2012 (5) TMI 271 - AT - Central Excise

Job work - valuation under central excise - held that - Rule 10A(i) or (ii) or Rule 8 of the Valuation Rules will not apply in respect of job worked goods consumed by the principal manufacturer and not sold. It was further held that Rule 11 will apply in such cases and Revenue can take recourse to provisions of rule 11 which talks about using reasonable means consistent with the principles and general provisions of the Valuation Rule read with sub-section (1) Section 4 of the Central Excise Act, 1944. Keeping this in mind, the ratio laid down by the hon ble Supreme Court in the case of Ujagar Prints will squarely apply, that is, to ascertain the assessable value on the cost of raw materials plus processing charges. - Decided in favor of assessee.

Summary

Issues:
- Correct assessable value determination under Central Excise Valuation Rules
- Applicability of Rule 10A and Rule 8 of the Valuation Rules in job work transactions

Issue 1: Correct assessable value determination under Central Excise Valuation Rules
The case involved M/s Indian Extrusions, Mumbai, manufacturers of Plastic bottles, who supplied goods to M/s Aero Pharma Pvt. Ltd. The dispute arose when the department alleged that the appellants were not paying duty on the correct assessable value. A show-cause notice was issued proposing a differential duty payment, interest, and penalties. The case was adjudicated, confirming a duty demand, interest, and imposing a penalty. The appellant argued that the assessable value should be based on the cost of raw materials plus job charges, citing legal precedents and circulars. The Tribunal analyzed Rule 10A and Rule 8 of the Central Excise Valuation Rules. It concluded that Rule 10A did not apply as the goods were not sold by the principal manufacturer, and Rule 8 did not apply as the goods were not captively consumed. Referring to previous judgments, the Tribunal held that the duty liability should be based on the cost of raw materials plus job charges, as per the Ujagar Prints formula. Consequently, the impugned order was set aside, and the appeal was allowed.

Issue 2: Applicability of Rule 10A and Rule 8 of the Valuation Rules in job work transactions
The appellant contended that Rule 10A and Rule 8 of the Valuation Rules were not applicable in their case, as they operated on a principal-to-principal basis. They relied on legal precedents and Tribunal judgments to support their argument. The Tribunal examined the provisions of Rule 10A and Rule 8, determining that neither rule applied to the situation at hand. It clarified that Rule 10A dealt with goods sold by the principal manufacturer, which was not the scenario in this case. Additionally, Rule 8 applied to goods consumed in production, which did not align with the appellant's operations. Citing previous Tribunal decisions, the Tribunal emphasized that the duty liability should be calculated based on the cost of raw materials plus job charges. By applying the principles established in Ujagar Prints and other relevant cases, the Tribunal ruled in favor of the appellant, setting aside the impugned order and granting the appeal with any consequential relief.

This judgment by the Appellate Tribunal CESTAT, Mumbai, provides a detailed analysis of the correct assessable value determination under the Central Excise Valuation Rules and the application of Rule 10A and Rule 8 in job work transactions. The Tribunal's decision was based on legal precedents, statutory provisions, and the specific facts of the case, ultimately resulting in the allowance of the appeal and setting aside of the duty demand and penalties imposed on the appellant.