Assessable value – inclusion of value of sale proceeds of waste and scrape – pre-deposit ordered by Tribunal in appeal without considering the judgment of the Supreme Court

PJ/Case Laws/2012-13/1028

Assessable value – inclusion of value of sale proceeds of waste and scrape – pre-deposit ordered by Tribunal in appeal without considering the judgment of the Supreme Court – whether sustainable?

Case: VINAR ISPAT LTD v/s COMMISSIONER OF CENTRAL EXCISE

Citation: 2011-TIOL-572-HC-MUM-CX

Issue:- Assessable value – inclusion of value of sale proceeds of waste and scrape – pre-deposit ordered by Tribunal in appeal without considering the judgment of the Supreme Court – whether sustainable?

Preliminary action raised w.r.t. jurisdiction to file appeal – as Apex Court has held that appeal can be filed at either Court, objection not sustainable.

Brief Facts:- Appellant undertook the work of converting billets, blooms and slabs purchased from various manufacturers on a job work basis into angles and channels. Upon conversion, the angles/channels were cleared upon payment of excise duty on the basis of the landed cost of raw material and conversion charges. During the course of the conversion, waste and scrap was generated which was retained by Appellant and cleared on payment of duty.

According to the department, the sale proceeds received by Appellant on sale of scrap was additional consideration for the job work undertaken and ought to have been but was not included in the value of finished products supplied by Appellant between 2003-2004 and 2007-2008. Department alleged that there was a suppression of facts on the part of Appellant. Show cause notice was issued on 02.02.2009 applying extended period of limitation. The Commissioner of Central Excise, Nagpur confirmed the duty demand with interest and also imposed penalty under Section 11AC and under Rule 25 and 26 of the central Excise Rules, 2002.

Appeal was filed before the Tribunal against order of the Commissioner. In application for waiver of pre-deposit and stay, the Tribunal prima facie there was no suppression on the part of appellant with intent to evade payment of duty particularly having regard to the fact that there were contrary decisions regarding the inclusion or exclusion of cost of scrap in assessable value of product and until 10.03.2005, the Tribunal had taken the view that the price of scarp sold was not to be included in assessable value. Hence, the Tribunal was of the view that only a part of demand was within limitation and no suppression could be alleged. The Tribunal relied upon judgment given in General Engineering Works v/s CCE [2005-TIOL-187-SC-CX] and in Jay Engineering Works Limited v/s CCE [1997 (93) ELT 492] in support of the proposition that if the value realized on account of the sale of scrap has depressed either the raw material value or the job charges, then the same is includable in assessable value of goods. The Tribunal directed the appellants to deposit Rs. 11.52 lakhs by holding that prima facie case is not made out for total waiver of duty, interest and penalty.

Appellant is now before the High Court against the order passed by the Tribunal.

Appellant’s Contention:- Appellant contended that the Tribunal in determining the issue of whether there is a prima facie case relied upon judgment of the Supreme Court in General Engineering Works and did not consider the impact of judgment of the Supreme Court in International Auto Limited Vs. CCE [2005-TIOL-81-SC-CX-LB)] though this was cited before the Tribunal. In this regard, they submitted that the Bangalore Bench of the Tribunal in P. R. Rolling Mills Pvt. Ltd. Vs. Commissioner of Central Excise, Tirupathi [2010 (249) ELT 232 (Tri.-Bang.)] has taken a final view on the subject after taking note of all the aforesaid judgments and hence, a complete waiver ought to have been granted.

Respondent’s Contention:- Department argued that the jurisdiction to entertain the present Appeal would lie before the Nagpur Bench since the Appellant has its registered office there and the order of adjudication was passed by the Commissioner of Central Excise at Nagpur. Further they said that the view of the Tribunal is consistent with law and does not warrant reconsideration.

Reasoning of Judgment:- The High Court with regard to preliminary objection on jurisdiction ground, held that at least part of the cause of action has arisen within the jurisdiction of this Court in view of the fact that the impugned order was rendered by a bench of Mumbai Tribunal. Reliance was placed on Sri Nasiruddin v/s State Transport Appellate Tribunal [(1975) 2 CC 671] wherein the Supreme Court has held that where a part of the cause of action has arisen within jurisdiction of the Lucknow Bench of the Allahabad High Court that Bench would have jurisdiction to entertain a Petition under Article 226 of the Constitution. The same principle has been reiterated in a Judgment of a Division Bench of this Court in The Commissioner of Customs Vs. Standard Industries Limited, Bombay [2007 Vol. 109 (1) Bom L.R. 677]. In the case which arose before the Division Bench, a notice to show cause was issued to the importer by the Commissioner of Customs, Trichy-I and was adjudicated upon, resulting in a final order. An Appeal was filed before the Tribunal at Mumbai which allowed the Appeal. Aggrieved by the decision of the Tribunal, the Commissioner approached this Court with an application for raising certain substantial questions of law, and a prayer to call upon the Tribunal to refer the questions for the opinion of this Court. A preliminary objection was raised on behalf of the importer to the jurisdiction of this Court. The Division Bench, after adverting to the law laid down by the Supreme Court, held that the cause of action for moving the application was the order of the Tribunal which is located at Mumbai and consequently this Court would have jurisdiction. As a matter of fact the Division Bench held that both the High Courts of Madras as well as this Court would have territorial jurisdiction and it was open to a suitor to select a forum which was normally the case when the cause of action fell within the territorial jurisdiction of two Courts. Following the law laid down by the Supreme Court and as reiterated in the Judgment of the Division Bench, we decline to accede to the preliminary objection.

On merits, the High Court was of the view that it would be appropriate in the interests of justice to remand the proceedings back to the Tribunal for re-consideration. This is in view of the fact that prima facie it would appear that the Bangalore Bench of the Tribunal has taken a view which would have a material bearing on the issue involved, in P.R. Rolling Mills Pvt. Ltd. The Tribunal ought to have considered the impact of the judgment of the Supreme Court in International Auto Ltd., which was cited before it. In this view of the matter and without expressing any opinion on the merits of the question as to whether a prima facie case has been made out, we set aside the impugned order of the Tribunal and remand the proceedings for a fresh determination.

Decision:- Appeal was partly allowed & partly remanded.

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PJ/Case Laws/2012-13/1028

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