2010 (5) TMI 482 - AT - Central Excise

Valuation job work - goods manufactured by the Appellant on job work basis - after manufacture of the goods cleared depots of principal manufacturer - duty paid on the ex-factory price of the principal manufacturer, which is not correct - matter is remanded to the original adjudicating authority for determining the assessable value in accordance with the judgement of Hon ble Supreme Court in case of Ujjagar Prints and others v. UOI (1988 -TMI - 42346 - SUPREME COURT OF INDIA) and (1989 -TMI - 42390 - SUPREME COURT OF INDIA)

Summary

Issues:
- Duty payment on goods manufactured on job work basis
- Assessment of assessable value for duty calculation
- Correctness of duty payment basis on ex-factory price
- Remand for determination of correct assessable value

Analysis:
- Duty Payment on Goods Manufactured on Job Work Basis: The appeal concerned duty payment on Partially Oriented Yarn (POY) manufactured by the appellants for Reliance Industries Ltd. (RIL) on a job work basis. The department alleged that duty was not paid on the depot price but on the ex-factory price provided by RIL. The Assistant Commissioner confirmed the duty demand and imposed a penalty. The appellants argued that duty should be paid on the deemed value of goods at the factory gate, as per the Supreme Court's judgment in Ujjagar Prints & others v. Union of India. The Tribunal acknowledged that goods were manufactured on job work basis for RIL, and duty should be based on the raw material cost, job charges, and job worker's profit, not the price at which RIL sold the goods.

- Assessment of Assessable Value for Duty Calculation: The Tribunal examined the legal principles governing the assessment of assessable value for duty calculation. It emphasized that in cases of job-work goods, duty should be levied based on the cost components at the job-worker's premises, as per relevant judicial decisions. The duty payment should reflect the actual value of the goods manufactured on job work basis, considering raw material costs and associated charges, rather than the selling price of the owner of the goods.

- Correctness of Duty Payment Basis on Ex-Factory Price: The Tribunal noted that duty had been paid by the appellants on RIL's ex-factory price, which was deemed incorrect based on the legal requirements. The duty payment basis should align with the Supreme Court's judgment in Ujjagar Prints & Others v. Union of India, ensuring the duty is calculated on the correct assessable value. The Tribunal found the impugned order upholding the duty demand to be unsustainable due to the incorrect basis of duty payment.

- Remand for Determination of Correct Assessable Value: Consequently, the Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for determining the assessable value in accordance with the Supreme Court's judgment in the case of Ujjagar Prints and others v. Union of India. The decision emphasized the importance of aligning duty payment with the legal requirements for goods manufactured on job work basis, ensuring accuracy in duty calculation based on the appropriate assessable value.