2016 (12) TMI 1776 - AT - Central Excise

Valuation - job-work - stock transfer basis - Rule 8 of Central Excise Valuation Rules, 2000 - HELD THAT - The appellant supplied the bulk detergent powder to their job worker but at the same time they are selling the same product to independent buyers, i.e. Hindustan Lever Ltd. on principal to principal basis. In the transaction of job work, the valuation is governed by Rule 8 in a case where no sale price is available and entire transaction is under job work only. However, in a case where the same goods is sold by the assessee on principal to principal basis then instead of valuation of Rule 8, the sale price to the independent buyer will apply. Appeal dismissed - decided against Revenue.

Summary

Issues: Valuation of goods supplied to job worker under Central Excise Valuation Rules, 2000; Applicability of Rule 8 for captive consumption; Use of sale price in principal to principal transactions.

Valuation of goods supplied to job worker under Central Excise Valuation Rules, 2000:
The case involved the appellant supplying detergent powder in bulk to a job worker for packing in retail packs. The Revenue contended that valuation should be done as per Rule 8 of Central Excise Valuation Rules, 2000, which determines the value at 115% of the cost of manufacture for goods used by the manufacturer for captive consumption or on behalf of the manufacturer. The Commissioner (Appeals) allowed the appeal, stating that the sale price to an independent buyer should prevail over Rule 8 valuation when the same goods are sold on a principal to principal basis. The Tribunal upheld this position, citing precedents like Ispat Industries Ltd. and Handy Wires Pvt. Ltd.

Applicability of Rule 8 for captive consumption:
The Revenue argued that since the goods were not sold but cleared to the job worker for further manufacture on the appellant's behalf, Rule 8 should apply for valuation. Rule 8 mandates valuing goods at 115% of the cost of manufacture in such cases. However, the Tribunal held that when the same goods are also sold to independent buyers on a principal to principal basis, the sale price should be used for valuation instead of Rule 8. This interpretation was supported by the judgment in Ispat Industries Ltd.

Use of sale price in principal to principal transactions:
The Tribunal emphasized that when goods are supplied to a job worker but also sold to independent buyers, the sale price to the independent buyer should be used for valuation. In this case, since the sale price at which the goods were sold to Hindustan Lever Ltd. was available, the appellant correctly applied this price for valuation. The Tribunal relied on the legal position established in the case of Ispat Industries Ltd. and similar views in the case of Handy Wires Pvt. Ltd. to uphold the order of the Commissioner (Appeals) and dismiss the Revenue's appeal.