AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1068
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....iod 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 margin on total cost. The list of customers covered unde....
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.... 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/ EXCUS/OOO/APP L/827/13-14, 12.09.2013 March 2011 to Nov 2011 30,292 30,292 13 E/85268/2014 -Do- OIA No NGP/ EXCUS/000/APP L /892-893/13-14 22.10.2013 Oct 2010 to June 2011 & July 2011 to Feb 2012 7,14,064 7,14,064 14 E/85269/2014 -Do- OIA No NGP/ EXCU....
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.... 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 that the value of scrap need not be included in the assessable value (i). SRF Limited VsCCE - 2007 (220) ELT 201 (T) affirmed by Supreme Court at 2016 (331) ELT A138 (SC) (ii). Ghatge Patil Industries Vs CCE - 2015 (320) ELT 646 (T) affirmed by Supreme Court reported as 2015 (322) ELT A28 (SC) (iii). ....
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....s 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 not sustainable on this ground also. 4. Learned Counsel for the appellants submits also that in respect of appeals E/914/2009, E/85928, E/85929, E/85694 and E/85693 of 2013, except for the period from November 2007 to March 2008, the entire demand of duty is beyond the normal period of limitation; the unit was visited regularly by CERA/EA-2000 Audit and no objection was raised on th....
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....ring 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. 6.1. Learned counsel for the appellants submits reliance on the decision of Larger Bench in the case of Thermax Babcock & Wilcox Limited (supra) is misplaced as the facts of the case were not identical; question which was referred to Larger Bench was "In the facts and circumstances of the present case, when the principal manufacturer (Babcock) clears the final product without payment of duty by availing exemption under a notificati....
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....x 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 accounting is to regard scrap sales as separate line item of other revenues. Learned Commissioner also refers to principles and practice of cost accounting by N.K. Prasad and A.K. Prasad which shows that the production process may generate scrap or waste. Realised or realisable value of scrap or waste shall be credited to the cost of production. We find that this principle has been adopted by the apex court and this Tribunal to come to a conclusion that the amounts....
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....f 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. Reliance was placed upon the case of Hindustan Engineering & Industries Limited v. CCE, Calcutta-I reported in 2002 (144) E.L.T. 418 (Tri. - Kolkata). In this case CEGAT has held that the value of scrap is not to be included in working out the value of points and crossings. CEGAT has so held on the basis that in working out the value of points and crossings, the entire value of the raw material supplied was taken into consideration and also that excise was being paid on the scrap which had been sold....
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....crap 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 in the cost of raw material and total sum of cost of raw material plus job charges plus realized value of scrap sale, shall be the correct assessable value. As regard the contention of the ld. Counsel for the respondent that value of the scrap is reduced for arriving at the cost of the product in terms of costing principle. We are of the view that method of costing according to the CAS4 will apply only when the goods is sold by the owner of the goods whereas in the present case the goods is not owned by the ....
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....ivity 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. Commissioner (Appeals) is not sustainable and same is set aside. The appeal of the Revenue is allowed. In view of the above, the clear exposition of the legal provisions relating to the need for including the sale proceeds of scrap in the assessable value at the hands of the job worker-appellant, it is evident that the appellants are required to include the value of the scrap sold in the assessable value of the goods they have manufactured and cleared on job work basis. It is the contention of the appellants that Supreme Court in the case of Internat....
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....e 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 for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyers to the assessee. In view of the same, we have no hesitation, to conclude that the impugned orders have arrived at the assessable value correctly and that the sale proceedings of the scrap are required to be included in the assessable of the goods cleared by the appellant-job worker. The appellants have also taken the plea that whatever duty they would hav....
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....l 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 18.7.2002, 13.5.2004, 20.4.2005, no audit para was raised. Learned Commissioner acknowledges that appellants were informed vide letter dated 11.2.2006 that they have not paid service tax on inward freight and vide letter dated 18.7.2008 that the appellants did not pay interest on differential duty. The learned Commissioner concludes that none of the documents indicate that the department was having knowledge about the landed cost arrived by the appellants and only on investigation, it was revealed that the appellants are not including the value of scrap in the asses....