TMI Blog2022 (2) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... their principal manufacturers. The impugned orders have arrived at the assessable value correctly and that the sale proceedings of the scrap are required to be included in the assessable of the goods cleared by the appellant-job worker. The appellants have also taken the plea that whatever duty they would have paid, the principal manufacturers or the other buyers would have availed CENVAT credit and therefore to that extent the issue is revenue neutral. We find that this submission is far fetched and cannot be considered in a case where the payment of duty is by someone and availment of credit would be by somebody else. Such an averment would defeat the very scheme of CENVAT Credit and therefore, cannot be accepted. The impugned orders fail to take into account burning losses during the process of rolling and in their case the actual scrap available is only 4.25% as against the assumption of the department that the entire 10% of the allowance given by the principal manufacturer is available for sale in the hands of the appellant-job workers. The appellant submits that the actual details were available in the Form-IV register maintained by them; demand confirmed, if any, cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account the burning losses, if any, as claimed by the appellants - demands shall be restricted to the normal period only as may be applicable during the relevant period of respective appeal - penalties imposed are set aside. Appeal allowed in part. - Excise Appeal No. 914 of 2009 with Excise Appeal No. 85693, 85694, 85928 & 85929 of 2013 and Excise Appeal No. 87463, 87464, 88204, 88205 of 2013 and Excise Appeal No. 85268, 85269 of 2014 - A/85137-85150/2022 - Dated:- 22-2-2022 - MR. S.K. MOHANTY, MEMBER (JUDICIAL) AND MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) Shri D. H. Nadkarni, Advocate for the Appellant Md. Shamshad Alam, Authorized Representative for the Respondent ORDER Heard both sides and perused the records of the case. 2. Brief facts of the case are that the M/s Sanvijay Rolling Engineering Ltd, the appellants are engaged in the manufacture of angles, channels, flat bars, round, Joints (Rolled Products for short) of Iron and Steel; the inputs are Iron and Steel billets/blooms/slabs etc. The appellants manufacture the said rolled products on their own account out of the Billets/Blooms/Slabs purchased by them as also on job work basis out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and weight of finished goods supplied is scrap as per purchase orders; the price of such scrap of such quantity is includable in the assessable value. Various Show Cause Notices were issued to the different units of the appellants seeking to demand of duty and impose penalty; show case notices did also propose penalties on various officials of the company. The SCNs were confirmed by Commissioner of Customs and Central Excise, Nagpur, vide Order No 2/2009/C dated 13.05.2009. Show Cause Notices confirmed by lower authorities were also confirmed by Commissioner (Appeals) Nagpur, vide orders No. PVR/240-243/2012 dated 30-11-2012; No. PVR/176,177/2013 dated 15-03-2013; PVR/278,281/2013 dated 24-05- 2013; No.773/2013 dated 22-08-2013; No. 827/ 2013 dated 12-9-2013 and No 892,893,894/2013 dated 22-10-2013. Hence, the following appeals are filed. Sr. No. Appeal No. Name of the Appellant Impugned Order No. date Period in dispute Duty demand (Rs.) Penalty u/s 11AC 1 E/914/2009 Sanvijay Rolling Engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 12.09.2013 March 2011 to Nov 2011 30,292 30,292 13 E/85268/2014 -Do- OIA No NGP/ EXCUS/000/APP L /892-893/13-14 22.10.2013 Oct 2010 to June 2011 July 2011 to Feb 2012 7,14,064 7,14,064 14 E/85269/2014 -Do- OIA No NGP/ EXCUS/000/APPL /894/13-14 22.10.2013 Oct 2010 to June 2011 9,852 9,852 3. Learned counsel for the appellants submits, on the demand pertaining to clearances of Category-I, that when Transaction value is available, there is no need to determine the value as per Valuation Rules / Ujagar Prints Formula; excise duty was paid at the value at which the raw material supplier (SAIL or Jindal) has sold the goods to the independent customers; The issue is settled by the CESTAT in case of Srutech Tubes2017-TIOL-3859-CESTAT-MUM holding that when the duty has been paid on the price at which the raw material supplier has paid the duty, no differential duty demand c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty to the Raw material supplier and therefore, when no duty was liable to be paid, adding of value of scrap also would not arise at all. He also relies upon the following cases submitting that it was held that the value of scrap need not be included in the assessable value (i). SRF Limited VsCCE 2007 (220) ELT 201 (T) affirmed by Supreme Court at 2016 (331) ELT A138 (SC) (ii). Ghatge Patil Industries Vs CCE 2015 (320) ELT 646 (T) affirmed by Supreme Court reported as 2015 (322) ELT A28 (SC) (iii). Automotive Stampings and Assemblies 2019 (5) TMI 1169 CESTAT MUMBAI (iv). Ad-manum Packaging Vs CCE 2016 (341) ELT 348 (T) (iv). CCE Vs Reclamation Welding Limited 2014 (308) ELT 542 (T) (v). CCE Vs Raja Magnetic Limited 2017-TIOL-1420-CESTAT-BANG (vi). Standard Drums and Barrels Final Order No. A/86853-86854/2018 dated 28.6.2018 (vii). Sigma Punch Vs CCE 2018-TIOL-1347-CESTAT-BANG (vii). CCE Vs Rane Brakes Lining 2018-TIOL-1058-CESTAT-MAD (ix). Ghatge Patil Vs. CCE 2014-TIOL-1760-CESTAT-MUM (x). Nirlon Limited 2015 (320) ELT 22 (SC) 3.2. Learned counsel submits further that the Appellants determined the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrap also; therefore, the addition of scrap value again would result into double taxation and hence, the demand is not sustainable on this ground also. 4. Learned Counsel for the appellants submits also that in respect of appeals E/914/2009, E/85928, E/85929, E/85694 and E/85693 of 2013, except for the period from November 2007 to March 2008, the entire demand of duty is beyond the normal period of limitation; the unit was visited regularly by CERA/EA-2000 Audit and no objection was raised on the ground that the scrap sale price was not included in the assessable value; the appellants had bonafide belief that the view adopted by them regarding the non-includibility of scrap value in the assessable value is correct in law; the view entertained by the appellants is supported by judicial pronouncements; the following decisions were in favour of appellants: (i). Hindustan Engineering Industries Ltd 2002 (144) ELT 418 (T) (ii). Lloyds Steels Industries Ltd- 2003 (163) ELT 128 (T) (iii). Mahindra Ugine Steel Co Ltd-2003 (157) ELT 435 (T). 4.1. Learned Counsel for the appellants submits that the appellants bonafide belief is also supported by the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including in the case of International Auto and P. R. Rolling Mills etc. 6.1. Learned counsel for the appellants submits reliance on the decision of Larger Bench in the case of Thermax Babcock Wilcox Limited (supra) is misplaced as the facts of the case were not identical; question which was referred to Larger Bench was In the facts and circumstances of the present case, when the principal manufacturer (Babcock) clears the final product without payment of duty by availing exemption under a notification, whether the job worker M/s. Thermax, who manufactures intermediate parts of boiler on the inputs sent by Babcock under Rule 4(5)(a) and returns the same to the principal manufacturer M/s. Babcock, is liable for payment of duty when Notification No. 214/86-C.E. is not available on the manufactured goods at the said job workers (Thermax) end. He submits that unlike in the case of Thermax Babcock Wilcox Limited, in the present case, the principal manufacturers are paying excise duty on their finished goods (transmission towers); facts are clearly distinguishable; hence, the aforesaid judgment of Larger Bench has no application to the present case.The Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that whenscrap is sold, the simplest accounting is to regard scrap sales as separate line item of other revenues. Learned Commissioner also refers to principles and practice of cost accounting by N.K. Prasad and A.K. Prasad which shows that the production process may generate scrap or waste. Realised or realisable value of scrap or waste shall be credited to the cost of production. We find that this principle has been adopted by the apex court and this Tribunal to come to a conclusion that the amounts realised by sale of scrap go to affect the job charges for the purposes of assessment of goods cleared by the appellant job worker. The sale proceeds realised by the sale of scrap do constitute an additional consideration in the hands of the job worker appellant and therefore, requires to be included in the cost of goods cleared on payment of duty and therefore, the learned Commissioner comes to a conclusion that as per Rule 10A(iii) read with Rule 6 of Central Excise Valuation (Determination of price of excisable goods) Rules, 2000, the retention of sale proceeds of waste and scrap so generated during themanufacture on job work basis, from the period 1.4.2007, would tantamount to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance was placed upon the case of Hindustan Engineering Industries Limited v. CCE, Calcutta-I reported in 2002 (144) E.L.T. 418 (Tri. - Kolkata). In this case CEGAT has held that the value of scrap is not to be included in working out the value of points and crossings. CEGAT has so held on the basis that in working out the value of points and crossings, the entire value of the raw material supplied was taken into consideration and also that excise was being paid on the scrap which had been sold. CEGAT has so opined even though an earlier decision of CEGAT in the case of Jay Engineering Works Limited v. Commissioner of C. Ex. Hyderabad reported in 1997 (93) E.L.T. 492 (Tribunal) had been brought to its attention. In our view, CEGAT has gone completely wrong in Hindustan Engineering Industries Limited s case (supra). It must be remembered that the element of raw material is a separate element from the element of conversion charges. The value of the entire raw material used has to be taken into consideration. The element of