Customs, Excise and Gold Tribunal - Delhi
Sangam Processors (Bhilwara) Ltd. vs Commissioner Of C. Ex. on 6 September, 2000
Equivalent citations: 2000(122)ELT45(TRI-DEL)
ORDER
K. Sreedharan, J. (President)
1. These appeals 6 in number are directed against adjudication order No. 14/CE/2000 dated 04.04.2000 passed by Commissioner, Central Excise, Jaipur. Appellants were the notices to the show cause notice dated 02.07.1999. These notices are jot workers, merchant and employees. M/s. Sangam Processors (Bhilwara) Ltd. are job workers. M/s. Sangam India Ltd. and M/s. Sangam Suitings were getting their grey fabrics processed through M/s. Sangam Processors (Bhilwara) Ltd. The traders, namely, Sangam India Ltd. and Sangam Suitings were declaring the value of the grey fabrics sent to Sangam Processors (Bhilwara) Ltd. for job work. On the basis of the declaration of the value given by the Sangam India Ltd. and Sangam Suitings, Sangam Processors (Bhilwara) Ltd. paid excise duty. The duty so paid by the job worker was found to be not correctly assessed on the value of the fabrics supplied by the traders. The case of the Department was that the job worker was not showing the actual value of grey fabrics. This conclusion was taken by the Department on the basis that the actual weight of the fabric supplied for job work was not taken into consideration. Had the price of grey fabric been properly given, taking into consideration the weight of the fabric, according to the Department, value of the processed goods would have been higher. Since the said higher price of the grey fabrics was not reckoned in arriving at the assessable value, there was short-levy of duty. The duty so found evaded has been levied on the job worker, namely, Sangam Processors (Bhilwara) Ltd. Penalty have been imposed on the Traders, Sangam India Ltd. and Sangam Suitings and their Officers for not giving the actual value of the fabric given to the job worker. Penalty was also imposed on the job worker.
2. The fact that M/s. Sangam Processors (Bhilwara) Ltd. was a job worker, carrying out job work on grey fabric supplied to it by different traders is not in dispute. Their liability under Excise Act is governed by the decision rendered by the Supreme Court in Ujagar Prints v. Union of India reported in 1989 (39) E.L.T. 493. For a proper understanding of the laws laid down by their Lordships, we read second paragraph of that judgment :-
"2. If the trader, who entrusts cotton or man-made fabrics to the processor for processing on job work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market, that would be taken by the Excise authorities as the assessable-value of the processed fabric and excise duty would be charged to the processor on that basis provided that the declaration as to the price at which he would be selling the processed goods in the market, would include only the price or deemed price at which the processed fabric would leave the processor's factory plus his profit. Rule 174 of the Central Excise Rules, 1944 enjoins that when goods owned by one person are manufactured by another the information is required relating to the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all the liabilities under the said Act and the rules made thereunder. The price at which he is selling the goods must be the value of the grey-cloth or fabric plus the value of the job work done plus the manufacturing profit and the manufacturing expenses but not any other subsequent profit or expenses. It is necessary to include the processor's expenses, costs and charges plus profit, but it is not necessary to include the trader's profits who gets the fabric processed, because those would be post-manufacturing profits."
In the instant case the short question that arises for consideration is as to whether Sangam Processors (Bhilwara) Ltd. were following the above provision stricto-sensu. If they were following the principle stated therein by their Lordships; then the action of the Department is unsustainable. The selling price of the processed goods given by the traders were made available to the excise authorities. On the basis of the selling price of the cost of manufacture duty was being paid by the job worker, namely, M/s. Sangam Processors (Bhilwara) Ltd. Department has not succeeded in showing that the price declared by the Trader was suppressed by the processor. The Departments' case is that the Trader was not declaring the correct value of the goods. Even in such a situation the question that arises is whether the job worker can be mulcted, with the liability to pay duty on the suppressed value. In terms of the law stated by their Lordships in the decision referred to (supra) excise authorities cannot find out the actual value of the fabric and direct the job worker to pay duty accordingly.
3. Learned Departmental Representative was trying to support the impugned order on the basis of the document at page 511 to 513 of the paper book. Page 511 is the proforma for declaring assessable value of excisable goods filed in terms of Rule 173 C of the Rules. The selling price of the fabric as given by the Trader was shown as Rs. 51.50. The break-up of the selling price (page 512) contains the break-up of whole-sale selling price. The whole-sale selling price shown therein is Rs. 57/-. It took in Rs. 5.50 towards other expenses and profit. The other expense and profit amounting to Rs. 5.50 mentioned therein were the other expense and profit of the trader. By adding that too the rate per meter mentioned in page 511, the total comes to Rs. 57. Cost sheet seen at page 513 is an elaboration of details given in page 512. In other words the entries in page 513 also took in the other expenditure and profit incurred by the Trader. The learned Departmental representative submits that the actual profit of the trader is far below Rs. 5.50 and that alone should have been deducted from Rs. 57/- seen in pages 512 and 513. If the actual profit alone is deducted from Rs. 57/-, the cost per meter should have been more than Rs. 51.50 shown at page 511. That amount should have been the assessable value and not Rs. 51.50. This argument is quite attractive. But we find it difficult to accept the same. When the trader gives value as his selling price of the processed fabric, that price given by the trader must be accepted by the job worker for the purpose of payment of duty. The excise authorities cannot go beyond that declared value. This is what the Supreme Court has stated in the decision quoted above. Since the practice resorted to, by the job worker in the case before us is found to be in strict compliance with the principles of the law -stated by their Lordships of the Supreme Court, we do not find any ground to fault that practice. The Departmental authorities were trying to find out the mistake committed by the Trader and pass-on that mistake to the job worker saddling him with additional duty liability. This is not warranted by law.
4. The show cause notice stated earlier was issued on 02.07.1999. The period with which the said notice related was from 01.06.1994 to 31.03.1998. That period was well beyond six months of the date of issue of show cause notice. Consequently, learned Counsel representing the appellant raised an argument that the entire exercise undertaken by the Departmental authorities was barred by limitation. We find substance in this argument. The job worker was paying duty on the fabrics worked upon by him relying on its sale value given by the Trader. Entire material were made available to the Department as and when he received fabric for carrying out the job work. The mere fact that the Department did not work upon those details at the appropriate time cannot enable them to invoke the extended period of 5 years contemplated by Section 11A of the Act. Viewed in that perspective the entire exercise undertaken by the Department in this case was un-sustainable, because it was barred by limitation. In view of what has been stated above, we allow these appeals and set aside the order impugned in its entirety with consequential relief, if any.