2009 (5) TMI 486 - AT - Central Excise

Valuation- The relevant facts that arise for consideration are, that the respondent during the period October 2001 to February 2002 manufacture Robin Blue retail packs on job work basis and it was alleged that there was under valuation as they had not included a margin of 15% on the cost of production of the main raw materials viz Ultramarine Blue in bulk form. The said ultramarine blue in bulk form is cleared by respondent s Principal M/s. Reckitt Benckiser India Ltd., on payment of appropriate duty on the cost of production plus 15% margin as provided under Rule 8 of the Central Excise Valuation Rules, 2000. After receipt of the said ultramarine blue in bulk form, respondent repacked the same into retail pack and was discharging duty on clearance of such retail packs by arriving at the value by the formula as is settled by Hon ble Supreme Court in the case of Ujagar Prints i.e. considering the cost of production in the hand of main raw material supplier i.e. M/s. Reckitt Benckiser India Ltd. and not adding the 15% margin to the said cost of production. Show cause notice was issued demanding differential duty on this 15% margin. Adjudicating Authority after considering the submissions made before dropped the proceedings initiated by the show cause notice. Held that- the impugned order is set aside and Revenue s appeal is allowed by way of remand to the Adjudicating Authority to reconsider the issue afresh on all the points, which may be raised by the respondent.

Summary

Issues: Valuation of goods based on cost of production, inclusion of profit margin, application of Rule 8 of Central Excise Valuation Rules, 2000, interpretation of Supreme Court judgments, applicability of Larger Bench decisions, limitation period for demanding duty.

Valuation based on cost of production and profit margin:
The case involved a dispute regarding the valuation of goods manufactured on a job work basis, specifically focusing on the inclusion of a 15% profit margin on the cost of production of the main raw material, Ultramarine Blue. The appellant argued that the cost of raw material should include the 15% margin as per Rule 8 of the Central Excise Valuation Rules, 2000. On the other hand, the respondent contended that the cost of the raw material should be based on the value charged by the principal raw material supplier, without adding the profit margin. The Tribunal examined the submissions and considered relevant precedents to address this issue.

Application of Rule 8 and interpretation of Supreme Court judgments:
The Tribunal referred to the decision of a Larger Bench in a similar case involving the valuation of goods used for manufacturing other articles. The Larger Bench clarified that the value of goods used for manufacturing other products should be determined as per Rule 8 of the Valuation Rules, which considers the cost of production or manufacture of such goods. The Tribunal emphasized the distinction between "cost" and "value" in determining the assessable value of goods, aligning with the principles established in Supreme Court judgments. The Tribunal analyzed various aspects of the case in light of Rule 8 and the interpretation of relevant legal precedents.

Applicability of Larger Bench decisions and limitation period:
The respondent's counsel cited decisions of Larger Benches and Circulars to support the argument that the profit margin of the raw material supplier should not be included in the assessable value of finished goods produced on a job work basis. The Tribunal examined these references and assessed their relevance to the present case. Additionally, the issue of the limitation period for demanding duty was raised, emphasizing the compliance of the appellants with price declarations and the availability of Cenvat credit. The Tribunal considered these factors while evaluating the arguments presented before reaching a decision.

Conclusion and Remand:
After thorough consideration of the submissions from both parties and the legal precedents cited, the Tribunal concluded that the order of the Larger Bench favored the Revenue and set aside the impugned order. However, the Tribunal noted that the Adjudicating Authority had not provided findings on certain crucial aspects, such as the actual value of the raw material and the potential limitation on the demand for duty. As a result, the Tribunal remanded the matter back to the Adjudicating Authority for a fresh consideration of the issues raised by the respondent. The Adjudicating Authority was directed to reevaluate the case in light of established case law and other relevant points within a specified timeframe.