2016 (11) TMI 1342 - AT - Central Excise

Valuation of intermediate products manufactured by the appellant for the principal manufacturer - ITOS Agglomerate - The Revenue held that w.e.f. 1.4.2007 the valuation of the goods manufactured on job work basis on behalf of the principal manufacturer is required to be done in terms of Rule 10 A of Valuation Rules 2000 - Held that - the identical issue has been settled by the Tribunal in Advance Surfactants India Ltd. 2011 (3) TMI 1380 - CESTAT BANGALORE where it was held that the ratio laid down by the Hon ble Supreme Court in the case of Ujagar Prints (1989 (1) TMI 124 - SUPREME COURT OF INDIA) will squarely apply i.e. to ascertain the assessable value on the cost of materials plus processing charges. In our view the appellants have been correctly valuating their products by adopting this method. Appeal allowed - decided in favor of assessee.

Summary

Issues: Valuation of intermediate products manufactured on job work basis for principal manufacturer under Rule 10 A of Valuation Rules, 2000; Applicability of Rule 8 of Valuation Rules; Interpretation of Circular issued by C.B.E.C.

In this judgment by the Appellate Tribunal CESTAT NEW DELHI, the issue revolved around the valuation of intermediate products, 'ITOS Agglomerate', manufactured on job work basis for a principal manufacturer, M/s. Procter & Gamble Home Products Ltd. The Revenue contended that post 1.4.2007, valuation should be done under Rule 10 A of Valuation Rules, 2000, specifically Rule 10 A(iii) which necessitates excise duty payment on 110% of the cost of production. The lower authority upheld this view, demanding a differential duty and imposing a penalty. However, the Tribunal analyzed Rule 8 of the Valuation Rules, which applies when goods are not sold but consumed in production or manufacture of other articles. The Tribunal observed that the intermediate products were not consumed by the appellants but used as job workers, making Rule 8 inapplicable. The Tribunal cited a similar case, Advance Surfactants India Ltd., where the principle of valuation based on the value at which the principal manufacturer sells the goods was upheld. The Tribunal also referenced a clarification by C.B.E.C. emphasizing valuation based on the Apex Court's judgment even after 1-7-2000. The Tribunal further highlighted the decision in Tara Industries Ltd., reinforcing the valuation principles for goods manufactured on job work basis. The Tribunal ultimately set aside the duty demand and penalty, aligning with the established valuation principles and previous judicial decisions. The judgment was pronounced on 28.10.2016.