M/S Laxmi Suitings vs Cce, Jaipur Ii

[Arising out of the Order-in-Appeal No. 197/(HKS)/CE/JPR-II/06 dated 12/04/2006 passed by The Commissioner (Appeals-II), Customs & Central Excise, Jaipur.]

For Approval and signature :

Honble Shri Ashok Jindal, Member (Judicial)

Honble Shri B. Ravichandran, Member (Technical)

1. Whether Press Reporters may be allowed to see :

the Order for publication as per Rule 27 of the

CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of :

the CESTAT (Procedure) Rules, 1982 for

publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair :

copy of the order?

4. Whether order is to be circulated to the :

Department Authorities?

M/s Laxmi Suitings Appellant

Versus

CCE, Jaipur  II Respondent

Appearance

Shri O.P. Agarwal, Advocate  for the appellant.

Shri Govind Dixit, Authorized Representative (DR)  for the Respondent.

CORAM: Honble Shri Ashok Jindal, Member (Judicial)

Honble Shri B. Ravichandran, Member (Technical)

Final Order No. 53060/2015 Dated : 28/09/2015

Per. B. Ravichandran :-

The appellants are engaged in the manufacture of Grey Fabrics, PV Grey Fabrics and Polyester Grey Fabrics. They were availing Cenvat credit of BED, SED and AED (T&TA) paid on inputs used in the manufacture of above final products. No AED (T&TA) was payable on the final products, namely, Grey Fabrics. Proceedings were initiated against the appellant as they have not included the component of AED (T&TA) while paying duty on the assessable value of Grey Fabrics manufactured on job work basis or sent for further processing on job work process. The Original Authority confirmed the demand of differential duty on account of non-inclusion of AED (T&TA) in the cost of Grey Fabrics for excise purposes. On appeal, the learned Commissioner (Appeals) confirmed the order. Aggrieved by the appellate order, the appellant is before us.

2. In the appeal, the appellant contended that the AED (T&TA) paid on inputs is rightly eligible for Cenvat credit and there is no dispute on that account. As the credit of AED (T&TA) has been rightly availed by them, the same cannot be included in the cost of production of Grey Fabrics. They relied on the decision of Honble Supreme Court in the case of CCE, Pune vs. Dai Ichi Karkaria Ltd. reported in 2004 (65) R.L.T. 443 (S.C.) and also Board Circular dated 12/03/2003. During the course of arguments, the learned Counsel for the appellant stated that when the AED (T&TA) was legally available as a credit, there is no question of addition of that component in arriving at the cost of Grey Fabrics for excise duty purpose. The learned AR on the other hand contended that the lower Authorities have examined the issue. There is no basis in the appeal to take a contrary view.

3. Heard both the sides and examined appeal records. The short point for decision is the inclusion of AED (T&TA) in the cost of Grey Fabric is sent for job work when the same is available as credit to the appellant. The appellants relied on the Honble Supreme Courts decision in the case of CCE, Pune vs. Dai Ichi Karkaria Ltd. (supra). We have perused the said decision. The Honble Supreme Court held excise duty paid on raw material, if permissible as credit, is not to be included in determining the cost of production of excisable goods. The said decision is not applicable to the facts of the present case. This is clear from the observations and findings of the Honble Apex Court, as reproduced below :-

24. We think it is appropriate that the cost of the excisable product for the purposes of assessment of excise duty under Section 4 (1) (b) of the Act readwith Rule 6 of the Valuation Rules should be reckoned as it would be reckoned by a man of commerce. We think that such realism must inform the meaning that the Courts give to words of a commercial nature, like cost, which are not defined in the statutes which use them. A man of commerce would, in our view, look at the matter thus : I paid Rs. 100/- to the seller of the raw material as the price thereof. The seller of the raw material had paid Rs. 10/- as the excise duty thereon. Consequent upon purchasing the raw material and by virtue of the Modvat scheme, I have become entitled to the credit of Rs. 10/- with the excise authorities and can utilize this credit when I pay excise duty on my finished product. The real cost of the raw material (exclusive of freight, insurance and the like) to me is, therefore, Rs. 90/- in reckoning the cost of the final product I would include Rs. 90/- on this account. This, in real terms, is the cost of the raw material (exclusive of freight, insurance and the like) and it is this, in our view, which should properly be included in computing the cost of the excisable product.

4. It is clear that in the case under consideration by the Honble Supreme Court, the assessee can utilize the credit taken to pay excise duty on the finished product, as such, the Honble Apex Court observed in such situation the duty which was already credited and which can be used for discharging duty on final product need not be included in the cost. In the present case we find the appellant though availed the credit as permissible by the law, cannot utilize the same as the finished product Grey Fabric is not liable to AED (T&TA). As such, the said duty paid on inputs will become cost to the appellant, which cannot be passed on by way of utilization of the said credit for discharging the duty on finished product. This much is clear from appellants own treatment of the said credit as expenditure in the balance sheet for the year 2003-2004. Their not showing the said duty as expenditure in the next year will not affect the fact the AED paid has to be observed as a cost in view of the fact that they are not able to utilize the same. We find no infirmity in the order of the lower authority and as such dismiss the appeal.

(Operative part of the order pronounced in the open court.)

(Ashok Jindal)

Member (Judicial)

(B. Ravichandran)

Member (Technical)

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