2016 (8) TMI 380 - AT - Central Excise

Valuation - Clearance of goods on job work basis - no evidence provided that the goods cleared on job work basis are not the same as the goods cleared otherwise - Appellant paid duty in terms of the decision of Hon ble Apex Court in the case of Ujagar Prints Ltd. Vs. Union of India & others 1989 (1) TMI 124 - SUPREME COURT OF INDIA - Held that - valuation is not an exact science. Some amount of guess work exists in valuation. Therefore, different methods are prescribed by Valuation Rules. These rules are prescribed in order to find out the actual realization which realization constitutes the basis of assessable value. At the same time one must keep in mind that different methods prescribed have to converge to a common valuation. Thus the correct method of ascertainment of value would be the method prescribed by the Hon ble Apex Court in the case of Ujagar Prints Ltd. In view of the above the assessment done by the appellants is correct and as per law. - Decided in favour of assessee

Summary

Issues: Valuation of goods manufactured on job work basis, Central Excise duty assessment, Applicability of Apex Court decisions

Valuation of goods manufactured on job work basis:
The appellants, chemical manufacturers, faced a notice alleging undervaluation of goods manufactured on job work basis compared to goods cleared otherwise. The impugned order assessed the goods under rule 7 read with rule 6 (b) of the Central Excise (valuation) rules 1975 for the period prior to 1/07/2000. The Commissioner (Appeals) noted the lack of evidence to prove differences between goods manufactured on job work and those produced by the appellants themselves. Circulars by CBEC clarified the valuation method for goods manufactured on job work basis, emphasizing the principles set by the Apex Court decisions in Ujagar Prints Ltd. and Pawan Biscuits Co. Pvt. Ltd. The consistent stand of CBEC was to follow these decisions both before and after 1/07/2000.

Central Excise duty assessment:
The show cause notice demanded Central Excise duty based on comparative assessable value of similar goods cleared by the appellants prior to 1/07/2000 and on the cost construction method for the period thereafter. The appellants argued for the application of the Apex Court decision in the case of Ujjagar prints, stating they had paid duty in accordance with that decision. The AR pointed to the recent decision in the case of Crompton Greaves, highlighting the distinction between captive clearance and job work. The AR also referenced the case of IPF Vikram India, emphasizing the substantial control the Principal had over the job worker.

Applicability of Apex Court decisions:
The legal position was considered by CBEC, leading to the issuance of circulars aligning with the principles set by the Apex Court decisions in Ujagar Prints Ltd. and Pawan Biscuits Co. Pvt. Ltd. The Hon'ble Apex court in the case of Rajasthan Spinning and Weaving Mills emphasized the convergence of different valuation methods to ascertain the estimated ad valorem value. The judgment upheld the correctness of the assessment done by the appellants based on the method prescribed by the Apex Court in the case of Ujagar Prints Ltd., ultimately allowing the appeal.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Mumbai highlighted the importance of following established legal principles in valuing goods manufactured on job work basis, considering Apex Court decisions and CBEC circulars. The assessment of Central Excise duty and the applicability of relevant legal precedents were thoroughly analyzed, leading to the allowance of the appeal based on the correct valuation method prescribed by the Apex Court.