2012 (7) TMI 747 - AT - Central Excise

Tribunal Upholds Excise Duty Demand, Modvat Credit Eligibility, and Goods Valuation in Appellants' Favor

The Tribunal upheld the demand for excise duty on nylon crimped yarn due to incorrect payment by the appellants, emphasizing their awareness of the ... Demand of duty – extended period of limitation - nylon crimped yarn - central excise duty on ad valorem basis – Held that:- Classification list was amended on 1.6.2001 by filing the revised declaration showing the ad valorem rate of duty in respect of nylon crimped yarn, but duty was not paid according to this declaration and thereafter this declaration was withdrawn on 11.6.2001. The correct rate of duty was applied by the appellants only from 1.10.2001. This only shows that they were aware of the correct rate of duty applicable on their products - contention of the appellants that duty is not required to be paid on Rs.5/- as twisting charges, it is found from the records that the goods in fact were manufactured on job work basis and they were charging Rs.15/- per kg. as job charges. Therefore, the entire Rs.15/- per kg. is required to be added in the value and their contention on the valuation is not acceptable. Cenvat credit – Held that:- W.e.f. 1.10.2001 the cenvat credit was admissible to them and prior to this date, they were not eligible for any credit since they themselves have withdrawn the letter under which they have requested for availing the credit - duty has rightly been demanded from the appellants in the show cause notice and accordingly the confirmation of the demand for the extended period is upheld - w.e.f. 1.10.2001, they are eligible to modvat/cenvat credit subject to filing of the duty paying documents in respect of the raw materials/inputs and verification by the departmental officers - matter remanded back to the adjudicating authority - appeals are allowed by way of remand Issues:1. Incorrect payment of excise duty on nylon crimped yarn.2. Denial of modvat/cenvat credit.3. Inclusion of job work charges in valuation of goods.Analysis:1. The case involves the incorrect payment of excise duty by the appellants on nylon crimped yarn for the period August 2000 to July 2002. Initially, duty was on ad valorem basis, but the appellants continued to pay duty on a specific rate basis, resulting in lesser payment. The investigation revealed discrepancies in the duty payment declarations filed by the appellants, leading to a show cause notice demanding duty and penalties. The Commissioner (Appeals) upheld the demand, citing deliberate intent to pay less duty. The Tribunal confirmed the duty demand for the extended period, emphasizing the awareness of correct duty rates by the appellants.2. The denial of modvat/cenvat credit to the appellants was a crucial issue. The appellants contended that they were eligible for credit since they had filed a declaration in October 2001 to avail the credit, despite withdrawing a previous claim. The Tribunal acknowledged the eligibility for credit from October 2001, remanding the matter to the adjudicating authority for verification of duty paying documents for allowing cenvat/modvat credit. The Tribunal emphasized the need for due verification and admissibility of credit before examining the case for penalty imposition.3. Another issue was the inclusion of job work charges in the valuation of goods, contested by the appellants. They argued that the charges for the exempted process of twisting should not be considered in the valuation for excise duty. However, the Tribunal found that the job work charges were correctly included in the valuation, as the goods were manufactured on a job work basis, and the entire amount needed to be added to the value. The Tribunal rejected the appellants' contention on the valuation issue.In conclusion, the Tribunal allowed the appeals by way of remand, directing verification of duty paying documents for credit eligibility and further examination for penalty imposition after due process. The judgment addressed the issues of duty payment discrepancies, credit denial, and valuation of goods comprehensively, providing clarity on the correct application of excise duty regulations.