FLEX CHEMICALS LTD. Vs. CCE

JUDGEMENT

(1.) The appellants M/s Flex Chemicals Ltd. manufacturer PET chips falling under Chapter Heading No. 3907.60 of Central Excise Tariff Act, 1985. The appellants apart from manufacturing these chips for their own use are also manufacturing the same on job work basis for their sister concern - M/s Flex Industries Ltd. (hereinafter referred to as FIL) for which the raw material is supplied to them by this party. The duty on such PET chips is paid by the appellants by computing the assessable value on the basis of the cost of inputs + job charges. The manufacture of the chips on job work for FIL involves two separate processes/methods which are as under:

(2.) In their written reply dated 20.11.2001 to the show -cause notice, the appellants submitted before the Commissioner that they were charging two different rates for the job work of manufacturing PET chips; that this was in the knowledge of the department since 12.12.97 the date on which a certificate from the Chartered Accountant showing two different job work charges i.e. @ Rs. 6.00 and @ Rs. 10.00 per kg. was submitted to the Supdt. of Central Excise vide their letter dated 28.11.97. It was contended that payment of duty at different job work charges for the manufacture of PET chips depending upon the method of manufacture was in the knowledge of the department since 12.12.97; the present show -cause notice had been issued on 24,3.2001 and received by them on 29.3.2001 i.e. after a delay of approximately 39 months from the date of their knowledge whereas the normal limitation period available to the department is only six months from the date of knowledge, therefore, the demand is time -barred. As regards the merits of their case, the noticee party submitted that the allegation of lowering the job charges by Rs. 4000.00 per MT on account of additional consideration through retention of Methanol in the show -cause notice is not correct and the provisions of Section 4(2) of the Central Excise Act, 1944 are not applicable. It is submitted that nothing more was paid by the supplier of the raw material to them over and above the billed amount, that the job charges were fixed in advance after considering all the factors in totality before taking up the manufacturing activity on job work; that job charges were determined as per job work undertaken; that job charges @ Rs. 6 per kg was fixed for the job work to be undertaken through DMT route and another job charges @ Rs. 10.00 per kg was fixed for the manufacture through PTA route; that comparison of two different types of job works is unwarranted because each job work is independent of each other and the demand of duty on the basis of difference in two job charge rates does not have any sanction of law. They further contended that the provisions of Rule 173C of Central Excise Rules, 1944 are not applicable for valuation of the goods since the same has to be done as per the method laid down by the Supreme Court in the case of Ujagar Prints Etc. v. Union of India 1988 (18) ECC 435 (SC): 1988 (38) ELT 535 (SC). They further submitted that they had already paid an amount of Rs. 24,24,648 the subject matter of demand. It is however, contended that this amount is not liable to be recovered from them and they are not liable to any penalty under the provision of Section 11AC read with Rule173Q.

(3.) On considering the above submissions of the party, the Commissioner of Central Excise, Indore vide his order dated 24.1.2002 confirmed the demand of Rs. 24,24,648 on them under the proviso to Section 11A(1) of the Central Excise Act, 1944. Since the party had paid this amount, he ordered for appropriation of the same against the amount confirmed on them. The adjudicating authority further imposed a penalty of equal amount under Section 11AC read with Rule 173Q. He also held that the appellants were liable to pay interest under Section 11AB of the Act.