2015 (4) TMI 161 - AT - Central Excise

Valuation of goods - inclusion of cost of raw material inventory - Whether the amount charged by the appellant from their customer M/s. Bajaj Tempo under debit notes as interest on raw-material inventory which was the cost of carrying additional raw-material inventory to ensure timely supply of the finished product to the M/s Bajaj Tempo is to be included in the assessable value or not - Held that - in terms of the Apex Court s judgement in the case of Bombay Tyre International vs. Union of India reported in 1983 (10) TMI 51 - SUPREME COURT OF INDIA the cost of carrying finished goods inventory is includible in the assessable value and no reduction of this account can be claimed by the appellant and in our view the ratio of this judgment of the Apex Court would be applicable to the cost of raw material inventory also. It has therefore to be held that the amount charged from the customers as carrying cost of the extra raw materia linventory would be includible in the assessable value. - Decided against the assessee. Levy of penalty - Held that - The suppression of fact or contravention of the Provisions of the Central Excise Act 1944 or of the rules made there under with intent to evade the payment of duty is a state of mind which has to be ascertained from the circumstances of the case. In this case since the fact of recovery of extra inventory cost from M/s Bajaj Auto under debit notes had not been disclosed in the ER-I returns it has to be inferred that the short payment was on account of suppression of fact on the part of the assessee and hence the longer limitation period has been correctly invoked and penalty under section 11AC has been correctly imposed. - No merit in appeal - Decided against assessee.

Summary

Issues:
1. Inclusion of extra carrying cost of raw-material inventory in assessable value of goods.
2. Applicability of longer limitation period and penalty under Section 11AC for duty demand.

Analysis:
1. The case involved a dispute regarding whether the amount charged by the appellants from their customer as extra carrying cost of raw-material inventory should be included in the assessable value of goods. The appellants had purchased two years' raw material requirement at once to ensure timely supply, and the extra carrying cost was recovered from the customer under debit notes. The Tribunal referred to the judgment in Bombay Tyre International vs. Union of India, stating that the cost of carrying finished goods inventory is includible in the assessable value. Applying the same principle, the Tribunal held that the amount charged for the extra raw material inventory carrying cost should be included in the assessable value, thereby upholding the duty demand against the appellant.

2. Regarding the question of limitation and applicability of Section 11AC, the Tribunal considered whether the short payment of duty was due to wilful misstatement, suppression of facts, or deliberate contravention to evade duty payment. The Tribunal noted the self-assessment system in place during the disputed period, where the assessee was expected to disclose all relevant facts for correct assessment. Since the appellant had not disclosed the recovery of extra inventory cost in their returns, the Tribunal inferred suppression of facts, justifying the invocation of the longer limitation period and imposition of penalty under Section 11AC. The Tribunal concluded that the duty demand was correctly upheld, dismissing the appeal against the appellant.

In summary, the Tribunal ruled in favor of including the extra carrying cost of raw-material inventory in the assessable value of goods and justified the imposition of penalty under Section 11AC due to the suppression of facts by the appellant. The appeal was dismissed based on these findings.