2018 (2) TMI 911 - AT - Central Excise

Tribunal rules in favor of manufacturers in duty dispute, citing double taxation prohibition

The Tribunal ruled in favor of the appellants, manufacturers of economizer and super heater coils, in a case involving a demand for differential duty, ... Valuation - job-work - Rule 10A(ii) of Central Excise Valuation Rules, 2000 - it was alleged that M/s ISGEC is selling the goods as such as the appellants have manufactured the goods in complete form, therefore, in terms of Rule 10A(ii), the appellants are required to pay the duty on the value at which M/s ISGEC sold the goods - Held that: - identical issue came in appellant own case Suyog Engineers Pvt. Ltd., Yamuna Fabricators Versus CCE, Panchkula [2017 (10) TMI 893 - CESTAT CHANDIGARH], where it was held that on the amount on which duty have been demanded from the appellants, duty has already been paid by the M/s ISGEC on the said amount. If the duty has been demanded from the appellant, in that circumstances, it will be the case of demand of duty twice on the same product which is not permissible in law. Demand do not sustain - appeal allowed - decided in favor of appellant. Issues:1. Differential duty demand along with interest and penalty imposed on the appellants.Analysis:The appellants, manufacturers of economizer coils and super heater coils, were job workers of another company. They received pre-bended steel tubes free of cost from the principal company, accompanied by invoices indicating payment of duty. The appellants took Cenvat Credit based on these invoices and undertook manufacturing processes on the coils, which were then cleared to the principal company after payment of duty. The issue arose when it was alleged that the principal company was selling the goods as manufactured by the appellants, triggering a demand for differential duty, interest, and penalties. The appellants argued that a similar issue had been decided in their favor by the Tribunal in a previous case, where it was held that although duty was payable as per the Valuation Rules, since duty had already been paid by the principal company, no additional duty was owed by the appellants. The Tribunal also found that no penalty was imposable on the appellants as there was no intention to underpay duty due to an understanding between the parties regarding the valuation of the goods.2. Application of Rule 10A(ii) of Central Excise Valuation Rules, 2000.Analysis:The crux of the matter revolved around the application of Rule 10A(ii) of the Central Excise Valuation Rules, 2000. The Revenue contended that the appellants were required to pay duty on the transaction value at which the principal company sold the goods. However, the Tribunal, in line with its previous decision, held that while duty was indeed payable as per the rule, the duty had already been paid by the principal company on the same goods. Therefore, demanding duty from the appellants in such circumstances would amount to double taxation on the same product, which is impermissible in law. The Tribunal emphasized that the duty had been paid on the transaction value by the principal company, absolving the appellants from any additional duty liability under Rule 10A(ii).3. Penalty imposition on the appellants.Analysis:Regarding the imposition of penalties on the appellants, the Tribunal found that no penalty was warranted. It noted that the appellants had not suppressed any facts or underpaid duty intentionally. The understanding between the parties, wherein the principal company undertook testing activities that amounted to manufacturing, led to a specific valuation method agreed upon by both parties. As duty had been paid by the principal company based on this valuation, the Tribunal concluded that the appellants had not intended to evade duty payments or engage in under-valuation. Consequently, the Tribunal held that no penalty could be imposed on the appellants, considering the circumstances and the absence of any malafide intent.