2005 (6) TMI 310 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 8 of the Central Excise Valuation Rules, 2000.
2. Application of CBEC Circular No. 619/10/2002-CX.
3. Assessment of duty based on job work basis.
4. Invocation of penalty under Rule 173Q of the C.E. Rules, 1944.

Interpretation of Rule 8:
The case involved a dispute where the Revenue alleged that the appellants did not correctly declare the value of goods manufactured due to the nature of transactions with raw material suppliers. The Revenue invoked Rule 8 of the Central Excise Valuation Rules, 2000, related to captive consumption, to determine the assessable value. However, the Commissioner (Appeals) found that Rule 8 could only be invoked for captive consumption, which was not the case here as the appellants were engaged in job work and had not consumed the goods themselves. The Commissioner relied on CBEC Circular No. 619/10/2002-CX to support this interpretation, emphasizing that the valuation of goods manufactured by job workers followed the principles laid down by the Apex Court in the Ujagar Prints case. The Tribunal upheld the Commissioner (Appeals)'s decision, concluding that the invocation of Rule 8 was incorrect in this scenario, and the order demanding duty based on Rule 8 had no merits.

Application of CBEC Circular:
The Tribunal considered the application of CBEC Circular No. 619/10/2002-CX, dated 19-2-2002, which clarified the valuation provisions introduced from 1-7-2000. The Circular emphasized that even under the new valuation provisions, there was no departure from the principles established by the Apex Court in the Ujagar Prints case. The Commissioner (Appeals) had extensively examined this issue and concluded that the appellants' valuation of goods manufactured by job workers was in line with the Circular and legal principles. The Tribunal agreed with this analysis, reinforcing that the Circular supported the appellants' approach and further discredited the Revenue's invocation of Rule 8.

Assessment of Duty Based on Job Work Basis:
The appellants contended that they correctly determined the duty based on the Ujagar Prints case, which had been supported by a Board's Circular. They argued that any mistake made in including a 2% profit should not be penalized, especially considering that the Revenue sought to add the profit margin of the raw material supplier, which they deemed unnecessary. The Tribunal acknowledged the appellants' job work nature and upheld the Commissioner (Appeals)'s decision, emphasizing that the appellants' valuation method was appropriate and the Revenue's insistence on adding the supplier's profit margin was unwarranted.

Invocation of Penalty under Rule 173Q:
The Revenue had imposed penalties under Rule 173Q of the C.E. Rules, 1944, which was challenged by the appellants. The Tribunal, after considering the arguments from both sides and reviewing the orders of the Commissioners, found that the Commissioner (Appeals) had correctly understood the facts and applied the law. The Tribunal upheld the decision of the Commissioner (Appeals), ruling in favor of the appellants and rejecting the Revenue's appeal. Consequently, the Tribunal dismissed the Revenue's claims for penalties under Rule 173Q, further supporting the appellants' position in the case.