2018 (5) TMI 393 - AT - Central Excise

Valuation - inclusion of value of pre-supply inputs used in the manufacture of job-work goods - The case of the department is that the value of such two types of critical raw material supplied by Ranbaxy should be added in the assessable value of the goods manufactured by the appellant - Held that - Merely because the certain raw material was supplied by the principal under Rule 57F or 57 AC of erstwhile Central Excise Rules, 1944, the inclusion of cost of such raw material cannot be avoided. Since the appellant have opted to job-work on payment of excise duty then the correct assessable value has to be arrived at i.e. cost of all the raw materials used in the manufacture job charges and nothing can be excluded from such value. The proposal of the department is to include actual cost of the raw material on which cum duty value should not be further taken, hence the same cannot be allowed on this count. Appeal dismissed - decided against appellant.

Summary

Issues:
Assessable value calculation for job-work goods including critical raw materials supplied by principal under Central Excise Rules.

Detailed Analysis:
The case involved the appellants engaged in the manufacture of chemicals on a job-work basis for a principal company, who provided critical raw materials. The dispute arose regarding the inclusion of the value of these raw materials in the assessable value of the goods manufactured. The department contended that the value of the raw materials supplied by the principal should be added to the assessable value, leading to a demand for differential duty, which was confirmed by the Commissioner (Appeals).

The appellant argued that since the raw materials were supplied by the principal under specific rules, their value should not be included in the assessable value. The appellant relied on various judgments to support their case. Additionally, they argued that the cum duty value should be adopted for calculating the differential duty, citing a Supreme Court judgment. They further contended that the highest value of the raw materials should not be considered for duty calculation.

The Tribunal analyzed the submissions and referred to valuation principles established by the Supreme Court in previous cases. It was held that for job-work goods, the valuation should be based on the cost of raw material plus job charges. Therefore, the cost of raw materials supplied by the principal had to be included in the assessable value. The Tribunal rejected the argument that CENVAT Credit availed by the principal should lead to duty reduction, as no provision allowed such deductions under Valuation Rules.

Regarding the cum duty value and the contention about the highest value of raw materials, the Tribunal found no evidence provided by the appellants to support their claims. Consequently, the Tribunal upheld the impugned order, dismissing the appeal and sustaining the differential duty demand.

In conclusion, the Tribunal emphasized that the correct assessable value for job-work goods should include the cost of all raw materials used in manufacturing, in accordance with established valuation principles. The decision highlighted the importance of following valuation rules and principles in determining the assessable value of goods, even when certain raw materials are supplied by the principal under specific rules.