2025-VIL-836-CESTAT-CHD-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Area-based exemption, Fixation of Value addition as per financial records, Samples, Work in Progress - The appellant was engaged in the manufacture of medicines and availing the benefit of area-based exemption under Notification No. 56/2002-CE dated 14/11/2002. The appellant filed an application for fixation of special rate of value addition at 76.56% as per the provisions of para 2.1 of the Notification for the period 2008-09. However, the Commissioner fixed the special rate at 72.16% - Whether the Commissioner was correct in fixing the special rate of value addition at 72.16% instead of the appellant's claim of 76.56% - HELD - as per the explanation below para 4 of the Notification No.56/2002-CE dated 14.11.2002, as amended Notification No. 19/2008-CE NT dated 27-3-2008 prescribes that the actual value addition in respect of said goods shall be calculated on the basis of the financial records of the preceding financial year - the adjudicating authority observes that the explanation to Para 2.1 provides that for the purpose of this Paragraph, the actual value addition in respect of the said goods shall be calculated on the basis of the Financial Records of the preceding financial year; thus as per the provisions, the calculation for fixation of Special Rate under Notification No. 56/2002-CE dated 14.11.2002, as amended, is to be done as per the figures of the Audited Balance Sheet/Financial Records of the unit. In view of the explicit provision in the Notification, the commissioner was correct in taking the value as per financial records and the appellant’s contention in this regard are not acceptable - The Commissioner had given logical and reasoned findings on issues such as consideration of sales value, inclusion of excise duty and cess, exclusion of free samples, inclusion of octroi, transport and coolie charges in raw material cost, and inclusion of work in progress in inventory – the adjudicating authority has discussed each of the elements that go in to the calculation of the value addition and has given logical reasoned findings referring to accounting standards - the Commissioner's decision to fix the special rate of value addition at 72.16% is upheld – Ordered accordingly - Whether the demand on account of non-utilization of CENVAT credit on capital goods is justified - HELD - Revenue was of the opinion that the appellants should have availed CENVAT credit on the capital goods they have procured from domestic manufacturers; the appellants submit that in terms of Para 8.3 (c) of Foreign Trade Policy, the supplier of such capital goods will be eligible for refund of Terminal Excise Duty under the condition that the purchasers, in this case the appellants, do not avail CENVAT credit and that for this purpose they have not availed CENVAT credit - the appellants cannot be forced to utilize such CENVAT credit - The Tribunal set aside the demand on account of non-utilization of CENVAT credit on capital goods - Whether the demand on account of alleged excess credit availed is justified - HELD - The Tribunal partially allowed the appeal on this issue - The issuance of the show cause notice dated 03.07.2009 was premature as the application for fixing the special rate was pending. The Tribunal directed the Department to re-calculate the demand in view of the special rate fixed by the Commissioner at 72.16%. However, the Tribunal set aside the penalties imposed.
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