2019 (6) TMI 120 - AT - Central Excise

Tribunal Upholds Order on Undervaluation Dispute

Commissioner of Central Excise, Mumbai-III Versus M/s Indian Smelting & Refining Co. Ltd.

The Tribunal upheld the Order-in-Original, dismissing the Revenue's appeal against the respondent in a dispute over the undervaluation of copper scrap in ... Valuation - copper scrap - under-valuation - upward revision of price can be done or not - whether the value of copper scrap declared by the raw material supplier for job work would be revised at the end of the job-worker? - HELD THAT:- Undisputedly, the respondent has availed the CENVAT Credit of duty paid on the scrap by the principal manufacturer and there is no objection raised by the jurisdictional Commissionerate on the value declared by the principal manufacturers. The issue is no more res integra and covered by the principles laid down by the Hon'ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE & CUSTOMS VERSUS MDS SWITCHGEAR LTD. [2008 (8) TMI 37 - SUPREME COURT] laying down the principle that value of the raw material declared by the principal manufacturer cannot be questioned in the hands of the receiver unless there is allegation of connivance or collusion between the raw material supplier and receiver of the same is established. In the present case, no such allegation is forthcoming. Also, no proceeding has been initiated against the principal manufacturer who supplied the copper scrap for job-work to the respondent alleging undervaluation of the scrap. Upward revision of price cannot be done - appeal dismissed - decided against Revenue. Issues:1. Allegation of undervaluation of copper scrap by the job-worker.2. Dispute regarding the determination of the value of job-worked goods.3. Interpretation of principles laid down by the Hon'ble Supreme Court in relevant cases.Issue 1: Allegation of undervaluation of copper scrap by the job-workerThe appeal was filed by the Revenue against the Order-in-Original passed by the Commissioner of Central Excise, Mumbai-III. The respondent had undertaken job-work for various customers, converting scraps into bars, strips, etc., and cleared the goods to the principal manufacturer. A show-cause notice was issued alleging that the value of the copper scrap declared by the principal manufacturer and considered in discharging duty was lower than the actual market value. The demand for recovery of differential duty was contested by the respondent and dropped by the adjudicating authority, leading to the Revenue's appeal.Issue 2: Dispute regarding the determination of the value of job-worked goodsThe Revenue contended that the price of the copper scrap declared by the principal manufacturer and considered by the respondent was incorrect, as the market price was higher. The Revenue argued that the value of the copper scrap in the hands of the respondent was not properly ascertained by the Commissioner. In response, the respondent maintained that the value declared by the principal manufacturer was used to determine the value of the job-worked goods, and no show-cause notice was issued to the supplier of raw material indicating undervaluation. The respondent cited legal precedents to support their position.Issue 3: Interpretation of principles laid down by the Hon'ble Supreme Court in relevant casesThe Tribunal analyzed whether the value of copper scrap declared by the raw material supplier for job work could be revised at the end of the job-worker. It was noted that the respondent had availed CENVAT Credit on the duty paid by the principal manufacturer without objection from the jurisdictional Commissionerate. Referring to legal precedents, including the cases of MDS Switchgear Ltd. and Sarvesh Refractories (P) Ltd., the Tribunal emphasized that the value declared by the principal manufacturer cannot be questioned unless collusion is proven. Since no such allegation was made, and no action was taken against the principal manufacturer, the Tribunal upheld the impugned order, dismissing the Revenue's appeal for lack of merit.---