2012 (3) TMI 360 - AT - Central Excise

Valuation of goods - Determination of assessable value of goods - Held that - Sofar as clearances of goods manufactured on job work basis concerned, during the period of dispute, the assessable value in respect of the such clearances was to be determined by applying the formulae prescribed in the Apex Court s judgment in the case of Ujagar Prints & Ors (1988 (11) TMI 106 - SUPREME COURT OF INDIA) read with the clarificatory judgment in the same case reported in 1989 (1) TMI 124 - SUPREME COURT OF INDIA and accordingly, on this basis, the assessable value has to be the cost of raw materials in the hands of job worker plus job charges plus job worker s profit. The amount and designing charges would be part of the job charges. However, there is no scope for adding losses suffered by company or notional interest on interest free loans to this cost. In view of this, sofar differential duty in respect of the clearances of goods manufactured on job work basis is concerned, the assessable value has to be determined strictly in terms of the Apex Court judgment in Ujagar Paints (supra). However, if the Department doubts the assessable value of the job- work goods, the same can be got verified by appointing a Cost Accountant under Section 14A. As regards clearance to other group company alleged to be the related persons, for their captive consumption are concerned, there is no dispute that in respect of these clearances, the assessable value would be 115%/110% of the cost of production in terms of the provisions of Rule 8 of Valuation Rules, 2000 - However, the appellant s plea, as mentioned in the grounds of appeal, is that they have not provided any C&F Agent service and in fact, they have received the service of C&F agent from some persons and the amount on which the Service Tax is sought to be charged is the amount paid by them to their C&F Agent. The Commissioner must examine this plea and ascertain the factual position. If the appellant are recipient of the C&F Agent services, the Service Tax cannot be charged from them as it is the service providers, who would be liable to pay Service Tax - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Determination of assessable value for clearances of goods processed on job work basis.
2. Inclusion of notional interest on interest-free loans in the cost of manufacture.
3. Recovery of Art & Designing charges in the assessable value.
4. Alleged evasion of Service Tax on C&F agent services.
5. Validity of the show cause notice and imposition of penalties.

Analysis:

Issue 1:
The appellant contended that duty for job work goods should be paid based on the Ujagar Prints judgment, including raw material cost, job charges, and job worker's profit. Losses and notional interest should not be added to this cost. The Tribunal agreed, stating that the assessable value must strictly follow the Ujagar Prints judgment. The Department can verify the value by appointing a Cost Accountant if needed.

Issue 2:
Regarding loans' notional interest, the appellant argued that interest cost should not be included as per CAS-IV Standard. The Tribunal concurred, stating that interest cost and losses should not be part of the cost of production. The Commissioner's failure to appoint a Cost Accountant for redetermining the cost was noted.

Issue 3:
The recovery of Art & Designing charges in the assessable value was disputed. The Tribunal did not find a basis for including these charges in the duty calculation, as they were not part of the cost of production.

Issue 4:
On the alleged evasion of Service Tax for C&F agent services, the appellant denied providing such services and claimed they were service recipients. The Tribunal directed the Commissioner to examine this claim and determine the factual position.

Issue 5:
The Tribunal found the show cause notice time-barred for alleged duty shortfalls to group companies. It set aside the penalties imposed and remanded the matter to the Commissioner for fresh adjudication based on the directions provided in the order.

This detailed analysis covers the various issues raised in the judgment, providing a comprehensive understanding of the Tribunal's decision on each point.