2017 (2) TMI 1168 - AT - Central Excise

Valuation - Job work - The Revenue tried to apply the same price of the principal on the clearance of goods from the job-worker i.e. appellant, for the reason that the appellant has manufactured the goods on loan license basis - Held that - there is no different law for the manufacture of the medicaments and manufacture of other goods as regard valuation of the goods. Therefore, merely because the appellant has manufactured medicaments on loan license basis, the valuation principle cannot be discarded - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Manufacture of medicaments on behalf of other companies under a loan license agreement and valuation of goods for excise duty purposes.

Analysis:
The case involved the appellant engaged in manufacturing medicaments under Heading 3003 of the Central Excise Tariff Act, 1985, on behalf of other companies under a loan license agreement. The appellant valued the goods on a cost construction method for excise duty purposes, considering the cost of raw materials and job charges. A show-cause notice contended that the appellant, acting on behalf of other companies, should be treated as an agent of the principal manufacturers, leading to excise duty being chargeable on the sale price of the medicaments. The adjudicating authority upheld the differential duty demand. The appellant, aggrieved by the decision, appealed to the Commissioner (Appeals) and subsequently to the Tribunal.

The appellant argued that they were manufacturing medicaments for other companies on a job work basis, maintaining a principal-to-principal relationship. They contended that the valuation method based on the cost of manufacturing plus profit of the job-worker was correct, citing legal precedents such as the Ujagar Prints case and decisions by the Supreme Court and Tribunal. They emphasized that they should not be considered related persons or agents of the principal manufacturers, relying on various judgments and circulars to support their position.

On the other hand, the Revenue reiterated the findings of the impugned order, maintaining that the appellant should be treated as an agent of the principal manufacturers for excise duty valuation purposes. However, the Tribunal, after considering both sides' submissions, concluded that the appellant was manufacturing goods on a job work basis without being an agent of the principal manufacturers. The Tribunal referenced legal precedents, including the Ujagar Prints case, to support the valuation method adopted by the appellant. It emphasized that the principles established by the Supreme Court for valuing job-work goods should be applied, rejecting the Revenue's argument to apply the principal's sale price for clearance of goods. The Tribunal found no merit in the Revenue's case, setting aside the impugned order and allowing the appeal.

In conclusion, the Tribunal's judgment favored the appellant, ruling that the valuation method based on the cost of raw materials and job charges was legal and correct for goods manufactured on a job work basis. The Tribunal emphasized the independence of the appellant in manufacturing the goods and rejected the Revenue's argument to treat the appellant as an agent of the principal manufacturers for excise duty valuation purposes. The decision was based on established legal principles and precedents, ultimately setting aside the differential duty demand imposed on the appellant.