2010 (7) TMI 547 - AT - Central Excise

Valuation - Job work - Rule 8 or Rule 11 as per Circular No. 619/10/2002-CX., dated 19-2-2002 - Since, the authorities below being conscious about the instructions issued by the Board proceeded to apply the Board Circular for the purpose of valuation of the goods manufactured on job-work basis by the appellants failed to take note of the fact that the instructions specifically refers to Rule 6 and not Rule 8 of the said Rules - The Board also clarifies that while finalizing the assessments, the decisions of the Apex Court in Ujagar Prints Ltd. (1986 -TMI - 41825 - SUPREME COURT OF INDIA) and Pawan Biscuits Co. (Pvt.) Ltd., (2000 -TMI - 45451 - SUPREME COURT OF INDIA) should also be taken into consideration - The orders passed by the lower authorities do not disclose the compliance of the said instructions nor the same disclose any logical and reasonable basis for adoption of principles of 115% of the cost of production as provided under Rule 8 - Hence, the orders passed by the lower authorities are unsustainable and are liable to be set aside and the matter remanded to the adjudicating authority to apply the correct provisions.

Summary

Issues: Valuation of goods manufactured on job-work basis under Central Excise Valuation Rules, 2000.

Analysis:
1. Background: The appeal arose from an order by the Commissioner (Appeals) dismissing an appeal filed against the demand of duty confirmed by the Deputy Commissioner. The appellants were engaged in manufacturing excisable goods and undertaking job-work for M/s. ONGC.

2. Valuation Dispute: The dispute centered around the method of calculating the assessable value of goods manufactured on job-work basis. The appellants contended that the valuation should be based on the principle of 115% of the cost of production under Rule 8 of the Central Excise Valuation Rules, 2000, while the authorities applied Rule 11 for valuation.

3. Adjudication and Appeal: The adjudicating authority confirmed the demand based on a Board's Circular justifying the application of Rule 11 for valuation. The Commissioner (Appeals) upheld this decision, citing the Circular issued on the subject.

4. Observations: The Tribunal noted that the authorities failed to consider the specific instructions in the Circular, which referred to Rule 6 for valuation of goods manufactured on job-work basis. The orders lacked compliance with the Circular and failed to provide a logical basis for applying the principles of 115% of the cost of production under Rule 8.

5. Decision: The Tribunal found the approach of the lower authorities unsustainable and set aside the orders. The matter was remanded to the adjudicating authority to correctly apply the provisions of law, considering the decisions of the Apex Court. The authority was directed to dispose of the matter expeditiously by a specified date.

This detailed analysis of the judgment highlights the key issues surrounding the valuation of goods manufactured on a job-work basis under the Central Excise Valuation Rules, emphasizing the application of the correct legal provisions and compliance with relevant instructions and precedents.