2007 (1) TMI 19 - AT - Central Excise

Inclusion of Scrap Value in Assessable Value of Motor Vehicle Parts Upheld by Supreme Court

MAHINDRA UGINE STEEL CO. LTD. Versus COMMISSIONER OF C. EX., PUNE

The Supreme Court held that the value of scrap retained by the assessee must be included in the assessable value of motor vehicle parts manufactured on a ... Valuation(central Excise) – Department contended that assessee had undervalued the parts to the extent of scrap credit value and accordingly penalty imposed on him - After considering all the facts and authority allow the appeal partly Issues:1. Whether the value of scrap retained by the assessee should be included in the assessable value of motor vehicle parts manufactured on a job work basis.2. Whether the demand is barred by limitation.Analysis:Issue 1:The primary issue revolves around whether the value of scrap retained by the assessee should be considered in the assessable value of motor vehicle parts manufactured on a job work basis for a specific company. The Cost Auditor's report and relevant Cost Accounting Standard No. 4 are examined. The Apex Court's judgment in Jay Engineering Works Ltd. v. CCE is cited, emphasizing that the sale proceeds of scrap generated during job work are to be included in the assessable value. The Tribunal's differing view in Hindustan Engineering & Industries Ltd. v. CCE is discussed but ultimately overturned by the Apex Court. The Supreme Court's stance is reiterated, highlighting that the value of scrap must be incorporated into the overall value of the conversion charges. Consequently, the inclusion of scrap credit in the assessable value of motor vehicle parts is deemed necessary based on the legal precedents.Issue 2:The second issue pertains to whether the demand is barred by limitation. The Tribunal finds that during the period in question, legal precedents were established against the assessee, indicating that they were aware of the inclusion of scrap value in the assessable value. The failure to adhere to excise rules, such as not filing price declarations and not disclosing job work activities, reflects an intention to evade duty payment. Citing relevant judgments, including Dharampal Satyapal v. CCE, the Tribunal concludes that the extended period of limitation is applicable due to the deliberate suppression of information by the assessee. The contention that excess duty payment due to fluctuations in raw material prices absolves them of suppression is dismissed. Consequently, the demand is upheld, and penalties are adjusted based on the circumstances of the case.In conclusion, the Tribunal partially allows the manufacturer's appeal by reducing the penalty, fully allows the appeals of the company's officers, and rejects the Revenue's appeal for penalty enhancement. The duty demand is upheld, penalties are adjusted, and the appeals are disposed of accordingly.