VALUATION RULES, Central Excise

[SURESH BAGADIYA]

WE ARE ENGAGED IN GALVANIZATION OF M.S. ANGLES, M.S.FLATES AND PLATES. WE ARE GETTING M.S.ANGLES AND M.S.FLATES FREE OF COST FROM SUPPLIER ON DELIVERY CHALLAN AND WE CARRIED OUT HOT DIP GALVANIZATION. WE ARE MAKING INVOICE FOR THE SALES OF ZINC ONLY AND CHARGING EXCISE ON THE VALUE OF SALES OF ZINC AND ALSO AVAILING THE CREDIT OF ZINC PURCHASED BY US. MOST OF THE PARTIES ARE EXCISABLE AND REST ARE SSI UNITS HAVING TURNOVER OF LESS THAN 150 LACS. HOWEVER DEPARTMENT CLAIMING THAT VALUATION SHOULD BE AS PER RULES 10A AND ASSESSABLE VALUE SHALL BE THE GOODS AT WHICH GOODS REMOVED BY THE RAW MATERIAL SUPPLIER.

SO WHAT SHALL BE THE VALUE ON WHICH WE HAVE TO COLLECT EXCISE DUTY...????

Posts / Replies

[KASTURI SETHI]

Sh.Suresh Bagadiya Ji,

Your approach is totally wrong and the Department is absolutely right on the issue. You have committed two mistakes:-

(i) Non-payment of proper CE duty by way of undervaluation.

(ii) Non-following proper procedure of job-work under Notification No.214/86-CE as amended,

You have manufactured the excisable goods and removed the goods without proper payment of duty. Paying Central Excise duty on value of zinc only is not correct at all.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir.Thanks.

[Rajagopalan Ranganathan]

Sir,

As per Note 4 of Chapter 73 of first schedule to Central Excise Tariff Act, 1985, "in relation to products of Chapter 73, the process of galvanization shall amount to 'manufacture' ". Therefore the process undertaken by you amounts to manufacture. Therefore you cannot avail exemption granted by Notification No. 214/86-CE. Therefore the procedure followed by your supplier is not correct. He has to remove the M.S. Angles, M.S. Flats etc on payment of duty to you and you can take the credit of the duty paid on such articles. Then you subject the M.S. Angles, M.S. Flats etc to the process of galvanization and you have to pay duty on the transaction value at which you clear the galvanized products to your supplier. Your supplier can take credit of duty paid by you.

If your supplier the clears the galvanized products directly from your factory then rule 10 of Central Excise Rules, 2002 is applicable. Otherwise rule 10 is not applicable to you. This is my opinion.

[PAWAN KUMAR]

dear sir,

as per my view the duty is to be paid on value of material (galvanized) , cost of material plus cost of galvanization.

refer ujagar prints case.

[MUKUND THAKKAR]

As per my view it seems that your unit is carried out Hot Dip Galavizing activity. on job work basis in such cases no need to pay excise duty , but you have to pay service tax. what ever activity at present your are doing which is totally incorrect as explained by Sh. Kasturi sethiji..

[KASTURI SETHI]

Sh.Bagadiya Ji,

Pl. go through following Board's Circulars deeply. Duty is to be calculated on the transaction value but you will have to arrive at transaction value. There must be some basis for arriving at transaction value and that is mentioned in the undermentioned Board's circulars which is based on the Supreme Court judgement in the case of Ujagar Prints and Pawan Biscuits. Value of free goods has to be taken into account.

Value of raw material (including free of cost)+Cost of manufacture+ Profit ( Your profit on the product)

Valuation of recorded CD manufactured on job-work basis - Clarifications

Circular No. 619/10/2002-CX., dated 19-2-2002

 

How will valuation be done in cases of job-work ?

Please also refer to Board’s Circular 619/10/2002-CX., dt. 19-2-2002. Cost of transporting the raw materials/inputs to the premises of the job-worker will also be added to determine the cost of the raw material/input. [1997 (71) ECR 381 (TRIB)]

[KASTURI SETHI]

Sir,

ST is attracted on job-work if activity does not amount to manufacture (Except liquor). Here the activity (galvanization) amounts to manufacture. So CE duty is payable.

[KASTURI SETHI]

Sh.Mukund Thakkar Ji,

Sir, Pl. confirm "Does hot-dip galvanization not amount to manufacture ?"

Thanks.

[MUKUND THAKKAR]

Sh. Kasturi Sethiji,

As per Note 4 of Chapter 73 of first schedule to Central Excise Tariff Act, 1985, "in relation to products of Chapter 73, the process of galvanization shall amount to 'manufacture'

I am just picking word M.S. ANGLES, M.S.FLATES AND PLATES. all items of Iron and steel of chapter 72. not chapter 73. if any articles not covered under chapter 73.on what basis it is considering the amount of manufacture...

