2017 (10) TMI 1174 - AT - Central Excise

Tribunal overturns excise duty demand citing rule analysis, finding no merit in impugned order.

Yutaka Auto Parts India Pvt Ltd Versus CCE & ST Alwar

The Tribunal allowed the appeal, setting aside the demand for differential excise duty. The decision was based on the analysis of relevant rules, ... Valuation - includibility - cost of FOC material supplied, amortized cost of tools supplied by HSCIL and conversion/job charges including profit at the time of clearance of their finished goods to HSCIL - Held that: - an identical issue of valuation has come up before the Tribunal in the case laws relied by the appellant in the case of M/s Shivani Detergent Pvt Ltd [2016 (11) TMI 1342 - CESTAT NEW DELHI], where the identical issue has been settled by the Tribunal in Advance Surfactants India Ltd. [2011 (3) TMI 1380 - CESTAT, BANGALORE], where it was held that the ratio laid down by the Hon’ble Supreme Court in the case of Ujagar Prints (1989 (1) TMI 124 - SUPREME COURT OF INDIA) will squarely apply i.e. to ascertain the assessable value on the cost of materials plus processing charges - appeal allowed - decided in favor of appellant. Issues Involved:Valuation of excisable goods under Rule 8 and Rule 10A of the Central Excise Valuation Rules, 2000.Detailed Analysis:1. Valuation Dispute: The appeal challenged an Order-in-Original demanding differential excise duty based on the valuation of goods manufactured by the appellant. The dispute arose from the inclusion of the cost of free-of-cost (FOC) materials supplied by the principal manufacturer for further processing by the appellant. The audit team objected to the valuation method adopted by the appellant, leading to the issuance of a Show Cause Notice (SCN) for recovery of excise duty.2. Appellant's Arguments: The appellant contended that the provisions of Rule 10A of the Valuation Rules were not applicable as the finished goods were not sold in the market as directed by the principal manufacturer. Additionally, the appellant argued that Rule 8 was also not applicable as the goods were sold by the appellant without being captively consumed for the manufacture of other final products. The appellant cited case laws to support their position.3. Revenue's Justification: The Revenue argued that the appellant's activity constituted job work, making Rule 10A applicable. The valuation was done correctly by the adjudicating authority based on 110% of the cost of production as per sub-rule (iii) of Rule 10A.4. Tribunal's Analysis: The Tribunal analyzed similar valuation disputes in previous cases, including the case of M/s Shivani Detergent Pvt Ltd and Advance Surfactants India Ltd. The Tribunal observed that Rule 8 applies when goods are consumed or used in the production of other articles, which was not the case for the appellant. The Tribunal also highlighted a clarification issued by the Ministry of Finance regarding valuation for goods cleared by a job worker for captive consumption by the principal manufacturer.5. Judicial Precedents: The Tribunal referred to judicial precedents, including the case of Tara Industries Ltd, to support the appellant's argument that the valuation should be based on the cost of materials and job charges, as per the principles laid down by the Apex Court. The Tribunal set aside the impugned order, following the settled position in previous cases.6. Decision: Based on the analysis of relevant rules, precedents, and clarifications, the Tribunal found no merit in the impugned order and allowed the appeal, setting aside the demand for differential excise duty. The decision was pronounced in court on 08.09.2017.This detailed analysis of the judgment provides a comprehensive understanding of the valuation dispute and the legal principles applied by the Tribunal in resolving the issues raised by the appellant and the Revenue.