2017 (4) TMI 215 - AT - Central Excise

Valuation - Job-work - short payment of duty - The case of the department is that value of such goods should have been determined by cost construction method, the appellant suppressed the fact about increase in cost of raw material. Accordingly correct assessable value consequent upon increase in raw material cost was not declared - demand - Held that - appellant has adopted valuation in terms of N/N. 27/92-CE(NT) i.e. sale price of the goods manufactured on the job work basis at which the goods is sold by the principle manufacturer i.e. M/s. TISCO. In this case the said price is in conformity to Section 4(i)(a) therefore value u/s 4(i)(a) cannot be influenced by any other factor. The proposal of the department to add differential cost of raw material is only permissible if the appellant adopt the valuation as per principle laid down in case of Ujagar Print, which is not the case here. Therefore addition of any amount in the present case differential cost of raw material is not permissible - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Valuation of excisable goods manufactured on job work basis for another company.
2. Dispute regarding the increase in raw material cost and its impact on excise duty payment.
3. Applicability of Notification No.27/92(NT) for determining assessable value.
4. Interpretation of Section 4(i)(a) of the Central Excise Act, 1944.
5. Time bar considerations for declaring the sale price provided by the principal manufacturer.

Analysis:
1. The judgment deals with the valuation of excisable goods manufactured on job work basis for another company. The appellant, a manufacturer of non-alloy steel hot re-rolled products, was involved in two types of activities at their factory. They were not in dispute regarding the clearances made during the period under reference. The first activity involved the appellant purchasing raw material, manufacturing finished products, and selling them directly in the wholesale market on payment of appropriate duty. The second activity was carrying out job work of Hot-Rolling on behalf of another company, receiving raw material on a stock transfer basis, and dispatching finished products to the other company's customers on payment of duty. The dispute arose when the department contended that the value of goods manufactured on job work basis should have been determined by the cost construction method due to an increase in raw material cost.

2. The appellant argued that they discharged excise duty based on the sale price of the other company, and any increase in the cost of inputs should not impact the excise duty payment as it was paid on the transaction value. The department had raised a demand based on the addition of the increase in raw material cost, which the appellant contested as irrelevant since they paid duty on the sale price of the other company.

3. The tribunal analyzed the provisions of Notification No.27/92(NT), which allowed the principal manufacturer to authorize the appellant to adopt the sale price for discharging excise duty in the case of job work. The tribunal noted that the appellant followed this provision and discharged duty based on the sale price of the other company. They emphasized that the value under Section 4(i)(a) could not be influenced by any other factor when the valuation method under the notification was adopted.

4. Referring to the Ujagar Print case, the tribunal highlighted that the appellant had the option to choose between the valuation principle in that case or the method provided under Notification No.27/92(NT). Since the appellant opted for the latter and paid duty based on the sale price of the other company, any addition based on the cost of raw material was deemed impermissible.

5. The tribunal also considered the time bar aspect, noting that the appellant had been declaring the price provided by the other company, which was not disputed. As there was no suppression of facts and the declared price was consistent with the actual selling price, the tribunal found the impugned order unsustainable on both merit and limitation grounds. Consequently, the tribunal set aside the order and allowed the appeal.