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CX - Valuation - When applicant is paying duty in terms of rule 10A of Valuation Rules, 2000, it cannot be said that value of scrap retained by them is additional consideration - Stay granted: CESTAT

By TIOL News Service

MUMBAI, FEB 12, 2013: ONE of the favourite pastimes of the audit parties is raising valuation issues which more often than not do not survive. But the Range formations, even though they may not agree, not that they do not show their displeasure during the Audit Board meeting, are strictly bound by departmental diktats and are forced to issue the demand notices, always invoking the extended period. Never is a moment spared to discuss threadbare the details of the objections and whether they would finally stand the test of law. What happens in totality is a long list of SCNs and the resulting orders-in-original and orders-in-appeal all queued up at the CESTAT door awaiting their turn.

In the meantime, the threatening recovery notices and attachments start seeing the light of the day.

All this we mentioned is for the simple reason that thanks to the Rule 10A of the Valuation Rules, 2000 w.e.f 01.04.2007, the valuation now adopted by a job worker is the sale price at which the principal manufacturer sells to an un-related buyer and the price is the sole consideration for sale. Can there be any more value than this on which a job-worker should pay duty? Surely No, but in the present case the Revenue thinks otherwise.

The applicants are undertaking job work for Steel Authority of India Ltd. The demand is confirmed by the CCE, Nagpur on the ground that the applicants are not including the value of waste and scrap retained by them in the value of finished products for the purpose of payment of duty.

Before the CESTAT, the applicant submitted that the demand of approximately Rs.62 lakhs is in regard to the job work which was undertaken by the applicant in respect of the goods of Steel Authority of India Ltd. It is further submitted that since the applicants were paying duty at the sale price of Steel Authority of India Ltd. as per the provisions of Rule 10A of the Central Excise Valuation Rules, it cannot be said that the value of the scrap retained by the applicant is additional consideration.

Another two lakhs odd demand is on the same ground but in the matter of supplies made to M/s KEC International Ltd.

The Bench after hearing both sides observed -

"5. We find that the major portion of the demand is in respect of the goods manufactured on behalf of Steel Authority of India Ltd. The applicants are paying duty at the sale price of Steel Authority of India Ltd. as per the provisions of Rule 10A of the Valuation Rules. In this situation, the value of waste and scrap retained by the applicant cannot be considered as additional consideration.

6. In respect of the goods manufactured on behalf of KEC International Ltd., in similar situation in the case of Sanvijay Rolling & Engineering Ltd. vide order dated 15.11.2011, the Tribunal directed the assessee to pre-deposit part amount of duty and the Hon'ble Bombay High Court set aside the order passed by the Tribunal. In view of the above, the applicant has made out a strong case, therefore, pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal...."

In fine, the Stay petition was allowed.

(See 2013-TIOL-267-CESTAT-MUM)


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