2023 (6) TMI 586 - AT - Central Excise

CENVAT Credit - liability to pay 10% of the value of the clearance made to the SEZ developer under Rule 6(3) of Cenvat Credit Rules, 2004 - refundable security deposit received from the customer on Die development charges for making die which is used in the manufacture of final product i.e. Aluminium Profiles supplied to the customer - duty on excess insurance charges collected from the customers of their final product. Whether the appellant is liable to pay 10% on the value of the goods supplied to SEZ in terms of Rule 6(3) of Cenvat Credit Rules, 2004? - HELD THAT - The supplies made to SEZ is considered as export even as per the SEZ Act therefore even though by Notification No. 50/2008-CE (N.T.) in Rule 6(6) specific clause (v) was added, before that also the supplies made to SEZ is considered as export of goods. In case of export of goods neither the duty on inputs/input service nor duty on the final product are exported. Moreover, keeping in view that the supplies made to SEZ is export, the legislature has incorporated a specific entry by Clause (v) of Rule 6(6) of Cenvat Credit Rules, 2004 by way of substitution therefore, this amendment may be taken as retrospective also - in respect of supplies made to SEZ, payment of 10% in terms of Rule 6(3) of Cenvat Credit Rules, 2004 does not apply. Accordingly, demand on this ground is set aside. Demand of duty on refundable security deposit for die development charges - HELD THAT - Out of the total receipt of die development charges a part of amount has been refunded or adjusted against the sale therefore, the adjudicating authority has not demanded the duty. However, while proceeding was going on, a specific amount of refundable security deposit were retained by the appellant which is reflected in their books of account. If the appellant has retained the amount of die development charges and not returned which will amount to recovery of the price of the die development, in such case the amortized cost of die development charges should be included in the assessable value of the final product i.e. Aluminium Product supplied by the appellant on payment of duty however, this aspect has not been examined by the adjudicating authority therefore, the issue of demand of duty on refundable security deposit for die development charges needs to be re-examined and re-considered on the basis of factual position that what treatment was given to such refundable security deposit in the appellant s books of account, accordingly, this issue is remanded to the adjudicating authority. Differential duty on excess insurance charges collected from the customers - HELD THAT - When the assessee charge an average amount of insurance charges in the invoice, it may be less or excess as compared to the actual insurance charges borne by the assessee supplier of the goods. On this issue various courts have held that the excess insurance not being part of the price of the goods, the same should not be liable to duty. This issue has been considered by the Hon ble Supreme Court in the case of BARODA ELECTRIC METERS LTD. VERSUS COLLECTOR OF CENTRAL EXCISE 1997 (7) TMI 126 - SC ORDER wherein, the Hon ble Supreme Court has held that the duty of excise is a tax on the manufacturer and not a tax on the profits made by a dealer on transportation. In view of the settled legal position, no duty is payable on the excess insurance charged by the appellant to the customer accordingly, the demand on this count is set aside. Levy of personal penalties on Director and Employee of the company - HELD THAT - T he major demand has been dropped moreover, the issue involved is interpretation of law and it is not the case of clandestine removal of goods, therefore, the individuals cannot be implicated in nature of present case therefore, the personal penalties on both the persons are set aside. The impugned order stand modified to the above extent. The appeals are allowed.

Summary

Issues:
1. Liability to pay 10% on the value of clearance to SEZ developer under Rule 6(3) of Cenvat Credit Rules, 2004.
2. Excise duty on refundable security deposit for die development charges.
3. Liability to pay excise duty on excess insurance charges collected from customers.

Issue 1:
The appellant contended that the supplies made to SEZ should be considered as export, supported by various judgments. The Tribunal agreed, stating that the supplies to SEZ are considered as export of goods, and the specific entry by Clause (v) of Rule 6(6) of Cenvat Credit Rules, 2004 makes the payment of 10% inapplicable. The demand on this ground was set aside.

Issue 2:
Regarding the demand of duty on refundable security deposit for die development charges, the Tribunal noted that if the appellant retained the amount of die development charges not returned, it should be included in the assessable value of the final product. This issue was remanded for re-examination based on the treatment of such deposits in the appellant's books.

Issue 3:
On the demand for differential duty on excess insurance charges, the Tribunal cited precedents to support that excess insurance charges not being part of the price of goods should not be liable to duty. The demand on this count was set aside.

The Tribunal allowed the appeals, modifying the impugned order accordingly. The personal penalties on the individuals were set aside as the issue involved interpretation of law and not clandestine removal of goods.