Supreme Court's order, dated 27-1-1989 in the case of M/s. Ujagar Prints etc. etc. v. UOI & Others - Reg - Central Excise - 67/42/88-CX.2

Supreme Court's order, dated 27-1-1989 in the case of M/s. Ujagar Prints etc. etc. v. UOI Others - Reg F. No. 67/42/88-CX.2 Dated 17-5-1989 Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Supreme Court's order, dated 27-1-1989 in the case of M/s. Ujagar Prints etc. etc. v. UOI Others - Reg. I am directed to refer to the Supreme Court's order, [1989 (39) E.L.T., 493 (S.C.)], dated 27-1-1989 in the case of M/s. Ujaqar Prints etc. etc. v. UOI Others and to say that references have been made by some of the Collectors to the Board seeking clarification as to the practical application of the order to the facts of a given case. In particular, clarification has been sought for as to whether mere aggregate of the cost of grey-fabric and the job charges declared by the trader/processor would constitute the assessable value. It has also been suggested that the Board may consider whether the Hon'ble Supreme Court may be moved by the Department for further clarification as the order seems to be contrary to the existing practice of treating the trader's price as the assessable value. 2. The matter has been carefully examined by the Board in the context of the doubts raised in this regard. The Board is of the view that the application for further clarification of the Hon'ble Court's order is not called for. The order, dated 27-1-1989 clarifies as to what principles are to be applied for determination of assessable value of fabrics processed on job basis. This order was passed by a Constitution Bench of the Supreme Court in the context of the doubts which were raised for clarifying as to the "place and time" of removal for the purpose of computing the assessable value. Doubts were expressed as to whether excise duty is leviable on the basis of the value at the factory gate or on the basis of the value at which a trader sells the fabrics in the wholesale market outside the factory gate after the goods have left the factory gate. 3. It would be seen that the Hon'ble Court has clarified, inter alia, that the price at which the processed fabrics would have been sold at the factory gate or the "deemed" factory gate is relevant for determination of the assessable value. It follows from the order that the mere aggregate of the value of grey cloth in the hands of the processor and the value of job work done would not constitute the assessable value. Two more ingredients, namely, the manufacturing profit and the manufacturing expenses, whatever these may be, are to be come and determined for assessment of the processed fabrics u/s the Central Excises Salt Act. 4. The trader's profit, as such, is not to be included as assessable value. However, the assessable value is to be determined in each case applying the principles laid down in order, dated 27-1-1989 and keeping in view the provisions of Section 4 of the Central Excises Act and the rules made there under information furnished by the trader/processor, including trader's wholesale price, would be quite relevant for this purpose. Necessary action may, therefore, be taken accordingly. 5. The Board, desires that the implications of the Supreme Court's order on the revenue (by way of refunds etc.) may be examined on an immediate basis and a comprehensive report to this regard may be sent to the Commissioner (Tax Research) two weeks of the receipt of this letter so that retrospective legislation may be considered to protect revenue loss, if considered necessary.