2018 (8) TMI 1444 - AT - Central Excise

Valuation - P or P Medicaments cleared during the period July, 2002 to March, 2005 - value at which M/s PD sells the said Medicaments in the market - value of free supply of machinery, raw material and packing material is not considered - Held that - It is specifically recorded by the adjudicating authority that the genuineness of the transaction between the respondent and the said PD is not doubted in as much there is no allegation in the show cause notice that debit notes were fake and the show cause notice has not challenged the said debit notes, a finding not effectively countered by Revenue in appeal. The adjudicating authority was correct in relying upon the agreement executed by the respondent (PD) for manufacturing of P or P Medicaments on principal to principal basis, in discharging the Central Excise duty on the value which is arrived based upon cost of production ( ) profit margin as is decided by the Apex Court in the case of Pawan Biscuits 1991 (1) TMI 249 - CEGAT, NEW DELHI - the impugned order is correct and legal - appeal dismissed - decided against appellant.

Summary

Issues involved:
Valuation of P or P Medicaments for Central Excise Duty between July 2002 to March 2005.

Analysis:
1. Issue of Valuation Dispute:
The appeal before the Appellate Tribunal CESTAT Hyderabad pertained to a dispute regarding the valuation of P or P Medicaments for Central Excise Duty between July 2002 to March 2005. The Revenue contended that the respondent should have discharged Central Excise Duty based on the value at which M/s Parke Davis (I) Ltd (PD) sold the Medicaments in the market, rather than the agreed value between them. The Revenue argued that the valuation was incorrect as it did not consider the free supply of machinery, raw material, and packing material. The respondent contested the show cause notice, leading to the adjudicating authority dropping the proceedings. The Revenue appealed against this decision.

2. Interpretation of Job Worker Status and Valuation Rules:
The Learned Commissioner argued that the respondent should not be considered a job worker and that the provisions of Rule 11 read with Rule 6 of Valuation Rules should apply. The Commissioner cited the judgment of the Hon'ble Supreme Court in the case of Ujagar Prints and Pawan Biscuits. It was contended that the respondent should have included the additional consideration in the valuation, such as free supplies of raw material, machinery, knowhow, labels, designs, cartons, and foils received from PD. The Commissioner emphasized that these costs should have been factored into the valuation.

3. Evaluation of Evidence and Decision:
Upon careful consideration of the submissions and evidence, the Tribunal found that the respondent had purchased the plant and machinery, raw material, and packing material. The Tribunal noted that the cost of machinery was based on the written down value, and the cost of raw materials was evaluated at the time of supply. Statements from responsible personnel of both parties indicated that the transactions were on a principal-to-principal basis, and debit notes were raised to adjust the costs. The Tribunal observed that the genuineness of the transactions was not in doubt, as there were no allegations that the debit notes were fake. Therefore, the Tribunal upheld the adjudicating authority's decision to rely on the agreement for valuation based on the cost of production and profit margin, as established in previous judgments.

4. Conclusion:
Ultimately, the Tribunal found no reason to interfere with the Order-in-Original, as it was well-reasoned and legally sound. The Tribunal upheld the impugned order, stating that it was correct and free from any infirmity. As a result, the appeal by the Revenue was rejected, and the decision was in favor of the respondent.