themselves. Learned CA also draws our attention to the relevant document and submits that if the goods are sent, the goods would have been sent under the returnable gate pass and not under non-returnable gate pass. Further the value of Rs. 96,30,295/- adopted for such transaction is also not disclosed. Whereas as per the evidence on record, a nominal amount of Rs. 5/- was mentioned in the non-returnable gate pass for such drawing.
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7. As regards confirming the demand by invoking the extended period of limitation, Learned Chartered Accountant (CA) submits that to invoke the extended period of limitation by alleging suppression, merely by stating that the fact of non-payment of duty would not have come to the notice of the department but for audit is not sufficient. In this connection, Learned CA relies on the decision in M/s. Landis Plus GYR Ltd Vs. CCE 2013 (290) ELT 447 where it is held that:-
"6. Heard both sides and perused the record. Undisputedly the appellant had received input services viz. GTA and Business Auxiliary Service and used the same in or in relation to the manufacture and trading of Electric Meters. It is also not in dispute that credit of Rs. 3,41,397/- availed by the appellant on the said input services were not exclusively used in or in relation to the manufacture of Electricity Meters, but also used for trading purposes. Admitting the said wrong availment of credit, being pointed out by C.E.R.A. Audit, the appellant had reversed it and also paid the interest on the same. It is also not in dispute that the show cause notice was issued to them after a lapse of one and a half year i.e. on 10-4-2009 proposing penalty under Section 11AC of Central Excise Act, 1944. I find that the show cause notice does not spell out the circumstances or facts which were suppressed and how the appellant had availed the said admissible CENVAT credit with mala fide intention. I also find that the Adjudicating authority as well as the Appellate authority did not discuss the facts which were suppressed or mis-declared or mis- stated by the appellant, except observing that had the Audit not pointed out the said wrong credit, the amount would not have been recovered from the appellant. I find this reasoning standing alone cannot be accepted as a ground for confirming suppression, mis-statement or mis-declaration of facts by the appellant, in availing the inadmissible CENVAT credit on the input services used in the trading of the goods and not in or in relation to the manufacture of the goods".Page 5 of 8
Central Excise Appeal No. E/20057/2018
8. The Learned CA also relies on the decision of the Hon'ble Supreme Court in Gopal Zarda Udyog Vs. CCE -2005 (188) ELT 251(SC), where it is held that a mere failure or negligence on the part of manufacturer either not to take out licence or not to pay duty, when there is scope of doubt, does not attract extended period of limitation. More importantly it was held that a mere failure to pay duty is not necessarily due to willful suppression or fraud /collusion, etc. Further the appellant also relies on the decision of the Hon'ble Supreme Court in the case of Uniworth Textiles Ltd. -2013 (288) E.L.T. 161 wherein it was held that mere non-payment of duties is not equivalent to collusion or willful mis-statement or suppression of facts. When there is a bonafide belief, extended period of limitation cannot be invoked. Further it was held that the burden to prove that there was fraud, collusion, etc. lies on the department. In the instant case, the department has failed to discharge the burden.
9. Learned Chartered Accountant (CA) further submits that the Appellant has been regularly filing the monthly excise return. The details of such clearance were included in the monthly return filed for the period August 2010 to August, 2013. Thus, when the relevant details are disclosed in the monthly return, demand confirming by invoking the extended period of limitation is unsustainable. In this regard, reliance is placed on the decision of this Tribunal in the matter of M/s. Sipani Fibers Limited Vs. CCE, Bangalore -2007 (212) E.L.T 374 (Tri. - Bang) where it is held that when Appellant regularly filing ER-1 and RT-12 returns, indicating the details of waste, there was no justification of invocation of larger period of limitation. Learned Chartered Accountant (CA) also relied on the following decisions:-
(i) Centre for Development of Advanced Computing Vs. CCE
- 2002 (141) ELT 6
(ii) CCE Vs. Saurashtra Cements Ltd. - 2010 (260) ELT 71
10. The Learned Chartered Accountant (CA) also draws our attention to the certificate issued by other customers including M/s. Oro Labs and Page 6 of 8 Central Excise Appeal No. E/20057/2018 M/s. AMS certifying that the goods were dispatched by returnable delivery challan for inspection under Rule 4(5) of the Central Excise Rule, 2002. After receiving the goods, they have discharged the excise duty @ 12.36%. Further Learned CA submits that it is a revenue neutral situation and on that ground also, the demand is unsustainable. In case the Appellant had included the value of such goods, they are eligible for claiming the CENVAT credit and in present case, the Appellant has not claimed the CENVAT credit on the goods which is supplied by the manufacturer as a job worker to Appellant.
11. Learned Authorized Representative (AR) for the Revenue reiterated the finding in the impugned order.
12. Heard both sides and perused the records.
13. As regards confirming the demand by invoking extended period of limitation, we find that as per the judgment of the Hon'ble Supreme Court in the case International Auto Ltd (supra), if the appellant had a bona fide belief that the value of material supplied by customers under Rule 4(5) of Cenvat Credit Rules, 2004 need not be included, extended period of limitation cannot be invoked. Further we find that as per the finding in the impugned order, it is held that Appellant had manufactured final products. However, there is no such allegation in the show cause notice that the intermediate product manufactured by the Appellant is final product. As regarding the demand by including the value of goods covered under non-returnable gate pass, the components which are required to be incorporated in the work done by the appellant for M/s. TVS Motors. Following the ratio of the judgment of the Hon'ble Supreme Court in the matter of M/s. International Auto Ltd. (supra), when certificate issued by other customers including M/s. Oro Labs and M/s. AMS certifying that the goods were dispatched through a returnable delivery challan for inspection under Rule 4(5) of the Central Excise Rule, 2002 and after receiving the goods, when they have discharged the excise duty @ 12.36%, present demand is unsustainable. Further the demand of interest and imposition Page 7 of 8 Central Excise Appeal No. E/20057/2018 of penalty are also unsustainable. Therefore, the impugned order is liable to be set aside.
14. In view of the above discussion and considering the facts and circumstance of the case, the impugned order is set aside, and appeal is allowed with consequential relief, if any, in accordance with law.
(Order was pronounced in Open Court on 23.04.2026) (P. A. AUGUSTIAN) MEMBER (JUDICIAL) (PULLELA NAGESWARA RAO) MEMBER (TECHNICAL) hr/Sasi Page 8 of 8