profit/conversion charges has to be added to the element of value of raw material used. The element of job work charges being separate element from the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material and total sum of cost of raw material plus job charges plus realized value of scrap sale, shall be the correct assessable value. As regard the contention of the ld. Counsel for the respondent that value of the scrap is reduced for arriving at the cost of the product in terms of costing principle. We are of the view that method of costing according to the CAS4 will apply only when the goods is sold by the owner of the goods whereas in the present case the goods is not owned by the job worker but it is owned by the principal. For this reason, realized value of the scrap is additional consideration flowing to the job worker towards the overall job work activity. Therefore the contention of the ld. Counsel will not be of any help to the respondent. In the case of CCE, Nagpur v. Lloyds Industries Limited (supra) the Hon ble High Court has held as under : 4. This clearly indicates that the value of Conversion Charges is affected by the fact that the Respondents retain the scrap and sell it. 5. The Tribunal has, in the impugned judgment, noted that conversion costs may get depressed. Yet the Tribunal then erroneously assumes that if such a value is included, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above, the clear exposition of the legal provisions relating to the need for including the sale proceeds of scrap in the assessable value at the hands of the job worker-appellant, it is evident that the appellants are required to include the value of the scrap sold in the assessable value of the goods they have manufactured and cleared on job work basis. It is the contention of the appellants that Supreme Court in the case of International Auto (supra) has reversed their own decision in the case of General Engineering and that CESTAT followed the same in P.R. Rolling Mills case. However, we find that the ratio of the decision of the Tribunal in the case of P.R. Rolling Mills Pvt. Ltd. would not be applicable as the issue before the Tribunal in that case was the includability of value of scrap in the assessable value of the bars/sections cleared by job worker since intermediate product not liable to duty. To that extent, we find that the case of P.R. Rolling Mills would not come to rescue of the appellants for the twin reason that procedure under Rule 4(5)(a) of CENVAT Credit Rules, 2004 is not followed in the impugned case and that the dutiability of intermediate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of money value of any additional consideration flowing directly or indirectly from the buyers to the assessee. In view of the same, we have no hesitation, to conclude that the impugned orders have arrived at the assessable value correctly and that the sale proceedings of the scrap are required to be included in the assessable of the goods cleared by the appellant-job worker. The appellants have also taken the plea that whatever duty they would have paid, the principal manufacturers or the other buyers would have availed CENVAT credit and therefore to that extent theissue is revenue neutral. We find that this submission is far fetched and cannot be considered in a case where the payment of duty is by someone and availment of credit would be by somebody else. Such an averment would defeat the very scheme of CENVAT Credit and therefore, cannot be accepted. The case laws relied upon by the appellants in this regard is also of no avail as the facts of different cases are distinguishable. 7.4 We find that appellants have submitted that the quantification of duty by the Department was erroneous to the extent that the impugned orders and the show-cause notices presume that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed vide letter dated 11.2.2006 that they have not paid service tax on inward freight and vide letter dated 18.7.2008 that the appellants did not pay interest on differential duty. The learned Commissioner concludes that none of the documents indicate that the department was having knowledge about the landed cost arrived by the appellants and only on investigation, it was revealed that the appellants are not including the value of scrap in the assessable value. We find that learned Commissioner s argument on this point are not acceptable. When regular audit is conducted and the department fails to go through the accounts of the appellants with due diligence, the appellants cannot be faulted for the same. It cannot also be alleged that the appellants have suppressed any information with intent to evade payment of duty. Understandably, there were different opinions expressed in the judgments delivered during the relevant time, therefore, we find the contention of the appellant about existence of a bona fide belief that they are not required to include the value of the scrap in the assessable value is acceptable.It is not the case of the department that the appellants have not been f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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