Customs, Excise and Gold Tribunal - Bangalore
Brindavan Tex Processors Pvt. Ltd. vs The Commissioner Of Central Excise on 3 August, 2006
Equivalent citations: 2006(113)ECC458, 2006ECR458(TRI.-BANGALORE)
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against Order-in-Appeal No. 222/2005 CE dated 30.12.2005 passed by the Commissioner of Central Excise (Appeals-I), Bangalore.
2. The appellants are job workers of M/s. Madhura Coats Pvt. Ltd. (hereinafter referred to as MCL). MCL had cleared the yarn under Rule 8 of the Central Excise Valuation Rules 2000 by adopting 110% of the cost of production to the appellant. The point at issue is, on completion of the job work how the assessable value of the finished products should be determined by the appellant. The appellant determined the value on the basis of the decision of the Apex Court rendered in the case of Ujagar Prints followed by Board's Circular dated 19.2.2002. According to the appellant, his assessable value would the cost of the materials received from MCL plus the processing charges incurred by him. But, the Revenue contended that the appellant should take 110% of the cost of the materials cleared by MCL in view of the fact that MCL adopts 110% of the cost of production as assessable value in terms of Rule 8 of the CE Valuation Rules 2000. Therefore, the Original Authority confirmed an amount of Rs. 3,72,845/- being the differential duty for the period from January 2004 to 9th July 2004 under Section 11A of the CE Act, 1944 read with Section 4 of CE Act, 1944. Further, he demanded interest under Section 11AB of CE Act, 1944. He imposed a penalty of Rs. 3,72,845/- under Rule 25 of CE Rules, 2002. The appellants approached the Commissioner (A). The Commissioner (A) in the impugned order upheld the order of the lower authority. The appellants strongly challenged the impugned order.
3. Shri S.S. Thakur, Authorised Representative appeared for the appellants and Shri K.S. Reddy, JDR appeared for the Revenue.
4. The learned Authorised Representative urged the following points.
(i) The issue involved in this appeal is no longer res integra, as the Tribunal on identical issue in the case of Bhilwara Procesors Ltd. v. CCE, Jaipur-II 2004 (178) ELT 185 (T) has held "...Treating Central Excise assessable value as equivalent to cost of goods evidently creates problems. In many cases like MRP or tariff value based valuation or Rule 8 Valuation, assessable value is a nominal value and does not reflect cost of the item. Such a notional valuation would not be appropriate in determining the cost of an item..."
(ii) The Commissioner (A) committed a grave error in distinguishing the above case law by holding that "...dispute in those cases in regarding the determination of value of the goods manufactured on job work basis and none of the cases deals with the determination of the cost of materials used in the manufacture of goods on job work basis."
(iii) The findings of the Commissioner (A) are not correct as seen in para 2 of the case law cited supra. "...The present appeal is about the valuation of fabrics processed for M/s. BSL Ltd. During the period July 2002 to December 2002. The appellants arrived at the assessable value by adding their job charges to the cost of the fabrics received. Under the impugned order it has been held that the value so arrived at by the appellant was less, and on account of that, there was evasion of duty of about Rs. 34 lakhs. The error in valuation pointed out is that M/s. BSL Ltd. had paid Central Excise duty on the fabrics sent by them by treating 115% of the cost of production as the assessable value of the fabrics. This was done in terms of Rule 8 of Central Excise Valuation Rules. The impugned order has held that the appellant should have treated that assessable value as the value/cost of the fabric. The present appeal challenges that find."
(iv) In the following decisions the above cited decision of the Tribunal has been followed. These orders have not been appealed against and reached finality.
a. OIA No. 7/2005 dated 20.01.2005 M/s. A.P.R. Agencies, Kolvilkulam, Tirunelveli Commissionerate, Tamilnadu.
b. OIO No. 23/2005 dated 23.3.2005 M/s. Mercury Management & Technical Services Pvt. Ltd., Bangalore-I Commissionerate c. OIO No. 24/2005 dated 23.3.32005 M/s. Thungabhadra Tex Processors (P) Ltd., Bangalore-I Commissionerate.
(v) The impugned order is contrary to the principle laid down in the Ujagar Prints Ltd. case and Pawan Biscuits Co. Pvt. Ltd., decided by the Apex Court and also Board's circular No. 619/10/2002 dated 19.2.2002, which require the job worker to calculate the assessable value of the job worked goods on the basis of the job charges plus the cost of materials used in the manufacture of the said goods.
(vi) Neither the show cause notice nor the order of the lower authority nor the impugned order explains as to how the "assessable value" of inputs supplied by M/s. Madura Coats Pvt. Ltd. which was determined by adding 10% to the 'cost of production' of the said yarn as per Rule 8 of CE Valuation Rules 2000 for the purpose of payment of duty at their end, would indicate the actual 'cost of production' of the said yarn.
(vii) Since the duty demand is not sustainable, levy of penalty is not justified.
5. The learned Departmental Representative reiterated the impugned Order-in-Appeal.
6. We have gone through the records of the case carefully. The appellant is a job worker, who receives input yarns from MCL. In arriving at the landed cost of inputs in his premises, the appellant adds the profit margin of MCL as per CA Certificate and transport and other related expenses incurred for delivery of inputs at the appellants premises, as declared by MCL. Afterwards the principle enunciated by the Apex Court and reiterated in Board's Circular 19.2.2002 has been followed. In other words, to the landed cost of inputs, the processing charges are added to determine the assessable value for the final product manufactured by the job worker. We find that this method is in consonance with Board's Circular cited by the appellant. Rule 8 of the Valuation Rules is invoked for determining the assessable value of goods, which are cleared but not sold. In the present case, Rule 8 of Valuation Rules is applicable to MCL. Under the above said Rule the assessable value at MCL's end is determined by taking a notional value of 110% of the cost of production. There is no authority to take this 110% of the cost of production as cost of raw material of the job worker. The method adopted by the appellant is correct. The Commissioner (A) has not properly appreciated the ratio of the Tribunal decision cited by the appellant. We do not find any justification for demanding differential duty. The duty demand is liable to be set aside. In these circumstances, no penalty can be levied. Hence, we allow the appeal with consequential relief.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)