2018 (5) TMI 2045 - AT - Central Excise

Method of Valuation adopted by the assessee - Job-Work - supply of raw materials and packing materials to M/s Alcon Industry Limited as who manufactured patent and proprietary medicaments in their capacity as job-worker - adoption of cost construction method after June 2003 - HELD THAT - It is seen that the orders of the lower authorities have relied upon the licence held the principal manufacturer M/s Alkem Laboratories Limited, to determine the duty liability on the selling price of the goods instead of considering M/s Alcon Industries Ltd as job-worker and liable to duty at the value determined by cost construction method . In COMMISSIONER OF CENTRAL EXCISE, GOA VERSUS M/S. COSME FARMA LABORATORIES LTD. 2015 (4) TMI 355 - SUPREME COURT it has been held by the Hon'ble Supreme Court that Once it has been determined that the job workers are the manufacturers, the assessable value of the goods would be a sum total of cost of raw material, labour charges and profit of the job workers, as per circular No.619/10/2002-CX dated 19th February, 2002 and the law laid down by this Court in the case of Pawan Biscuits ( 2000 (7) TMI 78 - Supreme Court ) and other cases. In such a case, the price at which the respondent brand owner sells its goods would not be the assessable value because the duty is to be paid at the stage at which the goods are manufactured and not at the stage when the goods are sold. The impugned order has erred in determining the differential duty liability - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against order-in-appeal upholding original authority's decision
- Recovery of demand, interest, and penalties imposed
- Dispute regarding duty liability on finished goods
- Interpretation of 'manufacturer' under different Acts
- Reliance on circulars and judicial decisions
- Consideration of job-worker's role in determining duty liability
- Conflict between majority and minority views in Tribunal's decision
- Appeal to Supreme Court and its decision
- Assessable value determination based on raw material, labor, and profit

Analysis:
The appeal was filed against the order-in-appeal upholding the original authority's decision, which demanded recovery of a substantial amount, interest, and penalties from the appellant. The dispute revolved around the duty liability on finished goods dispatched by M/s Alkem Laboratories Ltd to M/s Alcon Industry Limited, acting as a 'job-worker'. The crux of the matter was the adoption of the 'cost construction method' by M/s Alcon Industries Limited post-June 2003, leading to proceedings challenging this approach.

During the hearing, the appellant's counsel cited circulars and various judicial decisions, including those from the Hon'ble Supreme Court and the Tribunal, to support their arguments. The interpretation of the term 'manufacturer' under different Acts, particularly the Drugs and Cosmetics Act, 1940, and the Central Excise Act, 1944, was crucial in determining the duty liability in this case.

The Tribunal's decision highlighted a conflict between the majority and minority views regarding the job-worker's role in the manufacturing process and duty liability. The appeal to the Hon'ble Supreme Court and its subsequent decision clarified that the duty is to be paid at the manufacturing stage, not at the point of sale of goods by the brand owner. This decision emphasized assessing the value based on raw material, labor charges, and job worker's profit.

Ultimately, the Tribunal set aside the impugned order, ruling in favor of the appellant based on the precedents and interpretations discussed during the proceedings. The judgment emphasized the importance of correctly determining duty liability and following established legal principles in such matters, leading to the allowance of the appeal against the original authority's decision.