TaxTMI 
TaxTMI 
TaxTMI 
2011 (6) TMI 618
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....thereby evading payment of excise duty.The factory premises of the appellants were searched on 12.07.2004 and certain incriminating documents/records were recovered. These records revealed that the appellant assessee was recovering extra charges namely rotary charges, peaching charges, zero zero charges etc. over & above the declared charges from the merchant manufacturers. However, they were not including these charges in the assessable value of the processed fabrics resulting in short payment of Central Excise duty. Similarly in the case of export consignment also it was found that the assessee had, in the price declaration filed by them, declared processing charges higher than what they were actually collecting under their job charges bills and they had also added 15% notional profit to the assessable value thereby declaring more assessable value than the actual value and availing excess 'deemed credit' than what was actually admissible.This excess deemed credit was used for payment of Central Excise duty for goods cleared for home consumption. After completing the investigation, the department issued a show-cause notice dated 23.08.2006 wherein it was alleged that the appellant....
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....to include job charges in the assessable value of the fabrics under clearance which was mainly for the reason that after the processing is over the fabrics were inspected by the customers, certain defects were noticed and in order to rectify the defects they undertook additional processing such as rotary, peaching or zero zero etc. and job charges for these processing carried out subsequently went un-noticed by the dealing clerk; hence duty was not paid. However, they submit that they have all along been paying excise duty on job charges including a notional profit of 15%. The notional profit of 15% was included in the job charges as per Trade Notice No. 20/C.Ex./Ch.54 & 55 (03)/2001/M-III dated 24.03.2001 issued by the Mumbai III Commissionerate wherein the trade was directed to load 15% towards notional profit and 4.2% towards shrinkage. The Central Board of Excise and Customs (CBEC) vide Circular No. 24/14/93 dated 31.12.1993 had clarified that landed cost of raw material + job charges would be the assessable value for the job work. In-spite of the clarification given by the CBEC, the Commissioner, Mumbai III had issued a Trade Notice directing the trade to load 15% ....
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....ollowing judgements in support of above contention viz. (1) Krishna Indl. Chemicals - 2002 (146) ELT 565 (T), (2) Indian Oil Corporation - 2005 (71) RLT 686 (T), (3) Order No. C-III/315 & 316/03 dated 20.2.2003 in the case of Indian Oil Corporation and (4) Indian Oil Corporation - 2005 (80) RLT 573 (T). 4.5 The learned Counsel further submits that as regards shrinkage, they have computed the actual shrinkage for the period from 2005-06 to 2009-10 and in their case it works out to 4.82% whereas as per Trade Notice they were required to take shrinkage @ 4.2% while during the period in question they have taken shrinkage at 6.2% which is much more than the shrinkage limit prescribed in the Trade Notice as also the shrinkage actually observed in their case. 4.6 The learned Counsel further submits that as regard the exports during the period from 2001-02 to 2003-04, they have exported fabrics worth of Rs.196.45 crores approximately. Out of this, they have exported fabrics worth about Rs.16.80 crores under claim for rebate of duty implying that they have paid more duty which is not taken into account by the department. He also submits that the learned Co....
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....or any willful mis-statement or suppression of facts, or contravention of any provisions of the Central Excise Act or of the Rules made there-under with intent to evade payment of duty. In the instant case, the appellants have short paid duty amounting to Rs.7,85,423/- by willfully mis-declaring and suppressing the job charges on account of rotary charges, peaching charges, zero zero charges etc. Therefore, the appellant is not eligible for the deemed credit in terms of the above said provisions. In his written submission, the learned DR has confirmed that the amount of Rs.90,89,899/- of deemed credit pertains to the entire 'deemed credit' taken by the appellants in respect of processed fabrics done on job work basis to domestic customers and it is not limited to the invoices where the value has been mis-declared. In the light of the above submissions the learned DR submits that the appeals are devoid of merit and the same deserve to be rejected. 6. We have carefully considered the rival submissions. 7.1 We notice that during the material period of time from August, 2001 to October, 2002, the appellants (textile processors) were directed to load their job char....
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....e of fabrics, it is seen that the Trade Notice provided for a shrinkage of 4.2% whereas the appellants took shrinkage at 6.2%. The Trade Notice also provided that if the shrinkage is substantially more than 4.2% as provided in the Trade Notice, actual shrinkage should be taken into account. The contention of the assessee is that the actual shrinkage for the period from 2005-06 to 2009-10 is 4.8%. If they can adduce evidence that they have taken higher amount of shrinkage than what is actually incurred, then the benefit of the same should be given to them. Of-course this will be subject to adducing evidence before the adjudicating authority that the actual shrinkage which has been actually incurred is less than what they have provided for while arriving at the value of the goods. Therefore, we hold that the appellant-assessee is entitled to the adjustments on account of addition of 15% notional profit and also on account of shrinkage which was taken into account more than the actually incurred shrinkage. After making such adjustments, the department has to determine whether any demand towards short levy exist and only to that extent the department can make legitimate claim from the ....