TMI Blog2011 (3) TMI 1380X X X X Extracts X X X X X X X X Extracts X X X X ..... done on behalf of Reckitt Benckiser India Ltd. which would clearly attract the provisions of Rule 8. The situation in the current appeal before us is totally different which has been set out by us in the earlier paragraphs. In view of this, the decision of this bench in the case of Ultrapack will not be applicable. - E/624-625/2010 - 239-240/2011 - Dated:- 30-3-2011 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. REPRESENTED BY : Shri Ramesh Nair, Advocate, for the Appellant. Shri Ganesh Havanur, SDR, for the Respondent. [Order per : M.V. Ravindran, Member (J)]. These two stay petitions are filed for the waiver of pre-deposit of the amounts confirmed by the adjudicating authority as differential duty. The said amounts have been confirmed by the adjudicating authority on the ground that the appellant herein is liable to pay the differential duty, as they have not adopted proper method for valuating the final products manufactured and cleared by them. Since the issue involved in both these stay petitions and appeals are same, they are being disposed off by a common order. After hearing both sides for some time on the stay petitions, we find that the appeals themse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dispute that the appellants are manufacturing LABSA on job work basis for M/s. HUL. He would submit that the said LABSA was cleared from the factory premises on payment of appropriate duty and the said LABSA was consumed by M/s. HUL for manufacturing of soaps and detergents. It is his submission that the valuation of the goods of the job workers should be determined according to the provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules. He would submit that prior to introduction of provisions of Rule 10A in the Valuation Rules, the appellants were following the same procedure of valuating their product LABSA. It is his submission that the valuation adopted by the appellant was the cost of material consumed for manufacturing of LABSA, processing charges, as has been laid down by the Hon ble Supreme Court in the case of Ujagar Prints and followed in various decisions like Pawan Biscuits Co. (Pvt.) Ltd. v. CCE, Patna [2000 (120) E.L.T. 24 (S.C.)] case. He would draw our attention to the provisions of Rule 10A and submit that Rule 10A will be applicable only when the goods are cleared from the job workers premises directly to the market or to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010. He would submit that the decisions relied upon by the appellant that in respect of Ujagar Prints and Pawan Biscuits were situations covering the period upto July 2007 when Rule 10A was not in existence. 5. We have considered the submissions made at length by both sides and perused the records. 6. The undisputed fact in these cases is the appellant herein is a job worker manufacturing LABSA for M/s. HUL. It is also undisputed that HUL gives LAB and the appellant uses other consumables in the manufacture of LABSA. It is also undisputed that the appellant has been valuing the said LABSA cleared from factory premises, based upon the cost of material plus processing charges prior to 1-4-2007 when the provisions of Rule 10A were inserted into the Central Excise Valuation Rules, 2000. It is also undisputed that the said LABSA is returned back to M/s. HUL for further consumption in their factory premises for manufacturing of soaps and detergents. It is nobody s case that LABSA consumed by HUL is on behalf of the appellant herein. 7. On these factual matrix we need to appreciate the provisions under Rule 10A, which is reproduced herein under :- RULE 10A. Where the excisable go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rule 10A(i) and (ii) does not arise as has been recorded by us in the earlier paragraphs. Provisions of rule 10A(iii) gets attracted which talks about a situation where 10A(i) or (ii) does not apply. The said provision (iii) very clearly mandate that in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever applicable shall mutatis and mutandis apply for determination of value of the excisable goods. This would indicate that the provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 has to be gone through serially. It is not the Revenue s case that provisions of Rules 3, 4, 5, 6 and 7 would also apply in this case. Revenue is of the view that provisions of Rule 8 will apply. In order to understand the Revenue s case, we reproduce the provisions of Rule 8. RULE 8. Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be [one hundred and ten per cent] of the cost of production or manufacture of such goods. 7.2 It can be seen from the above reproduced Rule that this will come into pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rer sells the goods, after it is received from the job worker, is considered as the assessable value. Following the said general principle, it is felt that where the goods manufactured by a job worker are used for captive consumption by the principal manufacturer, in such cases their value would be determined in terms of clause (iii) of Rule 10A read mutatis mutandis with Rule 8 of the Valuation Rules which provides for taking of 110% of the cost of production of the goods. Yours faithfully, (Madan Mohan) Under Secretary (CX. I) Copy to :-All Chief Commissioners of Central Excise and Central Excise Customs. 8.1 It can be seen that the clarification issued by the C.B.E.C. seems to be untenable in view of the foregoing reasons. The views expressed in the Circular are inconsistent with the provisions of Rule 8. The provisions of Rule 8 can be brought into play only if there is consumption of the goods by himself or on behalf of an assessee. Since the said clarification is against the mandate of the said Rule 8 of Central Excise Valuation (Determination of Prices of Excisable Goods) Rules, the said clarification is untenable and has to be held as such. 9. We find that ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he materials supplied free of cost to the job worker). The assessable value in such cases will not include the profit or the expenses like advertisement and publicity, overheads etc.) incurred by the buyer (or the supplier of the raw materials), where the dealing between the two are on principal-to-principal basis. The mere fact that the buyer is supplying some raw materials free of cost to the job worker, will not be sufficient ground to contend that the dealings between the two are not at arms length. Goods manufactured on job work were earlier assessed under the residuary Rule 7 of the erstwhile Valuation Rules of 1975 read with Rule 6(b) read with the Apex Court decisions referred to above. 3. Under the new valuation provisions, introduced with effect from 1-7-2000, there is no departure from the principles laid down by the Apex Court in the above two decisions, in respect of goods manufactured on job work basis. In other words goods manufactured on job work basis after 1-7-2000 will continue to be valued in the same manner as they were being valued before 1-7-2000. In other words, after 1-7-2000, in respect of goods manufactured on job work basis, valuation would be governed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscuits Co. Pvt. Ltd. - 2000 (120) E.L.T. 24. In Ujagar Prints, the Supreme Court said that value for assessment of the goods manufactured by a job worker will consist of the total of the cost of raw material, manufacturing cost and the manufacturing profit. Rule 11 is residuary rule determining the value. In other words, the value of such goods manufactured on job work will be governed by the ratio of the judgment of the Supreme Court in Ujagar Prints. 11. That still leaves us with a question of how the determination of value has to be done as provided under Rule 10A(iii). By elimination of Rule 2 to 10 as they may not apply in a situation like in this case provisions of Rule 11 will apply and Revenue has to take the recourse to provisions of Rule 11 which talks about using reasonable means consistent with the principles and general provisions of these rules read with sub-section (1) of Section 4 of Central Excise Act, 1944. Keeping this in mind, we find that the ratio laid down by the Hon ble Supreme Court in the case of Ujagar Prints and followed by various other decisions of this Tribunal and accepted by Revenue in their various Circulars will squarely apply i.e. to ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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