2011 (2) TMI 1086 - AT - Central Excise

Valuation - Job work - raw material and packing material were supplied customer to the assessee for the manufacture - assessee discharged the duty liability on the basis of price declaration based on cost basis under Rule 6(b)ii) of Central Excise Valuation Rules, 1975 - Held that - In the case of Ultra Lubricants (India) Pvt. Ltd. (1999 (7) TMI 488 - CEGAT, MUMBAI) it was held that the relationship between the jobworker and raw material supplier is on principal to principal basis and not of principal and agent. Therefore, the goods manufactured by the jobworker should not be assessed on the resale price of the raw material supplier and the value has to be determined on the costing basis i.e. cost of raw materials, labour charges and profit in accordance with decision in case of Ujagar Prints (1989 (1) TMI 124 - SUPREME COURT OF INDIA) , judgements are squarely applicable to the facts of the present case - no reason to interfere with the order passed by the Commissioner and departmental appeal is rejected

Summary

Issues:
Interpretation of Central Excise Valuation Rules regarding duty liability for manufactured goods cleared to the principal.

Detailed Analysis:
The case involves an appeal filed by the department against the decision of the Commissioner of Central Excise, Mumbai IV, regarding the duty liability of an assessee, a manufacturer of toilet soaps and detergents, engaged in manufacturing branded soaps on behalf of another company. The department argued that the transaction between the assessee and the brand owner should be treated as a stock transfer, not a sale at arm's length, and the duty liability should be based on the price at which the brand owner sells the product in the market. Show-cause notices were issued to the assessee demanding duty payment for clearances made during a specific period. The Commissioner, however, dropped the proceedings based on a previous Tribunal decision regarding a similar issue with another company, which was affirmed by the Supreme Court. The department appealed this decision.

Upon careful consideration, the Appellate Tribunal referred to previous judgments in cases like M/s. Pearl Soap Co. and Ultra Lubricants (India) Pvt. Ltd., where it was held that the jobworker should be treated as the manufacturer, and the value should be determined based on the costing basis, not the resale price of the raw material supplier. The Tribunal noted that the relationship between the jobworker and the raw material supplier is on a principal-to-principal basis, not that of principal and agent. The value should be determined based on the cost of raw materials, labor charges, and profit, as per the apex court's decision in a previous case. The Tribunal found that the principles established in these judgments were directly applicable to the present case, and therefore, upheld the decision of the Commissioner, rejecting the department's appeal.