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2016 (5) TMI 1071 - CESTAT KOLKATA

2016 (5) TMI 1071 - CESTAT KOLKATA - TMI - Valuation - Goods manufactured by M/s.TCIL on job-work basis for M/s.TISCO - Whether valuation of goods manufactured on job-work basis are required to be done @ 115% of the cost of manufacture of FHCR Coil under Rule 8 of the Central Excise Valuation Rules during the period 01.07.2000 to 09.02.2001 - Held that:- job-worker M/s.TCIL is not a sister concern of M/s.TISCO and the goods manufactured by the job-worker are not used captively by him or on his b .....

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reement between M/s.TCIL and M/s.TISCO minimum yield has been considered to be 92% but at the same time the contract also mentions it clearly that yield shall be calculated on actual basis. Appellant has brought on record the documents conveying that yield during the relevant period of demand varies from 94.86% to 95.42%. Accordingly quantification of demand, if any, has to be done by taking into consideration the percentage of actual yield during the period under consideration. However, such a .....

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ertain to inward freight on raw materials and how much pertain to outward freight on the finished products. On merits it is held that outward freight incurred by the Appellant from the place of removal is not required to be added to the assessable value of the goods manufactured on job-work basis which are cleared on payment of duty from the factory gate of the job-worker. However, the quantum of such outward freight incurred by the Appellant is required to be substantiated by the relevant recor .....

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her side. M/s.TCIL took up the matter with M/s.TISCO regarding calculating duty liability based on higher value of raw materials supplied. This correspondence regarding payment of duty at higher cost of raw material supplied with M/s.TISCO was also initiated only after department started investigating into the matter. At that stage Appellant M/s.TCIL was required to approach the department as soon as they realized higher cost of raw material supplied. Accordingly penalty is required to be impose .....

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of penalties upon Appellant M/s.TISCO, Shri B.Muthuraman, MD and Shri M.K.Jha, Dy.Controller of Accounts of M/s.TCIL is concerned, it is observed that Shri B.Muthuraman, MD and Shri M.K.Jha, Dy.Controller of Accounts were the employees of M/s.TISCO and M/s.TCIL and were not to gain financially on account of short payment for which credit was also admissible. Similarly M/s.TISCO has not dealt directly with the manufacture and clearance of goods on which duty has been demanded. Accordingly, it is .....

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ppellants against Order-in-Original No.51/COMMR/2004 dated 28.07.2004, issued on 09.11.2004 passed by the Commissioner of Central Excise, Jamshedpur. Under this Order-in-Original Adjudicating authority has confirmed a demand of ₹ 2,00,07,358/-(Rupees Two Crore Seven Thousand Three Hundred and Fifty Eight only) against Appellant M/s.The Tinplate Co. of India Ltd. (TCIL) along with interest and imposed equivalent penalty. A penalty of ₹ 1,00,000/-(Rupees One Lakh only) has been imposed .....

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behalf of the Appellants. Dr.Samir Chakraborty (Advocate) argued that Appellant M/s.The Tinplate Co. of India Ltd.(TCIL), Jamshedpur (Job-worker) is getting Hot Rolled (HR) Coils from M/s.TISCO, which are converted into Full Hard Cold Rolled (FHCR) Coils by the job-worker. That after detailed investigation a Show Cause Notice was issued to the Appellants on the grounds that duty for the period after 01.07.2000 was required to be paid at 115% of the cost of production of FHCR Coils at the hands .....

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l Excise, Patna [2000 (120) ELT 24 (SC)] and not Rule 8 of the Valuation Rules. Ld.Advocate relied upon another case law of the Apex Court in the case of Commissioner of C.Ex., Pune vs. Mahindra Ugine Steel Co.Ltd. [2015 (318) ELT 592(SC)] wherein it has been held by the Apex Court that motor vehicle parts manufactured on job-work basis are required to be subject to valuation under Rule 11 of the Central Excise Valuation Rules, 2000 and that the provisions of Rule 8 of these Rules are not applic .....

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.2001 based on 115% of the cost of manufacture of FHCR Coils comes to ₹ 85.00 Lakhs (approx.) which is required to be dropped as valuation cannot be done under Rule 8 of the Valuation Rules. It was also the case of the Appellant that out of total demand of ₹ 2,00,07,358/-(Rupees Two Crore Seven Thousand Three Hundred and Fifty Eight only) Appellant has already deposited an amount of ₹ 1,03,35,025/-(Rupees One Crore Three Lakh Thirty Five Thousand and Twenty Five only) on 27.02. .....

