Assessable value of goods subjected to value addition by processes not amounting to manufacture - Central Excise - 139/08/2000-CX. 4

Circular No. 139/08/2000-CX. 4 Dated 3-1-2001 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Assessable value of goods subjected to value addition by processes not amounting to manufacture - I am directed to refer to your letter No. CCU(DZ) CX/122/2000, dated 7-9-2000 on the subject noted above. You have drawn Board's attention to the decision of the Supreme Court in the case of M/s. Siddharth Tubes Limited v. CCE. In this case, it was held that the assessable value has to be calculated on the galvanized black pipe and the cost of galvanisation must form part thereof. The black pipes were subsequently galvanized in a separate section of the manufacturer called Galvanized Shed, but Supreme Court did not consider the shed a separate factory. You have raised a doubt as to whether the ratio of Siddharth Tubes case can only be applied if the processes such as galvanisation or coating, said to be processes not amounting to manufacture, are undertaken inside the same premises and has desired to know whether such value addition will be liable to duty if the goods manufactured are cleared to another premises outside the factory, for doing subsequent processes which may not amount to manufacture on behalf of the manufacturer. In view of the Supreme Court judgment in the case of M/s. Siddharth Tubes Limited [2000 (115) E.L.T. 32 (S.C.)] and in JG Glass case [1998 (97) E.L.T. 5 (S.C.)], Ministry of Law was requested to advise as regards to duty liability on value addition where the duty paid goods are cleared to other units for carrying further processes not amounting to manufacture and the other unit belongs to same group or is that of the job workers who merely processes the goods without owning them and collects job charges and return or clears the goods on behalf of the supplier of the goods. The Law Ministry has advised that the judgment of the Siddharth Tubes Ltd. 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. The Advice of the Ministry of Law has been accepted by the Board. 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.