2011 (9) TMI 776 - AT - Central Excise

Job Work - Valuation of goods manufactured by job worker - Rule 10(a) of the Central Excise (Valuation) Rules, 2000 - Revenue s stand that 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. - held that - Rule 8 is applicable to the assessee who manufactures the goods and uses the same captively either by himself or on his behalf. The said Rule would have been applicable if M/s. Sai Flipped Coil Pvt. Limited would have manufactured the goods themselves and then used the same captively. - Decided in favor of assessee.

Issues Involved:
1. Applicability of Rule 10(a) of the Central Excise (Valuation) Rules, 2000.
2. Applicability of Rule 8 of the Central Excise (Valuation) Rules, 2000.
3. Determination of the correct method for valuation of goods manufactured on a job work basis.
4. Validity of the clarification issued by the Ministry of Finance dated 31-3-2010.

Detailed Analysis:

1. Applicability of Rule 10(a) of the Central Excise (Valuation) Rules, 2000:
The primary issue was whether Rule 10(a) applied to the valuation of goods manufactured by the appellant on a job work basis. The Tribunal found that Rule 10(a) is applicable only when the job worker either sells the finished goods in the market as directed by the principal manufacturer or sends them to the principal manufacturer's depot for further sales. In this case, the job worked hallow profiles were dispatched to the principal manufacturer and consumed in further manufacturing, not sold. Therefore, Rule 10(a) was deemed inapplicable.

2. Applicability of Rule 8 of the Central Excise (Valuation) Rules, 2000:
The Tribunal also examined whether Rule 8, which requires valuation at 110% of the cost of production for goods captively consumed by the manufacturer, applied in this case. It was determined that Rule 8 applies only when goods are consumed by the manufacturer or on his behalf. Since the job worked goods were not consumed by the appellant but by the principal manufacturer, Rule 8 was found inapplicable.

3. Determination of the correct method for valuation of goods manufactured on a job work basis:
The Tribunal referred to previous judgments, including Advance Surfactants India Ltd. and Tara Industries Ltd., which established that the valuation of goods produced on a job work basis should be based on the cost of raw materials plus job charges, including the job worker's profit. The Tribunal concluded that the appellant had correctly valued the goods using this method, as per the principles laid down in the Ujagar Prints case and subsequent clarifications by the Central Board of Excise and Customs (C.B.E. & C.).

4. Validity of the clarification issued by the Ministry of Finance dated 31-3-2010:
The Tribunal found the Ministry of Finance's clarification, which suggested applying Rule 10A(iii) read with Rule 8 for captive consumption by the principal manufacturer, to be inconsistent with the provisions of Rule 8. The Tribunal held that this clarification was untenable as Rule 8 applies only to goods consumed by the manufacturer or on his behalf, not by a principal manufacturer.

Conclusion:
The Tribunal concluded that the provisions of Rule 10(a) and Rule 8 of the Central Excise (Valuation) Rules, 2000, were not applicable in this case. The correct method for valuation was based on the cost of raw materials plus job charges, including the job worker's profit, as established by the Ujagar Prints case and subsequent clarifications. The Tribunal set aside the impugned orders and allowed the appeals, reaffirming that the appellant had correctly valued the goods.

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