2009 (10) TMI 349 - AT - Central Excise

Demand-valuation- The appellant a manufacturer of excavator loaders and earthmoving machinery have been availing the Cenvat credit of the duty paid on inputs and capital goods. They were selling Escorts JCB 3D hydraulic excavator loader at a particular price and paying the duty. The Department has taken the stand that the kits supplied along with the excavator are collection of inputs on which Cenvat credit has been taken and therefore the appellants should have paid the duty on the inputs prior to 1-3-2003 and reversed the amount equal to the Cenvat credit taken on inputs for the period from 1-3-2003. Accordingly original authority confirmed the demand of Rs. 69, 02, 148/- and also imposed equal amount of penalty under Section 11AC. Commissioner (Appeals) upheld the order of the original authority. Held that- . we are of the considered opinion that the excavator loader along with standard fitments and accessories would be assessed separately and the duty liability or the Cenvat credit on the kits should be determined separately In other words the total value requires to be apportioned between the value of excavator and value of spare parts /extra spare parts. This exercise has not been done by the original authority. To enable the same we set aside the orders of the lower authorities and remand the matter to the original authority. In the facts and circumstances of the case we do not find that this is a case involving any intention to evade excise duty. Therefore no penalty is warranted and accordingly the same is set aside. The appeal is allowed by way of remand on the above terms.

Summary

Issues:
1. Duty liability on spare parts supplied along with excavator loaders.
2. Applicability of Cenvat credit on inputs and capital goods.
3. Assessment of duty on composite value of excavator loaders and spare parts.
4. Determination of duty liability and Cenvat credit reversal.

Analysis:
1. The appellant, a manufacturer of excavator loaders, availed Cenvat credit on duty paid on inputs and capital goods. They supplied spare parts kits along with excavator loaders without reducing the overall price. The Department contended that duty should have been paid on the spare parts separately as they were collected inputs on which Cenvat credit was taken. The original authority confirmed a demand of Rs. 69,02,148/- and imposed an equal penalty. The Commissioner (Appeals) upheld the decision.

2. The appellant argued that since duty was paid on the composite value of the excavator loaders and spare parts, demanding separate duty on spare parts was unjust. They claimed there was no duty evasion, and any extra duty paid was inadvertent. The Department maintained that since the spare parts contained inputs on which Cenvat credit was availed and were not used in the final products, duty should have been paid or credit reversed on them.

3. The Tribunal observed that supplying spare parts along with excavator loaders did not make them part of the loaders. While agreeing with the Department that the spare parts were not used in manufacturing final products, the Tribunal accepted the appellant's argument that demanding separate duty on spare parts after charging duty on the composite price was akin to double taxation. The overall price reduction due to supplying spare parts indicated a separate assessment was required for the excavator and spare parts.

4. The Tribunal set aside the lower authorities' orders and remanded the matter to determine the value of the excavator and spare parts separately for duty liability assessment and Cenvat credit reversal under the Cenvat Credit Rules. No penalty was imposed as there was no evidence of intentional duty evasion. The appeal was allowed for reconsideration based on the Tribunal's directions.