2018 (12) TMI 1034 - AT - Central Excise

Tribunal Upholds Rule 10A in Excise Valuation, Penalties Imposed

The Tribunal upheld the applicability of Rule 10A of Central Excise Valuation Rules in a job work scenario, requiring the appellant to discharge duty ... Valuation - Ayurvedic medicaments manufactured on job work basis - Rule 10A of Central Excise Rules, 2000 - period 01.04.2007 to 29.02.2008 - extended period of limitation - Held that:- As per the provisions of Rule 10A appellant is required to discharge the duty liability on the basis of sale price of the said goods - on merits there is no case for appellant. Time limitation - Held that:- The correspondences entered into by the appellant with P & G indicates that they were concerned with the issue but at the same time did not seek any clarification from the revenue authorities - Secondly, the appellant’s counsel was relying upon show cause notice dated 11.04.2008 to submit that the issue is hit by limitation, may also not carry their case any further as the adjudicating authority while adjudicating the said show cause notice clearly has recorded that the said show cause notice is up to 31.03.2007 - appellant’s case that revenue authorities were aware of the same issue before this adjudication is incorrect as the issue involved in that case was different and for a period up to March, 2007 wherein there was no provision for discharging duty liability under Rule 10A of the valuation rules, 2000. Penalty - Held that:- The penalty need not be set aside as appeal itself abates due to said demise of Shri C.L. Chadda. The appeal filed by M.s Elegant Chemicals is rejected and appeal of Shri C.L. Chadda abates. Issues:1. Applicability of Rule 10A of Central Excise Rules in a job work scenario.2. Discharge of Central Excise duty based on principles laid down by the Apex Court.3. Imposition of penalties on the company and an individual.4. Question of limitation in invoking the extended period for demand of duty.Analysis:Issue 1: Applicability of Rule 10A of Central Excise RulesThe case involved a dispute regarding the applicability of Rule 10A of Central Excise Valuation Rules, 2000 in a job work arrangement between the appellant and a principal manufacturer. The appellant contended that Rule 10A did not apply as the relationship was on a principal to principal basis, and they were not manufacturing goods on behalf of the principal manufacturer. However, the Tribunal held that the provisions of Rule 10A were applicable as the appellant was a job worker manufacturing goods based on materials and technology provided by the principal manufacturer. The Tribunal referenced previous judgments to support their decision, emphasizing that the appellant was required to discharge duty liability based on the sale price of the goods under Rule 10A.Issue 2: Discharge of Central Excise duty based on Apex Court principlesThe appellant had been discharging Central Excise duty on the manufactured products based on principles established by the Apex Court in the Ujagar Prints case. The Tribunal, however, ruled that the appellant was obligated to discharge duty as per Rule 10A and not based on the principles from the Ujagar Prints case. The Tribunal found that the issue had been previously settled in other cases involving similar circumstances, and therefore, the appellant's reliance on the Apex Court principles was not valid in this context.Issue 3: Imposition of penaltiesRegarding the imposition of penalties on the company and an individual, the Tribunal set aside the penalty imposed on the individual due to their demise. The penalty on the company was upheld as it was found to be in accordance with the law, considering the duty liability under Rule 10A. The Tribunal highlighted that penalties were justified based on the facts and circumstances of the case, emphasizing the need for compliance with the Central Excise rules and regulations.Issue 4: Question of limitationThe Tribunal addressed the question of limitation in invoking the extended period for demanding duty from the appellant. It was observed that the adjudicating authority had relied on correspondences between the appellant and the principal manufacturer to establish suppression of facts, justifying the invocation of the extended period. The Tribunal found that the appellant had not sought clarification from revenue authorities regarding the applicability of Rule 10A, indicating awareness of their duty liability. The Tribunal concluded that the issue of limitation was correctly decided by the adjudicating authority based on the evidence presented.In conclusion, the Tribunal rejected the appeal filed by the company but abated the appeal of the individual due to their demise, emphasizing the importance of compliance with Central Excise rules and regulations in such cases.