Other wise all expert view is up to mark.. but just i am sharing my view.. if I am wrong please correct.

[KASTURI SETHI]

Sh.Mukund Thakkar Ji,

Sir, Pl. go through the Board's circulars which are based on the judgements of Supreme Court and accepted by the Board on the advice of Ministry of Law on this very issue. Both the circulars have neither amended nor withdrawn.

Valuation (Central Excise) - Assessable value of goods subjected to value addition by processes not amounting to manufacture

Circular No. 139/08/2000-CX. 4, dated 3-1-2001

Valuation (Central Excise) of the goods where subsequent process does not amount to manufacture but the process adds to the intrinsic value of the product to make up full commercial value - Supreme Court decision in Civil Appeal No. 7282 of 1996, dated 3-11-1999 [2000 (115) E.L.T. 32 (S.C.)] =1999 (11) TMI 69 - SUPREME COURT OF INDIA in the matter of M/s. Sidhartha Tubes Ltd. v. CCE.

Circular No. 526/22/2000-CX., dated 19-4-2000

[Ganeshan Kalyani]

Either service tax or excise duty would apply but not both.

[YAGAY AND SUN]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE, CHENNAI - I

121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034.

GENERAL CIRCULAR NO: 03/2001 DATED:24.1.2001

 

Sub: CE - Assessable value of goods subjected to

value addition by processes not amounting to

manufacture - Regarding.

Copy of Board's letter F.No.139/08/2000-CX.4 dated 03.1.2001 along with the advice of the Ministry of Law are communicated herewith for information and appropriate action.

Issued from file C.No.IV/16/301/2001-CX.POL.)

 

Ministry of Law, Justice & CO. Affairs

Department of Legal Affairs

Advice (B) Section

The referring department seeks to be advised whether the Apex Court judgment in the case of Siddharth Tubes Ltd. 2000 (115) ELT 32 SC can be applied for charge of duty on value addition outside the factory of clearance on account of certain processes not amounting to manufacture on manufactured goods in a split / other unit of the same group or by an independent job worker from the original manufacturer of the product if there is no sale to these units / job worker.

2. The referring department's note at pre-page explains the reference. Based on the reference it is observed that one of the positions that may arise is where the goods manufactured in the factory premises are subjected to further process in a shed within factory premises. The other position would be where the goods are manufactured in the factory premises and are subsequently transferred to another unit / job worker outside the factory premises for further process. In the former case, this aspect was considered by the Apex Court in the case of Siddharth Tubes Ltd. Vs Collector of Central Excise, 2000 (115) ELT 32 SC and the Apex Court has held that the mere fact that the process of galvanisation is carried on in another shed can made no difference. The Apex Court further held that when the assessable value is to be calculated of the galvanized black pipe made by the appellants, the element of the cost of galvanization must form part thereof. Thus, it can be seen that the Siddharth Tubes (Supra) case has dealt with a situation where the goods are subjected to further process after manufacture though in a different shed but within the same premises.

3. As regards the other event where the goods have been cleared from the factory premises on payment of duty and have been subjected to further process in a different unit outside the premises of the assessee, such a situation cannot be taken into its fold by the Siddharth Tubes (supra) case. Such a situation would be covered by the case of Union of India Vs J.G.Glass Industries Ltd. 1998 (97) ELT 5 SC wherein both the above situations have been considered by the Apex Court. The Supreme Court in the said case has held that no duty /differential duty is payable again if printing / decoration on the bottles is done in separate premises. The Apex Court further held that duty shall be payable on value of printed bottles if manufacture of bottles and printing thereon is carried out within the same factory because in the latter case, the ultimate product happens to be excisable item at the factory gate which is printed bottle. Thus, it can be seen that in the given situation where the duty paid goods have been subject to further process in a premises other than the factory premises, no further value addition can be made to charge duty. Such a situation as aforesaid, would be covered by J.G.Glass (Supra) case as the ratio therein is the law as laid down by the Apex Court and continues to be so as in the case of Siddharth Tubes J.G.Glass (Supra) case neither has been considered not has till date been overruled by any subsequent Apex Court decision.

4. In view of the above, we advise that the judgement of the Siddarth Tubes ltd. (Supra), does not enable the department to charge duty on value addition outside the factory of clearance on account of certain processes not amounting to manufacture of manufactured goods in a separate / other unit of the same group or by any independent job worker.

JS&LA may please see.

[YAGAY AND SUN]

Commr. Of C. Ex. vs P.S.L. Corrosion Control Ltd. on 28 November, 2003 (151) ELT 439 Tri Del - 2002 (11) TMI 143 - CEGAT, COURT NO. II, NEW DELHI