2017 (7) TMI 440 - AT - Central Excise

Valuation - job-work - whether the job worker is required to discharge duty liability on the basis of selling price of the principal manufacturer? - Held that - issue regarding valuation of goods manufactured on job work basis is no more res integra and the law has been well settled in this regard by the Hon ble Apex Court in the case of Ujjagar Prints 1988 (11) TMI 106 - SUPREME COURT OF INDIA , where it was held that the job worker is not required to discharge duty liability on the basis of selling price of the principal manufacturer. - the adjudicating authority has rightly dropped the allegation in this regard and the interference by the Commissioner (Appeals) by placing reliance on the N/N. 27/92 dated 09.10.1992 is misconceived - Valuation - includibility - machine rental charges - Held that - the issue settled by the judgment in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI Versus PEPSICO INDIA HOLDINGS (P) LTD. 2009 (1) TMI 53 - SUPREME COURT wherein it has been categorically held that the charges are not includible in the assessable value. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Valuation of goods manufactured on job work basis; Inclusion of Machine Rental Charges in assessable value; Appeal against non-imposition of equal penalty.

Valuation of goods manufactured on job work basis:
The appellant, a job worker for a beverage company, was using materials supplied by the main manufacturer and clearing products on payment of appropriate duty. The department contended that Machine Rental Charges were not included in the assessable value. The adjudicating authority dropped the proceedings, stating that the transaction should be treated as manufacture on a job work basis. They relied on the Apex Court judgment in M/s. Ujjagar Prints for valuation. The Commissioner (Appeals) allowed the department's appeal, citing Notification No. 27/92-CE (NT). However, the Tribunal held that the valuation issue was settled by the Ujjagar Prints case, and the interference by the Commissioner was misconceived.

Inclusion of Machine Rental Charges in assessable value:
The department appealed against the non-imposition of an equal penalty, arguing that Machine Rental Charges should be included in the assessable value. The appellant's counsel referred to Circular No. 619/10/2002-CX and the Ujjagar Prints case, stating that the value of job worked goods must be determined based on this landmark decision. The Tribunal found that the issue of Machine Rental Charges was settled by the judgment in Pepsico India Holding Ltd., upheld by the Supreme Court. They concluded that these charges are not includible in the assessable value, thereby setting aside the demand confirmed by the Commissioner (Appeals).

Appeal against non-imposition of equal penalty:
The department filed an appeal against the impugned order, seeking the imposition of an equal penalty. However, the Tribunal dismissed the department's appeal and allowed the appellant's appeal, emphasizing that the demands made were not justified based on the settled legal principles regarding valuation and inclusion of charges in the assessable value.

This judgment clarifies the valuation principles for goods manufactured on a job work basis and the inclusion of charges in the assessable value, providing a detailed analysis based on legal precedents and circulars.