2016 (6) TMI 541 - AT - Central Excise

Valuation - Job worker - manufacture and clearance of intermediary goods to the principal manufacturer for manufacture of final goods - addition of 115% of the cost of production - Held that - the appellant was related to the principal manufacturer as interconnected undertaking and covered by Section 4(3)(b)(i) of the CEA, 1944. Such a case fundamentally goes out of the scope of Rule 9 of Valuation Rules because that rule does not cover the interconnected undertaking within its fold. Therefore, there is no necessity to examine even applicability of the proviso in the present case. Since the case falls under Section 4(3)(b)(i) of CEA, 1944, valuation it goes to Rule 10 (b) of the Valuation Rules. That sub-clause of Rule 10 requires valuation of goods under Section 4 (1) of CEA, 1944. Accordingly, the sequential step is to follow the ratio laid down in the case of Ujagar prints Etc.Etc. Vs. UOI & Others 1989 (1) TMI 124 - SUPREME COURT OF INDIA . Such manner of valuation is not questioned by Revenue. Therefore, there is no need to go further since the assesse says that Ujagar prints procedure has been followed and Revenue totally ignored such aspect to be examined. Therefore, the Tribunal cannot make a new case to create jurisdiction for it to decide the issue not before it. Since the case is covered by Section 4 (3) (b) (i), the present appeal is answerable in terms of Rule 10 read with Section 4 itself. - Decided in favour of appellant with consequential relief

Summary

Issues: Valuation of intermediary goods under Section 4 of CEA, 1944; Allegation of Revenue regarding Rule 9 of Valuation Rules; Applicability of Rule 10 (b) of Valuation Rules; Addition of 115% of cost of production as per proviso to Rule 9; Interpretation of interconnected undertaking under Section 4 (3) (b) (i) of CEA, 1944.

In this case, the appellant, a job worker, cleared intermediary goods to the principal manufacturer for further processing. The appellant valued these goods under Section 4 of the Central Excise Act, 1944, following the normal transaction value principle and relying on the Ujagar prints case and CBEC Circular No. 619/10/2002-CX. The Revenue alleged that the appellant's case fell under the proviso to Rule 9 of the Central Excise Valuation Rules, 2000, which required adding 115% of the cost of production to the value. The appellant argued that its case actually fell under Section 4 (3) (b) (i) of the CEA, 1944, as an interconnected undertaking with the principal manufacturer, thus Rule 9 did not apply. The Tribunal found that the appellant's case indeed fell under Section 4 (3) (b) (i), leading to the application of Rule 10 (b) of the Valuation Rules, requiring valuation under Section 4 (1) of the CEA, 1944, following the Ujagar prints case. The Tribunal emphasized that the Revenue's insistence on adding 115% of the cost of production was unwarranted, as the appellant's valuation method was in compliance with the law. The Tribunal also referenced the CCE, Pune Vs. Mahindra Ugine Steel Co. Ltd. judgment to clarify that the proviso is not independent of the basic provision of a rule. Ultimately, the appeal was allowed in favor of the appellant with consequential relief.