2015 (5) TMI 246 - SC - Central Excise

Supreme Court affirms duty payment & penalties in job work dispute

The Supreme Court dismissed the appellant's appeal challenging the Customs, Excise and Service Tax Appellate Tribunal's decision. The appellant, engaged ... Valuation of goods - Levy of penalty u/s 11AC - appellant was not taking into consideration the 'other works overhead' element in arriving at the assessable value though according to the Department, it formed part of the costing element of 'conversion cost' shown in the costing report - Held that:- Appellant had not included the cost of 'other works overhead' in arriving at the assessable value though it forms part of the costing element of 'conversion cost' shown in the costing report. - there was no intentional omission/ suppression on its part inasmuch as the differential duty was paid on the basis of average cost of raw material as intimated by P&G in their cost audit report and therefore, the appellant acted bona fide in relying upon the said report and recalculating the differential duty based thereupon. - cost audit report was supplied by the P&G. However, based thereupon, it is the appellant which had worked out the final costing and it is the chartered accountant of the appellant which had prepared the said costing and submitted to the Department. Therefore, the appellant cannot feign ignorance or be pretentious about its innocence in allegedly acting upon the cost audit report as supplied by P&G. - Decided against assessee. Issues:- Appeal against the order of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) dismissal- Appellant's job work for Procter & Gamble (P&G)- Discrepancy in assessable value calculation by the appellant- Show cause notice for demanding differential duty- Imposition of penalties by the Commissioner- Appeal to CESTAT and subsequent dismissal- Challenge against invoking extended period of limitation- Argument regarding the intentional omission by the appellant- Appeal submission on reliance on P&G's cost audit report- Commissioner's analysis on invoking proviso to Section 11A- Dismissal of the appeal by the Supreme CourtAnalysis:The Supreme Court heard an appeal challenging the Customs, Excise and Service Tax Appellate Tribunal's (CESTAT) order dismissing the appellant's appeal against the Commissioner of Central Excise's decision. The appellant had engaged in job work for Procter & Gamble (P&G) under an agreement signed in December 1994. The issue arose when the Department scrutinized the appellant's cost sheet and found a discrepancy in the assessable value calculation, specifically regarding the omission of 'other works overhead' element. This led to a show cause notice being issued, demanding a significant amount as differential duty for a specified period, along with penalties.The Commissioner adjudicated the matter, demanding the payment of the differential duty and imposing penalties. The appellant then appealed to CESTAT, which dismissed the appeal but set aside one of the imposed penalties. In the subsequent appeal to the Supreme Court, the appellant's counsel did not dispute the necessity of including 'other works overhead' in the cost calculation for excise duty payment. However, the appellant contested the Department's invocation of the extended period of limitation, arguing that it would render the demand for a specific period time-barred.The Court noted that while the appellant claimed innocence based on reliance on P&G's cost audit report for recalculating the duty, it was the appellant who finalized the costing based on the report provided by P&G. The Court highlighted the Commissioner's findings that the appellant's actions amounted to suppression of facts and contravention of Central Excise Act provisions with intent to evade duty payment. The Court upheld the Commissioner's decision to invoke the proviso to Section 11A, concluding that the appellant's appeal lacked merit and subsequently dismissed it.