2005 (9) TMI 414 - AT - Central Excise

Summary

Issues:
1. Inclusion of conversion charges in the assessable value of goods cleared by the assessee.
2. Whether conversion of reels into sheets of paper amounts to 'manufacture' under Section 2(f) of the Central Excise Act.
3. Applicability of Board's Circular No. 139/8/2000-CX.4 on the case.
4. Consistency with previous Tribunal decisions regarding inclusion of conversion charges in assessable value.

The judgment pertains to a case where the respondents, engaged in paper manufacturing, cleared paper reels to conversion centers outside their factory for cutting into sheets, which were then sold at a higher price. The department issued Show Cause Notices (SCNs) proposing to include the conversion charges in the assessable value of the paper reels and demand differential duty. The original authority confirmed the duty demand for a specific period. However, the first appellate authority set aside the demand, ruling that the mere cutting of reels into sheets did not constitute 'manufacture' under Section 2(f) of the Central Excise Act. The cost of conversion outside the factory was deemed not includible in the assessable value of the goods cleared.

The Revenue appealed against the decision of the lower appellate authority, contending that the conversion charges should be included in the assessable value. The respondents argued that the issue was covered in their favor by Board's Circular No. 139/8/2000-CX.4 and supported by various Tribunal decisions. The Board's circular clarified that the cost of processes not amounting to manufacture, carried out by another unit to duty-paid goods, should not be added to the assessable value, regardless of the unit being in the same group or an independent job worker. The Tribunal found the lower appellate authority's view consistent with the Board's clarification and supported by previous decisions, such as Rohit Mills Ltd. v. CCE, where cutting charges by a job worker outside the factory gate were not included in the assessable value of fabrics.

Ultimately, the Tribunal upheld the lower appellate authority's decision, dismissing the Revenue's appeals. The judgment highlighted the consistent application of the Board's circular and previous Tribunal decisions in similar cases, emphasizing that conversion charges for processes not amounting to 'manufacture' should not be added to the assessable value of goods cleared. The operative part of the order was pronounced in open court on 26-9-05.