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e Ld.Advocate made the Bench go through the relevant data maintained by the Appellant for the relevant period and emphasized that these facts were brought to the notice of the Adjudicating authority as per Para-14 of their reply to the Show Cause Notice dated 17.06.2002. Ld.Advocate also made the Bench go through the relevant conversion agreement where such a yield has been fixed at 92% but also mentions that yield shall be calculated on actual basis and is open to review. That in view of the va .....

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ty demanded on such inclusion of outward freight comes to ₹ 17.00 Lakhs (approx.) which is not demandable. That another demand of ₹ 2.00 Lakhs (approx.) has been demanded excess in the Show Cause Notice which is due to calculation errors. 5. On the issue of imposition of penalties Ld.Advocate relied upon the case law of Commr. of C.Ex. & Cus., Vadodara-II v. Indeos ABS Ltd. [2010 (254) ELT 628(Guj.)] to argue that entire exercise is revenue neutral as the excess duty, if any, pay .....

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d. [2005 (179) ELT 21(SC)] and Punjab Tractors Ltd. vs. Commissioner of C.Ex., Chandigarh [2005 (181) ELT 380 (SC)] revenue neutrality cannot be the only factor for not invoking extended period against the Appellant and for imposing penalties. Ld.AR thus strongly defended that penalties have been correctly imposed upon all the Appellants. On the issue of applicability of Supreme Court s judgement relied upon by the Appellant it was argued by Ld.AR that these judgements delivered in the year 2015 .....

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goods manufactured by M/s.TCIL on job-work basis for M/s.TISCO. Following issues are required to be decided in these Appeals:- 1) Whether valuation of goods manufactured on job-work basis are required to be done @ 115% of the cost of manufacture of FHCR Coil under Rule 8 of the Central Excise Valuation Rules during the period 01.07.2000 to 09.02.2001? 2) Whether demand of ₹ 17.00 Lakhs (approx.) calculated by the Adjudicating authority by taking the yield percentage as 92% was correct? 3) .....

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at valuation of goods manufactured on job-work basis has to be done as per CBEC CircularNo.619/10/2002-CX dated 19.02.2002 and Apex Court s decision in the case of Pawan Biscuits Co. (Pvt.) Ltd. v. Commissioner of Central Excise, Patna (supra). Further in the case of Commissioner of C.Ex., Pune vs. Mahindra Ugine Steel Co.Ltd. (supra) it has been opined by the Apex Court that Rule 8 of the Central Excise Valuation Rules is not applicable to the goods manufactured on job-work basis and that valua .....

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re for the period 01.07.2000 to 09.02.2001, under Rule 8 of the Central Excise Valuation Rules. Accordingly demand raised on the basis of 115% for the period 01.07.2000 to 09.02.2001 is required to be set aside. 9. On the issue of calculation of demand based on a maximum yield of 92% it is observed that as per the conversion agreement between M/s.TCIL and M/s.TISCO minimum yield has been considered to be 92% but at the same time the contract also mentions it clearly that yield shall be calculate .....

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purpose only. 10. Regarding inclusion of outward freight incurred by M/s.TCIL in the valuation of finished goods it is a settled law that only expenses up to place of removal have to be taken into consideration while calculating the assessable value. Having considered the job-worker as the manufacturer the expenses incurred on account of freight from the place of removal of finished goods cannot be added to the assessable value. However, Adjudicating authority has observed that Appellant M/s.TCI .....

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freight incurred by the Appellant is required to be substantiated by the relevant record maintained by the Appellant and also supported by a Cost Accountants Certificate. For this quantification also the matter is required to be remanded back to the Adjudicating authority for quantifying the demand, if any, based on Cost Accountants Certificate to be produced by the Appellant before the Adjudicating authority. 11. So far as imposition of penalties upon the Appellants is concerned, it is obser .....

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ent as soon as they realized higher cost of raw material supplied. Accordingly penalty is required to be imposed upon the Appellant only under Rule 173Q of the Central Excise Rules, 1944. Bench is of the considered view that excess duty, if any, paid by the Appellant would be admissible as Cenvat Credit to M/s.TISCO, therefore, there cannot be any intention to evade payment of duty for attracting imposition of penalty under Section 11AC as held by CESTAT Delhi in the case of Agarwal Pharmaceutic .....

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