2023 (10) TMI 110 - AT - Central Excise

Companies' duty liability upheld, penalties confirmed under Central Excise Act. Individuals' appeals allowed based on employee status.

The appeals of the companies involved in the 'job work' were dismissed, upholding duty liability and penalties under the Central Excise Act, 1944. ... Recovery of differential duty - clearance of goods by job-worker - undervalued goods - alleged ‘less charging’ in the value of supplied inputs, and discharge of 1% on freight and 5% on unloading charges and 15% on profit and overheads - penalty on employees of company - HELD THAT:- Clearance of goods by the ‘job-worker’ merits valuation in the same manner that ‘captive consumption’ would and, relying upon ‘cost computation’, in the manner determined by the Hon’ble Supreme Court in UJAGAR PRINTS, ETC. ETC. VERSUS UNION OF INDIA AND OTHERS [1988 (11) TMI 106 - SUPREME COURT], does not preclude scrutiny of assessing authorities. The charge in the show cause notice is that ‘additional consideration’, as received by the ‘job-worker’, from the principal having paid the cost of transportation and other charges that, otherwise, would, ordinarily, have not been. No evidence has been placed on record to counter this allegation. Furthermore, no evidence has been adduced to suggest that the allegation of pricing as being below that of procurement cost was incorrect. Consequently, the costs involved in the transaction between the ‘job-worker’ and principal require addition to the declared value. That the procedure prescribed in rule 57F of Central Excise Rules, 1944 were followed cannot alter the excisability or mode of determination of value – such treatment is akin to ‘inputs’ having reached the ‘job-worker’ directly – as the same would have been included in the price at which an ‘independent manufacturer’ would have cleared the goods to the principal. The plea for the privilege of excluding these costs is not tenable. Levy of penalty on employees of company - HELD THAT:- Both are employees of the respective corporate entities and there is no evidence of any pecuniary benefit deriving to the two persons directly or indirectly. As ‘limbs’ of their respective employer organizations, they may have had a role in the price-setting but with penalizing of the corporate entities that derived the benefit, it would be improper to penalize the ‘limbs’ for vicarious responsibility. Appeal disposed off. Issues involved:The judgment involves issues related to duty liability, undervaluation of goods, imposition of penalties under Central Excise Act, 1944, and the bar of limitation.Duty liability and undervaluation of goods:The judgment pertains to appeals arising from an impugned order regarding 'job work' undertaken by a company for the supply of 'magneto assembly' and 'transmission shaft' to another company. The duty liability was confirmed under section 11A of Central Excise Act, 1944, due to alleged undervaluation of goods. The appellants contended that duty was paid at each stage of the transaction, and they had relied on documentary evidence for computation of assessable value. However, the authorities found that certain costs and expenditure were not included in the duty computation, leading to the confirmation of duty liability and imposition of penalties.Imposition of penalties and bar of limitation:The judgment discusses the imposition of penalties under rule 209A of Central Excise Rules, 1944, on the appellants. The authorities argued that additional consideration received by the 'job-worker' should have been included in the assessable value. The issue of bar of limitation was raised by the appellants, citing previous cases, but it was held that the extended period for recovery of duty was justified due to willful suppression of facts with intent to evade duty. The penalties imposed on the individuals involved in price negotiations were confirmed based on their active role in the undervaluation of goods.Conclusion:The appeals of the companies involved in the 'job work' were dismissed, upholding the duty liability and penalties. However, the appeals of the individuals responsible for price negotiations were allowed, considering their roles as employees and lack of direct pecuniary benefit. The judgment was pronounced on 28/09/2023.