2019 (1) TMI 1659 - AT - Central Excise

Valuation - wool tops and polywool yarn - job-work - Since M/s. Raymond Woollen Mills Ltd. had undervalued the cost of input, the department contended that the final product manufactured by the appellant was also undervalued - applicability of Rule 4 or Rule 6 of CER - HELD THAT - The learned Commissioner (Appeals) has recorded the submissions of the appellant made before him in the appeal memorandum, contending inter alia, that the supplier M/s. Raymond Woollen Mills Ltd. was a Central Excise registered assessee and the valuation declared by them was duly accepted by the jurisdictional Central Excise authorities and the assessment was also final. However, the impugned order has not recorded any findings with regard to such submission of the appellant. With regard to consideration of assessable value for payment of central excise duty, the independent job worker is required to include the price at which the job worked goods would leave its premises along with the profit margin. Post manufacturing profit in the hands of main manufacturer should not be considered as the element of assessable value for determination of the duty liability - Thus, as an independent manufacturer, the assessable value is determinable under Section 4(i)(a) of the Act and there was no necessity of going into the Valuation Rules for such determination. Further, Rule 6 of the Valuation Rules is only applicable to the case of captive consumption and not to the goods manufactured on job work basis. Hence, such rule cannot be applicable in the present case, The appellant had appropriately discharged the central excise duty liability on the goods manufactured on job work basis and supplied to the supplier M/s. Raymond Woollen Mills Ltd. as the goods had been subject to valuation as required in Section 4 of Central Excise Act, 1944 before arriving at the factory of the appellant - Whenever a value is to be utilized for the purposes of implementing the Central Excise Act, 1944, only such value as ascertainable under Section 4 can be adopted. When that value is challenged in the hands of the principal manufacturer, a different value cannot be utilized at the appellant s end. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Undervaluation of goods leading to duty demand
- Applicability of Central Excise Valuation Rules
- Assessment based on price declarations by supplier

Undervaluation of Goods Leading to Duty Demand:
The case involved the appellant, a manufacturer of excisable goods, who faced duty demand due to alleged undervaluation of goods manufactured on job work basis for a supplier. The department contended that the supplier had undervalued the cost of input, leading to undervaluation of the final product by the appellant. Show cause proceedings were initiated, and duty demand was confirmed on the appellant. Appeals filed against the adjudication orders were also upheld by the Commissioner (Appeals). The appellant argued that it had no control over the prices declared by the supplier and had discharged duty liability based on assessable value as per relevant judgments. The Tribunal noted that the appellant had appropriately discharged the duty liability as the goods were subject to valuation as required by law. The Tribunal held that the appellant had followed proper procedure in determining the sale value and set aside the adjudged demands in favor of the appellant.

Applicability of Central Excise Valuation Rules:
The appellant contended that Rule 6 of the Central Excise Valuation Rules, 1975 is applicable only to captive consumption and not to job workers. The Tribunal agreed with this argument, stating that Rule 6 is not applicable in the case of goods manufactured on job work basis. It was emphasized that the assessable value for duty determination should be based on Section 4 of the Central Excise Act, 1944, and there was no need to apply Valuation Rules for such determination. The Tribunal highlighted that the factory of the job worker is deemed as the factory for the purpose of the Act, and post-manufacturing profit of the main manufacturer should not be considered in the assessable value.

Assessment Based on Price Declarations by Supplier:
The appellant argued that since the supplier's assessments were final and accepted by the Central Excise authorities, demanding differential duty from the appellant would amount to reviewing the supplier's assessment. The Tribunal noted that the impugned order did not address this submission of the appellant. It was clarified that when a value is to be used for implementing the Central Excise Act, only the ascertainable value under Section 4 can be adopted. The Tribunal held that a different value cannot be utilized at the appellant's end if the value is challenged at the principal manufacturer's end. Consequently, the Tribunal set aside the impugned orders confirming the duty demands on the appellant.