Custom, Excise & Service Tax Tribunal
Cce, Pondicherry vs Ravishankar Industries Pvt. Ltd on 19 July, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
CHENNAI
Appeal No. E/1287/2004 & E/CO/39/05
[Arising out of Order-in-Appeal No. 5/04 (P) (D) dated 1.7.2004 passed by the Commissioner of Central Excise (Appeals), Chennai]
For approval and signature:
Honble Shri P.K. Das, Judicial Member
Honble Shri Mathew John, Technical Member
1. Whether Press Reporters may be allowed to see 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 the Members wish to see the fair copy of the Order?
4. Whether order is to be circulated to the Departmental authorities?
CCE, Pondicherry Appellant
Versus
Ravishankar Industries Pvt. Ltd. Respondent
Appearance:
Shr iParmod Kumar, JC (AR), for the Appellant Shri S. Murugappan, Advocate, for the Respondent CORAM :
Honble Shri P.K. Das, Judicial Member Honble Shri Mathew John, Technical Member Date of Hearing :16.5.2013 Date of Pronouncement:19.7.2013 Final Order No.___________ Per Mathew John
1. The Respondents acted as job-workers for M/s KODAC India Ltd, Chennai (KODAC for short), for manufacture of Unexposed Cinematography Colour Polyester Positive Films. The raw material was supplied by KODAC and KODAC also paid job-work charges to the respondent. The respondents were paying excise duty on the manufactured products as per provisions in Notification 36/2001-CE (NT) dated 26/06/2001.
2. KODAC furnished a cost construction certificate w.e.f 19-09-2000 showing an assessable value of Rs. 5.69 per linear meter of the film after deducting a loss of 0.27 per liner meter toward loss incurred by M/s KODAC and respondent was paying duty based on assessable value of Rs. 5.69 per meter.
3. Revenue was of the view that excise duty should be paid on the cost of manufacture of the film by respondent and not based on the selling price of KODAC which involves a loss of Rs. 0.27 per linear meter. Based on such reasoning a show cause notice was issued for the period Jul 01 to Nov 01. The adjudicating authority dropped the demand on the ground that the provisions of Notification 36/2001-CE (NT) would imply that excise duty is to be paid on the price at which KODAC was selling the goods and the cost certificate furnished by KODAC was not really required for deciding the assessable value. Revenue filed an appeal with Commissioner (Appeal) against this decision arguing that the traders loss cannot be a factor to be taken into account while determining the manufacturing cost of goods which should be the assessable value in the hands of the job-worker. Commissioner (Appeal) rejected the appeal filed by Revenue based on the argument that the Central Excise Valuation Rules, 2000 do not have a specific rule to deal with valuation of goods manufactured on job-work basis and having regard to Rule 11 and the general principles of valuation in the said rules it is proper to accept the sale price of KODAC as assessable value of the respondent though the sale price involved some loss to KODAC. Aggrieved by the order of the Commissioner (Appeal) Revenue has filed this appeal.
4. The Ld. A. R. for Revenue submits that assessable value of goods in the hands of a job-worker who got inputs from another person free of cost and got paid only for the job-charges was to be decided based on the decision of the Hon. Apex Court in the case of Ujagar Prints Etc Vs. UOI [1989 (39) ELT 493(SC)]. In the said decision, wherein the raw material supplied by the principal manufacturer was grey-cloth, the court observed as under:
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 processors expenses, costs and charges plus profit, but it is not necessary to include the traders profits who gets the fabrics processed, because those would be post-manufacturing profits.
5. The Ld. A. R. for Revenue argues that the notification of CENTRAL EXCISE VALUATION (DETERMINATION OF PRICE OF EXCISABLE GOODS) RULES, 2000 did not change the situation in any way because the Rules did not make any special provisions with regard to valuation of goods in the hands of the job worker. The principles embodied in the said rules are in conformity with the principles laid down in the decision of Ujagar Prints (Supra). He argued that the fact that the person who was getting the goods manufactured were selling the goods at a loss cannot affect the assessable value of the goods in the hands of the job-worker and hence the deduction allowed from cost towards loss made by KODAC is not legal and orders of the lower authorities are wrong and need to be reversed. The Ld. A. R. also invited our attention to CBECs Circular 619/10/2002-CX dated 19-02-2002 which clarified that value in such case is to be determined based on the principles laid down in the decision of Ujagar Prints.
6. The Ld. A. R. relied on the following decisions:
(i) CCE Vs. Fiat India Pvt. Ltd-2012 (283) ELT 161 (S. C.);
(ii) Pawan Biscuits Co. Pvt Ltd Vs. CCE 2000 (120) ELT 0024 (SC)
7. So his prayer is demanded that demand may be confirmed based on manufacturing cost without allowing any deduction towards loss incurred by KODAC.
8. Opposing the prayer the Ld. Advocate for the respondent submits that when the price at which goods are actually sold by KODAC is available there is no scope for looking at the cost of manufacture. According to him the decision of the apex Court in the case of Ujagar Prints is applicable only in cases where the sale price of goods by the principal manufacturer is not ascertainable. He relies on the decision of the Tribunal in Chemdye Manufacturing Co. Pvt. Ltd Vs. CCE , Chennai in appeal No.E/465/2002 vide Final Order number 817/2003 dated 17-10-2003.
9. Further the advocates drew our attention to the fact that a new Rule 10A has been introduced in CENTRAL EXCISE VALUATION (DETERMINATION OF PRICE OF EXCISABLE GOODS) RULES, 2000w.e.f01-04-2007 under which assessable value in the hands of a job-worker is the price at which principal manufacturer sells goods to independent buyers. Now that the principle is recognized clearly in the rules, there is no reason to deny it for a period where there was no clarity in the rules about the principle to be followed. Further he argues that the fact that KODAC was making a loss during the relevant period should not alter the situation either. So re submits that Revenues appeal is not maintainable.
