2013 (9) TMI 651 - AT - Central Excise

Tribunal rules duty on captively used goods, directs re-evaluation and penalty reconsideration.

The Tribunal held that duty on the impugned goods used captively is leviable. The Commissioner was directed to re-determine the duty liability after ... Marketability of an intermediate product - excisability of captively consumed intermediate goods - valuation of captively consumed goods under the Valuation Rules - quantification of duty limited to quantity of final products cleared - imposition of penalty contingent on re-determined duty liability - remand for de novo adjudicationMarketability of an intermediate product - excisability of captively consumed intermediate goods - Impugned 'non-woven fabrics' used captively are marketable and therefore excisable. - HELD THAT: - The Tribunal examined the manufacturing process (including pre-needling and finished-needling passes) and the affidavit of the General Manager describing differences in compactness/tensile strength after first and second passes. Although the impugned goods undergo only the first pass and possess less compactness/tensile strength than goods cleared after a second pass, they nevertheless possess some dimensional stability. No evidence was produced to show that marketability requires compactness/tensile strength to exceed a specified threshold. The adjudicator's finding that the intermediate product is capable of being marketed is therefore upheld and the goods are held dutiable when captively consumed in manufacture of an exempt final product. [Paras 8, 9, 10, 11, 14]Duty on the impugned intermediate goods used captively is leviable.Valuation of captively consumed goods under the Valuation Rules - Valuation of the captively consumed intermediate goods was not finally determined and must be re-determined under the Valuation Rules. - HELD THAT: - Although the department had applied assessable values for certain later periods on the basis of cost-plus percentages, the Tribunal held that on remand the Commissioner must re-determine the value of the captively consumed goods in accordance with the Valuation Rules because the impugned goods are not strictly comparable to goods cleared from the factory. Since the matter was returned for de novo adjudication, the Commissioner is directed to apply the Valuation Rules in fixing assessable value. [Paras 11, 14]Commissioner to re-determine value of impugned goods as per the Valuation Rules.Quantification of duty limited to quantity of final products cleared - Duty demand must be re-quantified on the basis of quantity of impugned goods equal to the quantity of jute carpets actually cleared. - HELD THAT: - The Tribunal accepted the appellants' contention that the quantity of intermediate material for which duty is demanded cannot exceed the quantity of the final jute carpets manufactured and cleared. The Commissioner's earlier quantification, which demanded duty on a substantially larger square-meterage than the carpets produced, must be revisited and re-determined so that duty is assessed only on quantity commensurate with the final product clearances. [Paras 12, 14]Commissioner to re-determine duty on quantity equal to the jute carpets cleared by the appellants.Imposition of penalty contingent on re-determined duty liability - Imposition of penalty is not finally upheld and is to be reconsidered after re-determination of duty. - HELD THAT: - The Commissioner had imposed penalties inter alia on the view that appellants withheld information about dimensional stability. The Tribunal found that the Commissioner erred in treating this as conclusively established and noted that CESTAT had directed de novo consideration. Because duty itself is to be re-determined on valuation and quantity grounds, the question of penalty must be considered afresh by the Commissioner after the duty liability is recomputed. [Paras 13, 14]Commissioner to reconsider imposition of penalty afresh after re-determination of duty.Final Conclusion: The Tribunal affirms that duty is leviable on the captively consumed intermediate 'non-woven fabrics' but remands the matter to the Commissioner for de novo adjudication to (a) re-determine assessable value under the Valuation Rules, (b) re-quantify duty limited to quantities equal to jute carpets cleared, and (c) reconsider penalty after the duty is re-determined; appeal disposed of by way of remand. Issues Involved:1. Marketability and excisability of 'non-woven fabrics.'2. Valuation of the intermediate goods.3. Quantity of fabric on which duty is demanded.4. Imposition of penalty.Issue-wise Detailed Analysis:1. Marketability and Excisability of 'Non-Woven Fabrics':The primary issue was whether the intermediate product 'non-woven fabrics' used captively by the appellants for manufacturing jute carpets is marketable and therefore excisable. The appellants argued that the 'non-woven fabrics' lacked dimensional stability and were not marketable. They contended that the goods sold as 'non-woven fabrics' on payment of duty were different from the intermediate product in question. The Commissioner, however, decided based on the manufacturing process and the affidavit of Shri Patwardhan, General Manager, that the impugned goods were capable of being marketed and hence excisable. The Tribunal agreed with the Commissioner's finding that the impugned goods had some degree of compactness/tensile strength/dimensional stability and were therefore marketable and dutiable.2. Valuation of the Intermediate Goods:The appellants challenged the valuation of the captively consumed intermediate goods. The Commissioner had rejected their plea on the grounds that this issue was not raised in earlier proceedings. The Tribunal noted that since the matter was remanded for de novo adjudication, the Commissioner should have considered the valuation issue. The Tribunal directed the Commissioner to re-determine the value of the impugned goods as per Valuation Rules, considering the Department's method of determining assessable value based on 115% or 110% of the cost of production for the period July 2002 to December 2004.3. Quantity of Fabric on Which Duty is Demanded:The appellants contended that the quantity of 'non-woven fabrics' on which duty was demanded exceeded the quantity of jute carpets manufactured. Specifically, for the last eight show-cause notices, duty was demanded on 10,45,712.03 square meters, while the quantity of jute carpets manufactured was only 1,69,504.96 square meters. The Tribunal agreed with the appellants and directed the Commissioner to re-determine the duty based on the quantity of jute carpets cleared.4. Imposition of Penalty:The appellants argued that no penalty should be imposed as the extended period of limitation was dropped, indicating no suppression of facts or misdeclaration on their part. The Tribunal noted that the Commissioner's view that the appellants withheld information about the dimensional stability of the impugned goods was incorrect. The Tribunal directed that the imposition of penalty should be reconsidered by the Commissioner after re-determining the duty amount, based on the valuation and quantity issues.Conclusion:The Tribunal held that duty on the impugned goods used captively is leviable. The Commissioner was directed to re-determine the duty liability after considering the valuation as per Valuation Rules and the quantity of jute carpets cleared. The imposition of penalty was to be reconsidered after re-determination of duty. The case was remanded back to the Commissioner for a decision after affording an opportunity of hearing to the appellants.