1985 (6) TMI 141

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..... ers of garments buy grey cotton fabrics and artificial silk fabrics from the market and send them to the respondents for processing. The respondents dye/print these fabrics on recovery of processing charges. Since the fabrics so processed are liable to central excise duty on ad valorem basis, and there being no sale thereof, a dispute arose in these proceedings as to how their value should be determined for assessment of central excise duty. The authorities found that sale price of comparable goods was not available and so they took resort to best judgment assessment under Rule 7 of the Central Excise Valuation Rules, 1975. The Assistant Collector held that assessable value of the processed fabrics should be the sum total of - (1) value of .....

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..... looking after its bailing, forwarding and sale - that nothing was left with the powerloom units except their weaving charges. Though outwardly it was made out that the powerloom units were the manufacturers of fabrics on their own account, the real situation was that these units knew nothing about where the yarn came from and where the cloth went to. The powerloom units shared no profit in the sale of cloth. The Supreme Court saw through this facade and ruled that in the facts and circumstances of this case the master weaver was the real manufacturer of the fabrics, the position of powrloom units being no better than the hired labour of the master-weaver. In the case before us, the department wants us to pronounce the respondents as mere d .....

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..... aragraph 2 above are certainly a part of the intrinsic value of the processed fabric. The cost of the grey fabrics already includes the margin of profit of the weaving unit. Similarly, the job charges recovered for processing the fabrics also include the margin of profit of the processor. The weaving unit and the processor are the only two manufacturers involved. Since the garment exporter is not a manufacturer of these fabrics but the user thereof, his margin of profit cannot form a part of the assessable value of the processed fabrics. 5. The learned representative of the department argued before us during the hearing that the first three elements of cost specified in para 2 above do not exhaust all the elements that ought to go int .....

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