The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed the central excise duty demand as no under-valuation in costing of footwear components, thereby granting relief to M/s. Bata India Limited, the appellant.
The appellant manufactured and removed footwear components for use within the factory and in their own factories at other places as well as for use by their job workers for manufacture of complete footwear and did not make proper determination of assessable value of the said goods in terms of Section 4 of the Central Excise Act, 1944 read with Central Excise (Valuation) Rules, 1975 for the period of April’1996 to August’ 1998.
A Show Cause notice was issued to the appellant proposing to recover Central Excise Duty amounting to Rs.14 lakhs along with penalty under Sec.11AC and interest under Section 11AB of the Central Excise Act, 1944 invoking extended period of limitation in terms of proviso to Section 11A of the Central Excise Act.
The Appellant stated that the prime cost which primarily include the raw material cost will vary depending upon the raw material used and that it is not the right method of calculation of costing of the product. The Counsel stated that they have adopted ‘wages’ as the factor to work out of the overhead charges, which is more stable and that have uniformly adopted 1347% of the wages as the overhead charges to arrive at the cost of the final product.
The Tribunal of PK Choudhary, Judicial Member and K Anpazhakan, Technical Member observed that “We find that the Appellant has already paid duty on the basis of the cost arrived at based on the method cited above. Thus, we find that there is no under-valuation in the costing of the product adopted by the Appellant. Accordingly, we hold that the demand does not survive.”
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