1997 (8) TMI 173 - AT - Central Excise

Summary

Issues:
1. Whether trader's profit should be included in the assessable value of processed fabrics.
2. Whether shrinkage value should be added to determine the assessable value of processed fabrics.
3. Whether incidental charges/interest charges should be added to the assessable value.

Analysis:

Issue 1: Trader's Profit in Assessable Value
The Appellate Tribunal considered the appeal against the provisional assessment order by the Asstt. Commissioner, who included trader's profit in the assessable value of processed fabrics. The Commissioner (Appeals) set aside this order, stating that the inclusion of other elements without a show cause notice was improper. Referring to previous judgments, it was held that trader's profit is not to be included in the assessable value. The Tribunal, following precedent decisions, concluded that adding notional profit was not permissible, as it was already included in the processor's profit element.

Issue 2: Shrinkage Value in Assessable Value
Regarding the inclusion of shrinkage value in the assessable value, the Tribunal referred to the Supreme Court's decision in Ujagar Prints case. It was established that the assessable value should cover the value of grey cloth, job work, manufacturing expenses, and profit. The Tribunal rejected the argument that shrinkage should not be added, emphasizing that the value of grey cloth received by the processor must be considered. The Tribunal upheld the Asstt. Commissioner's decision to include shrinkage value in the assessable value.

Issue 3: Incidental Charges/Interest Charges
The Tribunal agreed with the Commissioner (Appeals) that the Asstt. Commissioner's order lacked justification for adding 1% incidental charges/interest charges. It was noted that the rate and period for charging interest were not specified, rendering the order unfounded. The Tribunal found merit in the argument that the order for adding incidental/interest charges was not adequately supported. Consequently, the Commissioner (Appeals) decision to set aside this aspect of the Asstt. Commissioner's order was upheld.

Conclusion
In conclusion, the Tribunal modified the Commissioner (Appeals) order by upholding the inclusion of shrinkage value in the assessable value of processed fabrics. However, the decision to add notional profit and incidental charges/interest charges was deemed unsustainable. The Tribunal disposed of the appeal by restoring the Asstt. Commissioner's order regarding shrinkage value and upholding it in other aspects.