TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 197
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....y of Cenvat credit on inputs, capital goods and input services under the provisions of Cenvat Credit Rules (CCR), 2004. However, they had stopped the manufacturing activity and closed down their factory with effect from October 2012 onwards and had shifted their plant and machinery to LMW-Unit I, Perianaickenpalayam by way of merger. It appeared to the Revenue that Appellant had contravened the provisions of (i) Rule 6 of CER inasmuch as they had failed to correctly assess themselves and appropriate value of goods cleared on stock transfer basis to their sister units and the duty payable thereon; (ii) Rule 8 of CER as they had failed to pay appropriate duty liability on the above goods; (iii) Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules (CEVR), 2000 read with Section 4 (1) (b) of Central Excise Act, 1944 and Rule 9 of CEVR 2000; and (iv) Rule 12 of CER as they had failed to file the correct details of the goods cleared in the E.R.1 returns and failed to discharge the differential duty liability within the specified date for the goods cleared during the Financial Years from 2009-10, to 2012-13, resulting....
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....2012-13 along with applicable interest and to impose equal penalty under Section 11AC ibid. After due process, the Adjudicating Authority vide Order-in-Original No.48/2016-Commr. dated 30.12.2016 confirmed the proposals made in SCN. Aggrieved by this order, the present Appeal has been filed before this forum. 5. Shri M. Saravanan, Ld. Chartered Accountant appearing for the Appellant made the following submissions: EXPENSES PERTAINING TO MANUFACTURING OF OTHER ITEMS: 5.1 The Adjudicating Authority in para 22.3 of impugned order has admitted that sale income has been shown in the Financial Year 2009-2010 and 2011-2012 and accepted that this expenditure will not form part of the taxable value of stock transferred goods in these years. However, he added this expenditure in Financial Year 2010-11 for the only reason that there was no income from sales and the basis of allocation of expenses was not given by the Appellant. 5.2 These expenses are fixed in nature and it pertains to manufacture of other goods and in no way connected with the Rings and Spindle production activity. It is not the case of the Department here that these expenses were incurred as part of Rings and Spi....
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.... a new product. During the period under dispute, Appellant was importing this item and used the same in the manufacture of Spindles and this cost was already included in the cost of production. The Adjudicating Authority in para 24.2 though has acknowledged this claim but has without discussion held that various expenses incurred was primarily intended to improve the quality of the finished goods and to impart competitive edge to the business. Without any basis, it has been held that this expenses was incurred towards various aspects such as development of new manufacturing process, optimum utilization of raw material, downscaling of process, process time, adoption of new technical knowhow etc. and therefore, it should form part of the cost of production as per CAS-4. 7.2 The Appellant submitted that as per CAS-4, only Research and Development cost incurred for development and improvement of the process or the existing product alone could be included in the cost of production, but here this expenditure was incurred towards Research & Development of a new product viz. HL insert assembly and not towards development and improvement of the process on the existing product. Hence, the....
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....ked with invoice price and found the same to be tallying, which was also communicated to the Appellant's jurisdictional Assistant Commissioner. Further, this issue was discussed in the October 2008 MCM and reported to the Commissioner and Additional Commissioner and there was no objection raised by any of them and hence, the valuation method adopted by the LMW Group as a whole was accepted by the Department and no further action was taken. 10. It was submitted that they have informed the method of valuation adopted by them for inter-unit transfers and Department, after verifying, had accepted the same. Hence, there is no scope to allege suppression of facts with intention to evade payment of duty in this case. Cost Audit conducted at their Foundry and Machine Shop unit based on which notice dated 27.08.2014 was issued by the Department and orders were passed which was subject matter of dispute before this Tribunal and the Tribunal vide Final Order Nos.40444-40447/2023 dt. 16.06.2023 disposed the Appeals. Hence, the SCN issued on 05.11.2015 invoking extended period is unsustainable, as ruled by the Hon'ble Apex Court in the following decisions: (i) Nizam Sugar Factor....
