TaxTMI 
TaxTMI 
2022 (2) TMI 1068
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....cost by the input suppliers; During the period in dispute, the appellants manufactured Rolled products on job work basis for various customers such as Steel Authority of India (SAIL), KEC International etc; the input suppliers (except SAIL and Jindal) use the rolled products in the manufacture structurals cleared on payment of duty. Such structurals are used for construction of Transmission Towers. 2.1. The clearances made by theAppellantsare divided in to three categories (based on the customer for whom job work was undertaken). (A). Category A : Principal manufacturer clears the job-worked goods as such; Excise duty was paid on the price at which the goods were sold by the principal manufacturer to their customers. The following are covered under this category. (i) Steel Authority of India Ltd., Nagpur (SAIL) (ii) Jindal Steel & Power Limited, Mumbai (Jindal) (B). Category B : Principal manufacturer clears the job-worked goods after further processing; Excise duty was paid on the assessable value arrived at by aggregating (i) landed cost of raw materials; (ii) conversion charges including profit of the appellants & (iii) 10% profit mar....
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....928/2013 -Do- OIA No PVR/240 TO 243/NGP/2012 30.11.2012 July 2004 to March 2009 44,30,024 44,30,024 3 E/85929/2013 -Do- -Do- October 2006 to March 2009 27,98,153 27,98,153 4 E/85694/2013 -Do- -Do- July 2004 to March 2009 38,03,150 38,03,150 5 E/85693/2013 -Do- -Do- March 2005 to March 2009 5,88,483 5,88,483 6 E/87463/2013 -Do- OIA No PVR/176/ NGP/2013 15.03.2013 Feb 2010 to Sept 2010 4,18,236 4,18,236 7 E/87464/2013 -Do- OIA No PVR/177/ NGP/2013 15.03.2013 March 2010 to Feb 2011 1,66,725 1,66,725 8 E/88204/2012 -Do- OIA No PVR/278/ NGP/2013 24.05.2013 Feb 2010 to Sept 2010 1,81,642 1,81,642 9 E/88205/2013 -Do- OIA No PVR/281/ NGP/2013 24.05.2013 Dec 2009 to Sept 2010 3,82,939 3,82,939 10 E/89404/2013 -Do- OIA No NGP/ EXCUS/OOO/APP L/773/13-14 22.08.2013 April 2009 to Feb 2010 1,85,356 1,85,356 11 E/89405/2013 -Do- OIA No NGP/ EXCUS/OOO/APP L/758/13-14 19.08.2013 April 2009 to Jan 2010 2,19,966 2,19,966 12 E/89769/2013 -Do- OIA No NGP/....
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....nder the aforesaid rule; in such a situation, question of demanding differential duty would not arise. Apex Court in the case of International Auto Limited2005 (183) ELT 239 (SC), in a matter involving similar proceedings, set aside the demand by observing that it is the Modvat of such final product which would have to be included in the cost of the inputs and in respect of which Modvat credit could be taken at the time of clearance of the final product; the Tribunal 2017-TIOL-3859- CESTAT-MUMhaving misconstrued the provisions of Rule 57F(2)(b), its decision cannot stand. He submits that CESTAT followed the above judgement in Law Kim Ltd 2007 (218) ELT 142(T) and the issue is also settled in favour of the Appellants by the judgment of CESTAT in the case of P.R. Rolling Mills 2010 (249) ELT 232 which has been affirmed by the Supreme Court2010 (260) ELT A84 (SC), on a set of identical facts, holding that P.R. Rolling Mills could have cleared the bars/ sections without payment of duty to the Raw material supplier and therefore, when no duty was liable to be paid, adding of value of scrap also would not arise at all. He also relies upon the following cases submitting that it was held t....
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....erence is towards the scrap; department had raised this issue in the similarly placed manufacturers like VinarIspat, Shilpa Re-rollers, however, giving benefit of burning loss. He submits thatthe scrap sale price is to be deducted to arrive at the conversion cost, when the raw material cost takes into account the gross weight of the raw material. The appellants had taken into account the price of the gross weight of the raw material without deducting the scrap value realised. Hence, the value of gross weight included the quantity of scrap also and therefore the addition of scrap value again would result into double taxation. Hence, the demand is not sustainable on this ground also. He submits that the scrap sale price is to be deducted to arrive at the conversion cost, when the raw material cost takes into account the gross weight of the raw material; the appellants had taken into account the price of the gross weight of the raw material without deducting the scrap value realised; hence, the value of gross weight includes the quantity of scrap also; therefore, the addition of scrap value again would result into double taxation and hence, the demand is ....
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....tive, that the department placed reliance on the judgment of Supreme Court in the case of General Engineering; however, Supreme Court delivered this decision vide order dated 10.3.2005 reported 2007 (212) ELT 295 (SC); Tribunal followed the same in the judgements cited by AR; subsequently, Hon'ble Supreme Court delivered the judgment of International Auto on 17.3.2005 reported 2005 (183) ELT 239 (SC); moreover, the judgment in General Engineering Works did not deal with the implication of Rule 4(5)); CESTAT in the case of P.R. Rolling Mills considered this judgment of General Engineering and held that value of scrap need not be includible in terms of alternate procedure of Rule 4(5)(a) and this judgment of CESTAT has been affirmed by Supreme Court; in view of the subsequent judgment of International Auto which was followed by the Apex Court in various other judgments cited above, reliance placed on the judgment of General Engineering Works is incorrect. He submits that the decision of Larger Bench in the case of Thermax Babcok& Wilcox would not alter the legal position settled by five judgments of Supreme Court including in the case of International Auto and P. R. Rolling Mills etc....
