1997 (4) TMI 419 - AT - Central Excise

Summary

Issues:
1. Assessment of duty based on the wholesale price charged by suppliers of raw materials.
2. Application of the Supreme Court decision in Ujagar Prints case to job workers manufacturing goods.
3. Consideration of brand name and relationship between job worker and supplier of raw material in determining assessable value.
4. Conflict between different tribunal decisions on the assessable value of goods manufactured by job workers.

Detailed Analysis:
1. The case involved nine job worker assessees who had been paying duty based on the wholesale price charged by suppliers of raw materials for the goods they manufactured. After a clarificatory order by the Supreme Court, the assessees filed revised price lists indicating the total cost of raw materials, manufacturing expenses, and profit margin as the assessable value. The department proposed to base the assessable value on the wholesale price of raw materials. The Assistant Commissioner and Commissioner (Appeals) upheld this, leading to appeals by the assessees challenging the assessment method.

2. The Commissioner (Appeals) argued that the Ujagar Prints case did not apply to these assessees as they manufactured different finished products from raw materials, unlike the textile processing in Ujagar Prints. However, the Tribunal disagreed, stating that for excise duty levy, a new product with distinct characteristics must emerge, which was the case for the assessees. The Tribunal also noted that the Ujagar Prints principle applied to various products beyond textiles, irrespective of the transformation of raw materials.

3. The presence of a brand name on the goods and their return to the raw material supplier was considered by the Commissioner (Appeals) as a reason to base the assessable value on wholesale prices. The Tribunal, however, found that the brand name did not alter the assessable value, as factors contributing to quality were already included in raw material costs. The Tribunal cited cases where the Ujagar Prints principle was applied regardless of brand names, emphasizing the value determination at the job worker's selling price.

4. The conflict between tribunal decisions was addressed, particularly the Dr. Writer's Food Products Ltd. case where Ujagar Prints was deemed inapplicable. The Tribunal differentiated this decision from later cases applying Ujagar Prints principles to goods manufactured by job workers. The Tribunal emphasized the value determination based on job worker selling prices, not the supplier's wholesale prices, as per Ujagar Prints.

5. Ultimately, the Tribunal allowed the appeals, setting aside the impugned orders and ruling that the margin of profit of raw material suppliers should not be included in the assessable value. The assessable value should be determined based on the Ujagar Prints principle when goods leave the job worker's factory, not the wholesale prices of raw material suppliers.