Custom, Excise & Service Tax Tribunal
Indian Extrusions vs Commissioner Of Central Excise on 6 March, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II Appln.No.E/S/1013/11 APPEAL No.E/879/11 (Arising out of Order-in-Appeal No.SB(23)/23/MV/2011 dated 28/02/11 passed by Commissioner of Central Excise (Appeals), Mumbai) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Indian Extrusions Appellant Vs. Commissioner of Central Excise, Respondent Mumbai Appearance: Shri.S.K.Babaladi, Consultant for appellant Shri.S.Dawalwar, Addl. Comm. (AR), for respondent CORAM: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 06/03/2012 Date of Decision : 06/03/2012 ORDER NO Per: P.R.Chandrasekharan
1. This appeal and stay application are directed against the order-in-appeal No. No.SB(23)/23/MV/2011 dated 28/02/11 passed by Commissioner of Central Excise (Appeals), Mumbai.
2. The appellants, M/s.Indian Extrusions, Goregaon, Mumbai, are manufactures of Plastic bottles/containers falling under Chapter 39 of the First Schedule to Central Excise Tariff Act, 1985. They were manufacturing the said goods from the raw-materials supplied by M/s.Marico Ltd., and after manufacturing they were supplying the goods to M/s.Aero Pharma Pvt. Ltd., Thane for use by the latter for packing hair oil bearing the brand name of Marico Ltd., on payment of excise duty. The appellants were discharging the excise duty on the cost of raw-materials plus job charges. The department was of the view that the assessees were not paying duty on the correct assessable value and the duty should have been paid under Rule 8 of the Central Excise Valuation Rules, 2000 and the value for the purpose of duty should be 110% of the cost of production. Accordingly, a show-cause notice dated 09/06/2009 was issued proposing to revise the assessable value under Rule 8 of the Central Excise Valuation Rules and a differential duty of Rs.3,33,110/- was demanded on a differential assessable value of Rs.22,09,577/- in respect of goods cleared by them during the period from 01/04/2007 to 25/10/2008. The show-cause notice also proposed to demand interest under Section 11AB and impose penalties under Section 11AC of the Central Excise Act, 1944 and under Rule 25 of the Central Excise Rules, 2002. The case was adjudicated and a duty demand of Rs.3,33,110/- was confirmed under the provisions of Section11A of the Central Excise Act,1944 along with interest thereon under Section 11AB and a penalty of Rs.3,33,110/- was imposed on the appellant under Section11AC. The appellant preferred an appeal before the Commissioner (Appeals), who vide the impugned order rejected their appeal and, hence, the appellants are before us.
3. The Ld. Counsel for the appellant submits that the provisions of Rule 10A and 8 of the Valuation Rules are not attracted in this case as has been held by the lower authorities, as they undertook the job work on a principal to principal basis and in respect of such transactions the assessable value has to be determined on the cost of raw-materials cost plus job charges collected as per the decision of the honble apex Court in the case of Ujagar Prints Vs. UOI, reported in 1989 (39) ELT 493 (SC) and as clarified by Boards Circular No.619/10/2002-Ex dated 19/02/2002.
3.1 The Ld. Counsel also relies on the judgement of this Tribunal in the case of Rolstar Pvt Ltd., Vs. CCE, Daman, reported in 2012 (276) ELT 87 (Tri-Ahmd) wherein the Tribunal has considered a situation in respect of goods manufactured on job work basis and cleared back by the assessee to the principal manufacturer, who had given raw-materials for doing such job work and consuming the same in further manufacture of final products. In that case the Tribunal held that Rule 10A of the Central Excise Valuation Rules, 2000 is not applicable and Rule 8 of the Valuation Rules are also not applicable and discharge of duty of liability on the cost of raw-materials plus job charges is correct in law as held by the honble apex Court in the case of Ujagar Prints case. A similar view has held by this Tribunal in the case of CCE Ahmedabad Vs. Palco Metals Ltd., reported in 2011 (23) STR 389 (Tri-Ahmed). The Bangalore Bench of this Tribunal in the case of Advance Surfactants India Ltd., Vs. CCE, Mangalore, reported in 2011-TIOL-787-CESTAT-Banglore also held that in the case of job worked goods consumed by the principal manufacturer and not sold, Rule 10A (i) or (ii) or Rule 8 of the Valuation Rules will not apply and cost of raw materials plus job charges and profits, if any, should be the assessable value for the purpose of discharge of excise duty. In the light of these submissions, the Ld. Advocate prays for grant of stay.
4. The Ld. AR appearing for the Revenue reiterates the findings of the lower adjudicating and appellate authorities.
5. We have considered the rival submissions.
5.1 After hearing the arguments, we are of the view that the appeal itself can be disposed of at this stage. Therefore, after granting stay, we take up the appeal for consideration.
5.2 Rule 10 (a) of the Central Excise Rules reads as follows:-
RULE 10A. Where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer), then, -
(i) in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer;
(ii) in a case where the goods are not sold by the principal manufacturer at the time of removal of goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of job-worker and where the principal manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of said goods from the factory of job-worker;
(iii) in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever applicable, shall mutatis mutandis apply for determination of the value of the excisable goods :
Provided that the cost of transportation, if any, from the premises, wherefrom the goods are sold, to the place of delivery shall not be included in the value of excisable goods.
Explanation. - For the purposes of this rule, job-worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorised by him.
5.3. Rule 8 of the Central Excise Valuation Rules, 2000 also reads as follows:-
Rule 8 - Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufacture of such goods 5.4 From a reading of the above Rules, it is seen that sub Rule (i) of the Rule 10 A deals with a situation where the job worked goods are sold by the principal manufacturer. This situation does not arise in this case. The principal manufacturer does not sell the goods but consumes it in the packing of hair oil and other products. Sub Rule (ii) of Rule 10 A also does not apply because that rule of envisages sale of job worked goods from a place from where the goods are to be sold after clearance from the factory of the job worker. The departments case is that Rule 8 would apply, but reading of the Rule clearly indicates that it applies to a situation where the goods are captively consumed by the assessee or on his behalf in the production/manufacture of other articles. The manufacturer/assessee in the instant case is the appellant job worker and not the raw-materials supplier. The appellant is not captively consuming the said items; therefore, Rule 8 has no application whatsoever to the facts of the case.
5.5 This Tribunal in the case of Advance Surfactants India Ltd., cited supra, in an identical situation, held that Rule 10A (i) or (ii) or Rule 8 of the Valuation Rules will not apply in respect of job worked goods consumed by the principal manufacturer and not sold. It was further held that Rule 11 will apply in such cases and Revenue can take recourse to provisions of Rule 11 which talks about using reasonable means consistent with the principles and general provisions of the Valuation Rule read with sub-section (1) Section 4 of the Central Excise Act, 1944. Keeping this in mind, the ratio laid down by the honble Supreme Court in the case of Ujagar Prints will squarely apply, that is, to ascertain the assessable value on the cost of raw materials plus processing charges. Similar view has been taken by this Tribunal in the case of Palco Metals Ltd. and Rolstar Pvt Ltd., (supra). In the light of these decisions, in the instant case also, the same principle will apply and, therefore, the discharge of duty liability by the appellant on the basis of Ujagar Prints formula, that is, on the cost of raw materials plus job charges is correct in law. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any.
(Pronounced in Court) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 7