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2016 (11) TMI 506 - CESTAT MUMBAI

2016 (11) TMI 506 - CESTAT MUMBAI - TMI - Demand - valuation - bearing rings - job-work - additional consideration received on account of conversion charges in the form of scrap value paid to job workers in addition to job charges not included - whether appellant has undervalued the bearing rings manufactured by them and cleared to SKF Ltd. or otherwise? - Held that: - we perused the purchase order placed by SKF on TISCO and the invoices raised by appellant and find that appellant has discharged .....

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als and the cost of conversion by the appellant job workers and their profit. The assessable value adopted by the appellants could only be in excess of assessable value liable to be adopted by the appellants. There could be no arguing that, by adopting the sale price of SAIL, the appellants under valued the goods and paid less duty than was due. - Demand not sustainable - appeal allowed - decided in favor of appellant. - Appeal Nos. E/4005/05, E/592/07-Mum - A/93203-93204/16/EB - Dated:- 19- .....

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re disposed of by a common order. 2. The matter was heard on two days. 3. The relevant facts that arise for consideration are that in terms of an agreement dated 11.5.1999, effective from 1.4.1999, the appellant as external processing agent of TISCO, was required to process rough forged rings, to be dispatched by TISCO, on consignment account basis, to the appellant and thereafter effect delivery of the finished products i.e. the said goods to TISCO s designated customer or place, on terms and c .....

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kers place during machining process was sold by the job workers, after clearing the same upon payment of appropriate central excise duty thereon. The finished products were sent by the job workers to the appellant who thereafter, upon testing, etc., cleared the same to TISCO s customer, SKF Ltd., on payment of duty thereon as per the assessable values fixed by TISCO from time to time, as per its contract with SKF Ltd. Following five show cause notices were issued by Revenue authorities: Sl. No. .....

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ursement of ₹ 30,000/- per month towards additional space hired for MPI centre and ₹ 0.27 per piece as MPI charges from TISCO were not included, thereby resulting in undervaluation and resultant short payment of central excise duty. Replies to the show cause notices filed by the appellant, followed by written submission along with enclosures, were submitted on 5.5.2005 at the time of personal hearing. The lower authorities did not agree with the contentions raised by the appellant, a .....

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. and duty paid on the said basis. The said prices/values inter alia included not only cost of materials, cost of conversion and job workers profit but also profit of TISCO on sale of the subject goods. In such circumstances, there can be no question of any short levy or short payment or undervaluation of the said goods. In support of this contention, he relied on the following decisions:- (i) Surindra Steel Rolling Mills vs. CCE 2003 (155) ELT 357 (T), affirmed by Hon ble Punjab & Haryana H .....

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f the said goods on which duty was paid. The breakup of the invoice price at which the said goods were sent by TISCO evidence this, hence the duty demand by including the said costs/charges once again is unsustainable. 5.3 Further, although adjustment of duty paid on scrap has been allowed in the impugned order, the same has not been taken into consideration while computing the purported short paid duty demand. From the chart included in the compilation, it would be seen that the total duty paid .....

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ng the same to be legally tenable and correct, can be only ₹ 19,62,303/-. 5.4 Without prejudice, the duty demand for the period 1.1.1999 to 31.3.2003, amounting to ₹ 42,60,969/-, is barred by limitation, the same being issued beyond the prescribed period of one year contained in Section 11A of the Central Excise Act. In the facts and circumstances of the instant case, there can be no invocation of the extended period of limitation. 5.5 In the premises, penalties imposed in the impugn .....

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osed under this provision is also untenable and unsustainable. He relied on the following decisions:- (i) Amrit Foods vs. CCE 2005 (190) ELT 433 (SC); (ii) CCE vs. Fenner (I) Ltd. 2014 (313) ELT 3 (Mad); (iii) Metro Enterprises vs. CCE 2014 (311) ELT 785 (T); (iv) Raymond Apparel Ltd. vs. CCE 2013 (294) ELT 151 (T). 6. In addition to above, he produces a copy of certificate from the Chartered Accountant to justify that all the expenses incurred in the manufacturing of the goods supplied to SKF i .....

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cleared. It is his further submission that the appellant has not disputed the fact that they are retaining the scrap generated and selling the same. He relies on the following decisions:- (a) CCE, Pune-III vs. Ankur Packaging Pvt. Ltd. 2015 (320) ELT 482 (Tri.-Mum.); (b) CCE, Nagpur vs. Lloyds Steels Industries Ltd. 2007 (213) ELT 339 (SC); (c) General Engineering Works vs. CCE, Jaipur 2007 (212) ELT 295 (SC). 8. We have considered the detailed submissions made both sides and perused the record .....

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directly to SKF Ltd. on instructions of TISCO. (e) Central excise duty is discharged on the value charged by TISCO to SKF Ltd. 11. On perusal of the records, we find that by an agreement dated 11.5.1999, appellant is undertaking job working of bearing rings and is paid as per the considerations agreed. It is the case of the appellant that, having discharged the appropriate duty on manufactured goods on the sale price of TISCO to SKF, there is no need for inclusion of any of the elements of cost .....

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value for sale of goods to SKF would have considered all the costs that would be incurred for manufacturing of bearing rings. 13. From the records produced before the Tribunal, we perused the purchase order placed by SKF on TISCO and the invoices raised by appellant and find that appellant has discharged the applicable central excise duty on the value on which TISCO sells the goods to SKF. If it is so, then in our view, appellant cannot be saddled with additional duty liability. Our views are fo .....

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at prices fixed by SAIL. The Appellant job workers fell in the category of manufacturers liable to pay Central Excise duty. According to the law laid down by the Apex Court in the Ujagar Prints case, assessable value of processed goods should take in the value of the raw materials and the conversion cost and the profit of the job workers. It is not to include the profit of the merchant who finally sells the processed goods. In the present cases, the goods were sold on behalf of SAIL and the appe .....

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hat, by adopting the sale price of SAIL, the appellants under valued the goods and paid less duty than was due. It is apparent that there could be no short-levy in respect of the goods cleared by the appellants. The duty demands made against the appellants are clearly the result of a gross misunderstanding of the principles of valuation laid down by the Apex Court in the Ujaggar Prints case. These demands are not sustainable. The above said order of the Tribunal is upheld by the Hon ble High Cou .....

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alue has not been correctly arrived at and the basis adopted by the appellant even though was claimed to be the price at which RIL sold, in reality, there were differences. Further, it was also contended by the Revenue that the goods manufactured by RIL even though same, cannot be compared with the goods manufactured by the assessee and therefore the assessee should have adopted the cost construction method. 3. In this connection, we find that the Commissioner has relied upon the Board s instruc .....

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