2007 (3) TMI 613 - AT - Central Excise

Tribunal Rules Duty and Penalty on Dipped Nylon Tyre Cord Fabrics Valuation Unsustainable; Modvat Credit Use Valid.

The Tribunal in CESTAT, Chennai, ruled that the demand for duty, interest, and penalty on the valuation of dipped nylon tyre cord fabrics (DNTCF) was ... Demand of duty, interest and penalty - valuation of DNTCF - Receipt of duty paid dipping chemicals free of cost, availment of the duty paid as credit and excluding the cost of chemicals from the value of dipped nylon tyre cord fabrics - HELD THAT:- The facts of the case of Jay Yuhshin Ltd. v. C.C.E [2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI-LB] are identical to those of the case on hand except that the goods had not moved to SRF under documents prescribed in Rule 57F(4). The free supply of dipping chemicals indicate the arrangement between Goodyear and SRF which ensured the supply to Goodyear of NDTCF manufactured with the free supplies. Movement of goods under Rule 57F(4)(i) & (ii) on payment of duty had served only this purpose in the case discussed in Jay Yuhshin Ltd. v. C.C.E.[2000 (11) TMI 250 - CEGAT, COURT NO. I, NEW DELHI]. They had started including value of free supplies from Goodyear from 1-4-1999. In the light of the ratio in the Apex Court’s in the International Auto Ltd.[2005 (3) TMI 132 - SUPREME COURT] by the ld. Counsel for the (appellants, we find that in the facts of this case, the demand of duty, interest and penalty in the impugned order are not sustainable. We vacate the orders to that effect. The impugned order is otherwise; affirmed as not challenged. The appeal is allowed on the above terms. The appellant shall not claim refund of the duty already paid on this account as undertaken by the Counsel on instructions. Issues Involved:Valuation of goods for payment of duty, Modvat credit on dipping chemicals, classification of goods, exigibility of goods, penalty imposition, applicability of previous judgments.Valuation of Goods for Payment of Duty:The case involved the valuation of dipped nylon tyre cord fabrics (DNTCF) cleared to another company using dipping chemicals received free of cost. The appellant argued that the cost of free supplies should not be included in the value for duty payment. They relied on the Modvat scheme and previous court decisions to support their stance. The Tribunal found that the appellant had taken Modvat credit on the free supplies and held that the impugned order was inconsistent with the Apex Court's decision in a similar case. The Tribunal concluded that the valuation dispute was of no consequence due to the operation of the Modvat scheme on the manufacturer of the final product, rendering the demand for duty unsustainable.Modvat Credit on Dipping Chemicals:The appellant had received duty paid dipping chemicals free of cost and had taken Modvat credit on them. The Tribunal noted that the movement of inputs in this case was not under a specific rule, unlike in other cases cited. However, even if duty had been paid on the correct value of the goods, the Tribunal found that it would have had no impact on the revenue due to the Modvat scheme. The Tribunal concluded that the failure to follow a revenue-neutral exercise was the reason behind the impugned order.Classification of Goods and Exigibility:The Commissioner had classified the goods under a specific chapter sub-heading and demanded differential duty based on the process of manufacturing excisable goods. The appellant contested the exigibility of the goods and the classification decided in the impugned order. The Tribunal examined previous court decisions and found that the impugned order was not sustainable, vacating the demand of duty, interest, and penalty.Penalty Imposition:The Commissioner had imposed a penalty under Section 11AC, along with demanding interest on the duty amount. The appellant argued that no penalty should be imposed due to a bona fide belief about the duty liability. The Tribunal referred to previous judgments and found that the penalty imposed was not justified, ultimately vacating the penalty along with the demand for duty and interest.Applicability of Previous Judgments:The Tribunal extensively discussed and compared the facts of the current case with previous judgments involving similar issues of free supplies, Modvat credit, and valuation of intermediate products. The Tribunal highlighted the decisions of the Apex Court in various cases and concluded that the demand for duty, interest, and penalty in the impugned order were not sustainable based on the principles established in those judgments.This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Chennai, provides a comprehensive overview of the issues involved and the Tribunal's findings on each aspect of the case.