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....lation to activities other than manufacturing activities shall be excluded from the cost of production even in respect of the aforesaid expenses, the expenses inter-alia include expenses relating to legal professional charges, Travelling & Maintenance of vehicles, security expenses etc. The Appellant had taken CENVAT Credit of Service Tax paid on the said expenses as such expenses appeared to be in relation to input services used in or in relation to the manufacture of the final product as defined under Rule-2(l) of CCR. The Appellant knowing that the said expenses were in or in relation to the manufacturing activity, availed the CENVAT Credit, which are towards the factory premise of manufacture. Therefore, these expenses cannot be excluded from the cost of production and hence, addition of the aforesaid administrative overheads in computation for the purpose of CAS-4 is legally tenable and sustainable in law and is order. 13.3 Various elements of expenditure incurred towards R&D is primarily intended to improve the quality of the finished goods and to impart a competitive edge to the business. It is not possible to forego such kind of expenditure, but to load on the value of g....
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....4 statement for the said period 2010-11 was due for filing immediately thereon. However, the Appellant filed the CAS-4 statement for the year 2009-10 only on 13.11.2014. Thus, the value and differential duty payable thereon has to be demanded from 2009-10 to 2012-13 by invoking the extended period of five years under the provisions of proviso to Section 11A (1) (up to 07.04.2011) and Section 11A (4) for the later period. 13.6 The Appellant deliberately avoided payment of correct duty by not resorting to CAS-4 for arriving at the cost of production of goods which resulted in short payment of duty to the tune of Rs.2,48,93,177/-and also did not disclose the fact of such non-adoption of correct value to the Department, there was also non-disclosure of facts resulting in short payment of duty. It is the obligation of the Appellant to pay the correct duty following the law and procedure when it becomes due and payable, withholding the same or following their own procedure, negating the express provisions of law citing revenue-neutrality is violation of law under CER. Further, revenue-neutrality is not an established principle of taxation jurisprudence. The Appellant must pay the Tax ....
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....the demand in respect of machine shop expenses and notional power cost expenses has been set aside by the Commissioner (Appeals) vide OIA No.295/2018 dt. 28.05.2018. Later, for the period 2015-2016 the demand raised in the SCN on these two expenses has been dropped by the adjudicating authority vide OIO 8/2018 dt.31.05.2018. It is not submitted that the department has filed any appeal against these issues. The department having accepted the view that machine shop expenses and notional power cost are not to be included in the cost of production for the period from 2013-14, 2014-15 and 2015-16, we are of the view that the demand confirmed for the period 2008-2013 in E/41271/2015 on Machine Shop expenses and Notional power cost requires to be set aside, which we hereby do. Accordingly, the demand under this head cannot sustain and deserves to be set aside, which we hereby do. 16. We find that issue (ii) Administrative Heads also stands covered by the said Tribunal's order, relevant part of the order is reproduced below : 26. Administrative Overheads : Ld. Consultant has submitted that the expenses incurred in the nature of Printing and Stationary, Postage, Tele....
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....ed under "Administrative Overheads". 17. Insofar as issue (iii) i.e. Research & Development is concerned, we find that the Appellant claimed that the same was incurred towards Spindles & Rings but only towards Research and Development (R&D) of HL-insert assembly - which was a new product. At paragraphs 24.1 and 24.2 of the Order-in-Original, the Original Authority assumes that various expenditure towards R & D were primarily to improve quality of the finished products, etc. but however, he has not given any evidence or basis to assume so and hence, the above finding is clearly on assumptions and presumptions. There is also no discussion at all by the Adjudicating Authority on the merits or otherwise of the claim of the Appellant that the R & D expenditure related only towards the HL-insert assembly which was a new product, according to them. We are therefore of the view that this requires de novo adjudication. 18. The next and last issue (iv) is the invocation of extended period of limitation. Our attention was invited to page 142 of the paper book filed by the Appellant which is a letter issued by the Range Authority to the Assistant Commissioner holding jurisdiction and bas....