1996 (2) TMI 305 - AT - Central Excise

Tribunal clarifies excise duty valuation, reduces penalties

The Tribunal allowed most appeals, setting aside impugned orders. It clarified excise duty on raw materials should not be included in assessable value. ... Valuation - Penalty - Appeal Issues:1. Duty liability of manufacturers in job work activities.2. Inclusion of excise duty paid on raw materials in the assessable value of final products.3. Valuation method under Central Excises and Salt Act, 1944 and Excise Valuation Rules.4. Limitation issue in appeals.5. Penalty imposition based on disputes.Analysis:Issue 1: Duty liability of manufacturers in job work activitiesThe appeals before the Appellate Tribunal involved manufacturers engaged in job work activities for Multi Layer Polythene Films using LDPE Granules supplied by customers. The question of duty liability of the appellants in relation to the job work done was central to the case.Issue 2: Inclusion of excise duty paid on raw materialsThe main issue for consideration was whether the excise duty paid on raw materials, for which credit was taken by the appellants, should be included in the cost of raw materials for determining the assessable value of the final products. The Tribunal referred to a previous decision where it was held that excise duty paid on raw materials should not be part of the assessable value.Issue 3: Valuation method under Central Excises and Salt ActThe Tribunal discussed the valuation method under Section 4(1)(b) of the Central Excises and Salt Act, 1944, and Rule 7 read with Rule 6(b)(ii) of the Excise Valuation Rules. It was emphasized that the excise duty paid on raw materials should not be included in the assessable value based on previous Tribunal decisions.Issue 4: Limitation issue and Penalty impositionIn some appeals, a question of limitation was raised, but it was deemed unnecessary to consider. The penalty was imposed primarily on the dispute regarding the inclusion of duty paid on raw materials in the assessable value. As the appellants succeeded on this aspect, the penalties imposed were set aside.Conclusion:The Tribunal allowed most of the appeals, setting aside the impugned orders. It was clarified that excise duty paid on raw materials should not be included in the assessable value. However, in one appeal, a penalty was reduced due to deliberate omission of certain costs. The judgment provided clarity on the duty liability of manufacturers in job work activities and the correct valuation method under the relevant excise laws.