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.... visited the appellants premises from time to time and hence, extended period cannot be invoked and penalties cannot be levied. The appellants mainly rely upon the judgment of Supreme Court in the case of International Auto (supra) and CESTAT judgment in the case of PR Rolling Mills. Whereas the department mainly relies on the judgment of Supreme Court in the case of General Engineering (supra) and that of Tribunal in the case of Thermax Babcock and Wilcox Ltd. (supra). 7.1 It will be beneficial to see as to how the learned adjudicating authority has dealt with the submissions of the appellants. As regards the submission of the appellants regarding following of the standard accounting procedures, we find that learned Commissioner, vide impugned order dated 13.5.2009, refers to articles from cost accounting-a managerial emphasis by Charles T Horngren, George Foster and Srikanth Datar, which envisage that unlike spoilage and rework, there is no cost attached to this scrap and hence, no normal or abnormal scrap; all scrap sales whatever the amount are credited to specific job. Scrap sales reduces the materials' cost of the job and that whenscrap is sold, the simplest accounti....
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....follows : - "The prices quoted are based on the free supply of Rails by you at our works, Bharatpur, Western Railway, Rajasthan. The tonnage for Rails will be 5% more than the net requirement of Rails required for different items of Switches, 5% being the manufacturing wastage." ........................... "The total requirement of Rails for different items would be forwarded to you within ten days of receipt of your formal order. Manufacturing wastage of 5% has been considered and therefore this wastage will not be separately accounted for and shall not be returned. Any surplus materials received from you against the contract, will be returned to you and dispatched to the destination as advised by you, F.O.R. Our word." 7. Thus, the contract clearly indicates that the price (conversion charges) have been worked out on the basis that 5% wastage would be available to the Appellants. This indicates that the price has been affected by the sale of scrap. In this view, we are in agreement with the view of the Tribunal that in computing the value of points and crossings the value of scrap sold has to be taken into account. 8. ....
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.... "5. The respondent paid the Excise duty on the realized value against sale of the scrap retained by them, which was generated during the course of processing of job work goods. It is undisputed fact that for the purpose of job work the respondent has received free of cost raw material from the principal. After processing finished goods, it was returned to the principal. However, the scrap generated during the course of manufacture in the job work basis has been retained by the respondent. The said scrap was sold in the market by the respondent and realized value. For the purpose of job work, the respondent is paid particular job work charges by the principal. We agree that as per the principle laid down by the Hon'ble High Court in Ujjagar Prints and various other judgments, the valuation of job work goods should be done by taking the cost of raw material plus job charges. However, in any valuation, if there is any extra consideration flowing to the manufacturer, the same should be added in the assessable value of the goods. In the present case the respondent is getting job work charges plus realized value against sale of scrap. Therefore both the elements should be added....
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....b work, the same should be included in the assessable value of the job work goods. We agree with the submission made by ld. AR that though the ld. Commissioner (Appeals) heavily relied on judgment of [2007 (211) E.L.T. 73 (Tri.-Mum.)] (sic) Mahindra Ugine Steel Co. Ltd. but subsequently said Tribunal judgment was set aside and matter was remanded back to the Tribunal. The impugned order of the ld. Commissioner, based on the judgment which does not exist presently, cannot be sustained. From the facts, our observation is that against overall activity of job work, the respondent job worker is getting the consideration in two forms, one job work charges and second realized value of scrap sale. In other words total sum of both these element will form the total consideration received by the respondent towards job work. Therefore the sale value of scrap is includible in the assessable value of job work goods. Therefore, differential Excise duty and interest thereupon paid by the respondent is correct and legal and the question of refund of said amount does not arise. In view of the above discussion and considering legal position we are of the considered view that order of the ld. Commissi....
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....t Rules, 2004 is not relevant to the present case on the facts. Any procedure under any statute requires to be followed and only then the benefits that accrue consequentially would be available. When the principal manufacturers of the appellant-job worker have not followed the procedure, any plea on the same would be only hypothetical. Moreover, as held by the Tribunal in the case of Thermax Babcock & Wilcox Limited has clarified that the applicability or otherwise of the said Rule has no bearing on the valuation of the goods cleared by the job worker.The issue before this Bench is to see whether the appellants were required to include the value of the scrap in the assessable value of the goods cleared by them after manufacture on job work basis on behalf of their principal manufacturers. To that extent, we find that the impugned orders do not suffer from any infirmity as far as the valuation is concerned. We find that in terms of Rule 6 of Central Excise Valuation Rules, 2000, Where the excisable goods are sold in the circumstances specified in Clause (a) of subsection (1) of Section 4 of the Central Excise Act, except the circumstances where the price is not sole consideration fo....
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....e appellants and about the includability of burning losses. Essential element that requires to be considered as additional consideration and thus, includable in the assessable value is the value / sale proceeds of scrap. Burning losses, if any, cannot be considered by any stretch of imagination as additional consideration in the hands of appellants, though it may constitute an amount of wastage or loss for the principal manufacturer. Therefore, we are of the considered opinion that the inclusion of additional consideration should be restricted to the actual scrap generated and sold by the appellants. For the computation of the same, the issue needs to go back to the Commissioner, who shall recalculate the demand including only the value of actual scrap generated and sold by the appellants. 7.5 Coming to the issue of limitation, the appellant submit that major part of the demands is time barred as extended period cannot be invoked since CERA/EA 2000 were taking place regularly; there were conflicting decisions by CESTAT on the issue. We find that the learned Commissioner while acknowledging the fact that CERA Audit have given intimation of visits vide letters dated 18.7.200....