2019 (7) TMI 1795 - AT - Central Excise

Valuation - inclusion of landed cost of the raw materials and conversion charges, which includes the margin of profit of job-worker in the assessable value - job-work - arm's length price - HELD THAT - In analyzing the facts in de novo proceedings, learned Commissioner (Appeals) though accepted the facts that there is no evidence to establish that the relation between the appellant and M/s Marico Industries Ltd. are not at arm s length and on principal to principal basis as alleged by the Revenue and also the activities carried out by the appellants in manufacturing the goods are on job-work basis, but failed to determine the assessable value of job-worked goods correctly. The principles of law laid down in UJAGAR PRINTS ETC. ETC. VERSUS UNION OF INDIA OTHERS 1989 (1) TMI 124 - SUPREME COURT is squarely applicable to the present case inasmuch as the landed cost of the raw materials and conversion charges, which includes the margin of profit of job-worker, is the basis for arriving at the assessable value of the job worked goods in the hands of the job worker. Therefore, the proposal to include the overheads of the supplier of raw materials purchased from the open market and delivered directly at the premises of the appellant, cannot form part of the assessable value. Inclusion of Landed cost of the raw material in assessable value - HELD THAT - The same includes the element of freight as well as transit insurance being evident from the sample copies of the invoices placed by the appellant in the paper book. Therefore, the method of assessment of job worked goods arrived at by the adjudicating authority on the basis of C.A. certificate is correct and in accordance with the law. For the limited purpose of verification of the sample invoices submitted before this forum, the matter is remanded to the adjudicating authority - appeal allowed by way of remand.

Summary

Issues:
- Assessment of duty on goods manufactured on job work basis
- Determination of assessable value based on C.A. certificate
- Inclusion of overhead expenses in assessable value
- Compliance with principles of valuation in Central Excise Rules

Analysis:
1. Assessment of duty on goods manufactured on job work basis:
The appeal was filed against an Order-in-Appeal dated 18.5.2011, where duty was demanded on goods manufactured on job work basis. The Assistant Commissioner confirmed a differential duty for the period November 1993 to February 1996. The Commissioner (Appeals) set aside the order and remanded the matter. The Tribunal had previously remanded the case to decide without considering certain statements. The Commissioner (Appeals) confirmed the demands raised in show cause notices, leading to the present appeal.

2. Determination of assessable value based on C.A. certificate:
The appellant contended that the Commissioner (Appeals) erred in confirming the demand based on the selling price of the supplier. The appellant provided a C.A. certificate detailing the cost of raw materials, conversion cost, and profit margin. The appellant argued that the assessable value should not include the supplier's overhead expenses and profit margin. The Tribunal found that the C.A. certificate reflected the landed cost of raw materials and packing materials, supporting the method of assessment based on the certificate.

3. Inclusion of overhead expenses in assessable value:
The Revenue reiterated the findings of the Commissioner (Appeals) but raised concerns about the invoices supporting the raw materials' cost in the C.A. certificate. The Tribunal noted the need to verify these invoices for accuracy.

4. Compliance with principles of valuation in Central Excise Rules:
In the de novo proceedings, the Commissioner (Appeals) acknowledged the absence of evidence to refute the job work basis of manufacturing. However, there was a failure to determine the assessable value correctly. The Tribunal emphasized the application of principles from relevant legal cases in determining the assessable value, focusing on the landed cost of raw materials and conversion charges, excluding the supplier's overheads. The Tribunal allowed the appeal by remanding the matter for verification of sample invoices.

In conclusion, the Tribunal allowed the appeal by way of remand, emphasizing the correct determination of assessable value based on the C.A. certificate and the exclusion of supplier's overhead expenses from the assessment.