2011 (4) TMI 460 - AT - Central Excise

Assessable value - Rule 8 of Valuation Rules, 2000 - Job work - Held that the goods manufactured by the job workers were cleared to the premises of the principal manufacturer for captive consumption, the assessable value has to be arrived at in terms of the provisions of Rule 8 - since the person to whom the goods were transferred i.e. M/s. Sai Flipped Coil Pvt. Limited was not selling the goods but was utilizing the same, the assessable value should have been arrived at in the hands of the present appellant at the rate of 110% of the cost of the goods - appellant is an independent manufacturer who had manufactured the goods out of the raw material supplied by M/s. Sai Flipped Coil Pvt. Limited, instead of using its own raw material - Assessee is not the manufacturer and is further consuming the goods captively for his own manufacturing activities - Appeal is rejected

Summary

Issues:
1. Interpretation of Central Excise Valuation Rules, 2000 for goods manufactured on job work basis.
2. Applicability of Rule 8 of Valuation Rules for assessable value determination.
3. Dispute over the assessable value calculation in the case of goods manufactured on job work basis.
4. Application of the principles laid down by the Hon'ble Supreme Court in Ujagar Prints case for valuation.
5. Assessment of duty liability when goods are not sold but used captively by the manufacturer.

Analysis:
The case involves a dispute regarding the assessable value determination of goods manufactured on job work basis from raw materials supplied by another entity. The Revenue contended that the assessable value should be calculated at 110% of the cost of production under Rule 8 of the Valuation Rules, 2000, as the goods were used captively by the principal manufacturer. However, the Commissioner (Appeals) relied on the Supreme Court's decision in Ujagar Prints case, stating that the assessable value should include the cost of material, processing charge, and profit of the producer, and set aside the demand on the grounds of limitation and revenue neutrality.

The Tribunal analyzed the provisions of Rule 10(a) inserted in 2007, which states that if goods manufactured by a job worker are not sold at the time of removal but used captively by the principal manufacturer, the Valuation Rules apply for determining the value. The Tribunal upheld the Commissioner's decision, emphasizing that the appellant, as an independent manufacturer, had followed the correct procedure in determining the assessable value based on raw material cost and processing charges, as per the Supreme Court's guidelines in Ujagar Prints case.

The Tribunal rejected the Revenue's argument that Rule 8 should apply because the goods were used captively by the principal manufacturer, emphasizing that Rule 8 is applicable when the assessee manufactures and uses goods captively. Since the appellant was an independent manufacturer using raw materials supplied by another entity, the principles laid down in Ujagar Prints case were deemed applicable for assessable value determination, irrespective of whether the goods were used captively or sold in the market.

In conclusion, the Tribunal found no error in the Commissioner's decision and rejected the Revenue's appeal, affirming that the assessable value determination was correct based on the principles established by the Supreme Court.