Jurisprudentiol - Recent Supreme Court Judgements
CENTRAL Excise - Modvat/Cenvat Credit - Clearance of inputs after partial process - Motor vehicle parts like bumpers, grills, etc., on which the process of Electro Deposition Coating, namely, EDC took place (which was in the nature of anti-rust so that the shelf life of the said bumpers, grills, etc., would be generally increased), cleared by reversing the credit taken. Revenue demands duty on the value addition (200 crores): Maruti Suzuki (then known as Maruti Udyog), had cleared inputs/ spares after processing, but duty was only paid equivalent to the MODVAT credit taken on these inputs before processing, and hence according to the intelligence gathered by the Central Excise Department, a substantial increase in the value of these inputs has escaped payment of duty on account of value addition in such inputs after processing. More specifically, what was alleged was that various spare parts relatable to motor vehicles procured by it in the form of bumpers, grills, etc., on which the process of Electro Deposition Coating, namely, EDC took place (which was in the nature of anti-rust so that the shelf life of the bumpers, grills, etc., would be generally increased) have escaped duty on account of the value addition of EDC.
A Show Cause Notice was issued on 30.08.2001, demanding a duty of over Rs. 200 crores and was confirmed even by the Tribunal and Maruti is before the Supreme Court. The Supreme Court held: it would be clear that the "input" that is removed from the factory for home consumption is bumpers, grills, etc., being spare parts of motor vehicles procured by the appellant. ED coating which would increase the shelf life of the spare parts and provide anti-rust treatment to the same would not convert these bumpers, etc., into a new commodity known to the market as such merely on account of value addition .
And the appeal was allowed and the demand set aside. The legal battle ran for 14 years.
Please see Marutti Suzuki Vs Commissioner of Central Excise -
Central Excise - Valuation- Section 4(old) - Value of goods captively consumed - Comparable goods - the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors, and in particular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods. Penalty set aside.: The appellant manufactures yarn which is mostly captively consumed in the manufacture of different varieties of fabrics and some yarn is sold in the market. They were paying duty on the captively consumed yarn on the basis of the cost of production of the yarn. For the yarn sold in the market, the duty was paid at the factory gate price. The period covered is 1994 to 1998. The Department felt that this method in calculating the excise duty in respect of the captive consumption was in-appropriate. As per the Department such a duty should have been paid on the same price at which the yarn was sold by the appellant in the market. The Commissioner confirmed a duty demand of nearly Rs. 40 lakhs with equal penalty. The Tribunal confirmed the duty but reduced the penalty to Rs. 5 lakhs.
The Supreme Court observed, “ Since the appellant itself is selling same very yarn in the open market, as per the aforesaid provision the said market value would clearly become the value of the comparable goods produced by the assessee/appellant itself. To this extent there cannot be any quarrel.” The Supreme Court added that the assessee is entitled to adjustment of the costs which are incurred in the sale of the same product in the open market as that cannot be included in the cost in respect of yarn which to be captively consumed. So, the Supreme Court directed the adjudicating authority to rework the duty amount. The penalty was set aside.