2000 (9) TMI 853 - AT - Central Excise

Appeal granted, penalty overturned, duty demand not upheld

The Tribunal allowed the appeal, setting aside the impugned order. It held that duty demand was correctly quantified but the extended period for demand ... Valuation - Modvat on inputs - Demand - Limitation Issues Involved:1. Inclusion of the value of 'Assembly Wheel Cylinder' in the assessable value of 'Assembly Axle Brake.'2. Liability of duty payment by the job worker.3. Applicability of Rule 57F(2) of the Central Excise Rules, 1944.4. Invocation of extended period for demand under Section 11A of the Central Excise Act, 1944.5. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.Issue-wise Detailed Analysis:1. Inclusion of the Value of 'Assembly Wheel Cylinder' in the Assessable Value of 'Assembly Axle Brake':The appellants argued that the value of the cylinders received under Rule 57F(2) should not be included in the assessable value of the Brakes. They contended that the job work involved addition of value through labor or material, and duty was not required on this added value. The Commissioner, however, rejected this argument, stating that an independent marketable excisable product emerged at the job worker's premises, and thus, the provisions of Rule 9(1) read with Section 4 of the C.E.A., 1944, were applicable. The Tribunal agreed with the Commissioner, citing the Ujjagar Prints case, which mandates duty on job charges plus the cost of material, including those obtained free of cost under Rule 57F(2).2. Liability of Duty Payment by the Job Worker:The appellants argued that the duty liability for job work done at their premises should rest with the parent factory, M/s. TELCO. They pointed out that M/s. TELCO supplied cylinders under Rule 57F(2) without payment of duty, and the final products were used in motor vehicle manufacturing at M/s. TELCO's premises, where duty was paid. The Tribunal, however, upheld the Commissioner's view that once the appellants opted to pay duty on the Brakes, the value of the cylinders had to be included in the assessable value as per Section 4 of the C.E.A., 1944.3. Applicability of Rule 57F(2) of the Central Excise Rules, 1944:The appellants claimed that they were entitled to clear goods without payment of duty under Rule 57F(2) read with Notification No. 214/86-CE. However, the Tribunal found that the appellants, having opted to pay duty, were bound to include the value of the cylinders in the assessable value of the Brakes. The Tribunal emphasized that the provisions of Rule 57F(2) were correctly interpreted by the Commissioner in determining the assessable value.4. Invocation of Extended Period for Demand under Section 11A of the Central Excise Act, 1944:The appellants argued that the extended period for demand could not be invoked as there was no suppression of facts. They had informed the Department through a letter dated 21-11-1989 about the non-inclusion of the cylinder value in the assessable value of the Brakes. The Tribunal agreed with the appellants, noting that the Department was aware of the transactions and had tacitly approved M/s. TELCO's benefit under Rule 57F(2). The Tribunal concluded that the demand was time-barred as the Department failed to act on the appellants' transparent disclosures.5. Imposition of Penalty under Rule 173Q of the Central Excise Rules, 1944:Given the Tribunal's finding that the duty demand was time-barred, it held that there was no justification for imposing a penalty on the appellants. The Tribunal noted that the appellants had not suppressed material facts with intent to evade duty, and thus, the penalty imposed by the Commissioner was unwarranted.Conclusion:The Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellants. The Tribunal found that the Commissioner correctly quantified and confirmed the duty demand but erred in invoking the extended period for demand and imposing a penalty.