10. Having stated the arguments on both sides it may be proper to have a look at the provisions in notification 36/2001-CE (NT) dated 26-06-2001 which is reproduced below:
Central Board of Excise and Customs, being satisfied that it is necessary and expedient in the public interest so to do, -
hereby?(1) exempts from the operation of rule 9 of the said rules, -
(i) --------
(ii) every manufacturer who gets his goods manufactured on his account from any other person subject to the conditions that the said manufacturer authorises the person, who actually manufactures or fabricates the said goods to comply with all procedural formalities under the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, in respect of the goods manufactured on behalf of the said manufacturer and, in order to enable the determination of value of the said goods under section 4 or section 4A of the said Act, to furnish information including the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all liabilities under the Act and the rules made thereunder :
Provided that in respect of goods falling under Chapter 62 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), the manufacturer shall authorize the job worker, who has been authorized to pay the duty of excise leviable on such goods on his behalf under sub rule (3) of rule 4, to furnish information including the retail sale price at which such goods are sold in order to enable determination of tariff value of such goods under sub-section (2) of section 3 of the Central Excise Act, 1944 (1 of 1944) or any notification issued thereunder.
Explanation. - For the purposes of this notification, retail sale price means the maximum price at which the excisable goods may be sold in packaged form to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be, and the price is the sole consideration for such sale;
(iii) ----
(iv) ----
(v) ----
(vi) ----
(2) ---------------
(3) -----------------?
Annexure Declaration Form To The Assistant Commissioner/ Deputy Commissioner, Central Excise, I/We.declare that to the best of my/our knowledge and belief the information furnished in the Schedule below is true and complete.
I/We undertake to apply for a Central Excise registration certificate in the proper form as soon as the value of the goods, mentioned in the said Schedule, cleared for home consumption in a financial year, reaches the full exemption limit.
I/We undertake to apply for a Central Excise Registration in the proper form as soon as the goods mentioned in the Schedule become chargeable to duty.
I/We undertake to maintain such records and follow such procedure as may be prescribed by the Commissioner in relation to the exempted goods.
I/We also undertake to intimate any change in the information furnished in the said Schedule.
THE SCHEDULE
1. Name(s) and address(es) of the proprietors/all partners/Directors of the company owning the factory.
2. Name and address of the factory.
3. Name and addresses of other factories/manufacturers (producing such goods) in whom the manufacturer claiming the exemption has proprietary interest.
4. Full description of the goods (heading-wise) manufactured by the factory.
5. Value/quantity of the goods cleared during the preceding financial year.
6. Value/quantity of the goods estimated to be cleared in the current financial year.
7. Heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) under which the goods are classifiable.
8. (a) Reference to the heading/sub-heading of the said Schedule Section 5A of the Central Excise Act, 1944 (1 of 1944), the case may be (under which the goods are exempted from the whole of the duty of excise leviable thereon).
(b) Ground of exemption under the said heading/sub-heading or the said notification
9. Process of manufacture.
(SIGNATURE OF THE APPLICANT)
11. It is seen from the notification that there is nothing in the notification which speaks of the method of determining value of goods in the hands of the job-worker. The notification exempts the person supplying the raw material from provisions of Rule 9 of Central Excise Rules and also enjoins on him certain responsibilities to furnish certain relevant information. The notification is not relevant for anything more. So the question of deciding valuation has to be done with regard to Central Excise Act, 1994 and Central Excise Valuation Rules and relevant judicial pronouncements.
12. It is quite true that till 01-04-2007 the Central Excise Valuation Rules did not have clear providing how to arrive at value of goods manufactured on job-work basis. So this issue was subject matter of many litigation and finally decided by the Apex Court in the case of Ujagar Prints (Supra) and the decision was followed till 01-04-2007 when rule 10A has been introduced in the valuation rules. Ever since that the issue is still under dispute. But that is really not relevant for deciding the dispute at hand because it relates to the period prior to 01-04-2007.
13. In view of the decision of the Apex Court in the case of Ujagar Prints we are of the view that for determining the assessable value in the hands of job-worker only the value of the raw materials plus the value of the job work done plus the manufacturing profit and the manufacturing expenses but not any other subsequent profit or expenses. Just as traders profit cannot form part of the assessable value traders loss cannot result in reduction in assessable value of the goods in the hands of the job-worker. The decision of the Tribunal in the case of Chemdye Manufacturing Company Pvt. Ltd distinguishes the decision in the case of Ujagar prints by stating that in those cases the tradersprices were not known. Such statement is not supported by the facts of the case and in fact the whole dispute in the matter of levying duty was whether the principal manufacturers selling price should be adopted for collecting duty when goods are manufactured by the job-worker. Further the Apex Court in the case of Fiat India Ltd (Supra) did not find it proper to give deduction from cost of manufacture incurred by the actual who incurs cost of material and does the manufacturing activity by himself. So allowing deduction towards loss of the person supplying raw material to determine assessable value in the hands of the person undertaking manufacturing activity is not warranted.So we follow the decision of the Apex Court in the case of Ujagar Prints and hold that duty was payable by the respondent without allowing any deduction for loss incurred by the respondent. The demand for differential duty amounting to Rs. 3,94,978/- is confirmed.
14. Since this is a legal dispute we do not agree with the proposal to impose any penalty on the respondent.
15. Thus the appeal filed by Revenue is allowed. Consequently the cross objection filed by the respondent is rejected.
(Pronounced in open court on 19-07-2013)
(MATHEW JOHN) (P.K.DAS)
TECHNICAL MEMBER JUDICIAL MEMBER
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