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Commissioner of Central Excise, Mumbai-IV Versus Ruby Mills Ltd.

2016 (4) TMI 58 - CESTAT MUMBAI

Valuation of the goods manufactured on job-work basis - sale at processor's factory-gate needs to be loaded with the trader's profit and discharge excise duty or otherwise - Held that:- The assessable value should be the value worked out based on the cost of the material and the job-work charges. The Revenue's claim that the respondent had collected over and above the job-charges in the form of cutting, checking and packing of the processed fabrics is without any evidence and there is nothing on .....

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to include the trader's profits who gets the fabrics processed, because those would be post-manufacturing profits. - We also find that the first appellate authority has correctly enunciated the law as to the activity of job-work as to how it should be understood and the valuation of the said goods to be done. - Decided against revenue - Appeal No. E/1316/2005 - Final Order No. A/3788/2015-WZB/EB - Dated:- 4-11-2015 - M. V. Ravindran, Member (J) And C J Mathew, Member (T) For the Appellant : .....

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ory of Risha was closed in September 1998 and they were getting their finished products manufactured on job-work basis form the respondent and the respondent was discharging duty liability based upon the cost of the grey fabrics plus processing charges'. The lower authorities were of the view that the respondent should have included the trader's profit and various other costs incurred for cutting, packing, etc. to discharge the duty liability as the goods i.e., processed fabrics were cle .....

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fit. 3. The learned Departmental Representative would submit that the Revenue is aggrieved by the said order on the ground that the first appellate has not considered the judgment of the apex Court in the case of Pawan Biscuits co. (Pvt.) Ltd. vs. Collector of Central Excise, Patna 2000 (120) ELT 24 (SC) and the ratio of Ujagar Prints (supra) case. It is his submission that the assessable value of the processed fabrics would be the value of the grey cloth in the hands of the processor. The value .....

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that since Risha did not have its own premises for carrying out the activity like cutting, packing and folding of the processing fabrics, the same being carried out by the respondent, the charges should be included in the assessable value and it seems that the respondent had not done so. It is also his further submission that the respondent had cleared the goods on the invoice indicating address of Risha at Badlapur wherein the unit never functioned therefrom and closed operations since 1988. It .....

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ra) and submit that the post manufacturing profit of the traders need not be included in the cost, is the law which has been declared by the apex Court for the material period in question and has been followed in the various cases as also in the case in hand. It is his further submission that invoking of the extended period is totally incorrect as the respondent had filed various declarations with the authorities before clearance of the goods from their factory premises. It is also his submissio .....

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cords. 6. The only issue that falls for consideration in this case is whether the valuation of the goods manufactured on job-work basis and allegedly sold at processor's factory-gate needs to be loaded with the trader's profit and discharge excise duty or otherwise. 7. It is undisputed that the respondent is undertaking jobwork of processing the grey fabrics sent to them by Risha and has filed various price declarations with the authorities as prescribed during the relevant period based .....

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of the respondent and as per the judgment of the apex Court in the case of Ujagar Prints (supra) deemed factory-gate would the factory-gate of the respondent. 9. We find no merit in the submissions made by the learned departmental representative for more than one reason. Firstly, there is no dispute as to the declarations as required by the law having been filed by the respondent to the authorities and there is nothing on record to show that the department challenged such declarations earlier. I .....

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h November, 1988, it is made clear that the assessable value of the processed fabric would be the value of the grey-cloth in the hands of the processor plus the value of the job work done plus manufacturing profit and manufacturing expenses whatever these may be, which will either be included in the price at the factory gate or deemed to be the price at the factory gate for the processed fabric. The factory gate here means the 'deemed' factory gate as if the processed fabric was sold by .....

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alue. 2. If the trader, who entrusts cotton or man-made fabric to the processor for processing on job work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market, that would be taken by the Excise authorities as the assessable-value of the processed fabric and excise duty would be charged to the processor on that basis provided that the declaration as to the price at which he would be selling the processed goo .....

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at which he is selling the goods must be the value of the grey-cloth or fabric plus the value of the job work done plus the manufacturing profit and the manufacturing expenses but not any other subsequent profit or expenses. It is necessary to include the processor's expenses, costs and charges plus profit, but it is not necessary to include the trader's profits who gets the fabrics processed, because those would be post-manufacturing profits." 10. It can be seen from the above rep .....

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uch evidence, we find that the findings of the first appellate authority in paragraph No. 13 are correct and we reproduce the same. "13. The Supreme Court had to give a clarificatory order. "The assessable value of the processed fabric would be the value of the grey cloth in the hands of the processor plus the value of the job work done plus manufacturing profit and manufacturing expenses whatever they pay. It is not necessary to include the trader's profits who get the fabrics pro .....

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o consideration for arriving at the assessable value. But the Hon'ble Supreme Court did not agree. Following Ujagar, the Hon'ble Supreme Court held that the cost of raw materials plus the job worker's cost and profit shall be included not the profit of M/s Britannia or the expenses incurred after the manufacture of the biscuits by the appellant. With the Hon'ble Supreme Court reiterating the position, as of now this is the settled law of the land. Thus, it reveals that the goods .....

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first appellate authority has correctly enunciated the law as to the activity of job-work as to how it should be understood and the valuation of the said goods to be done. We reproduce paragraph 15 and 16 "15. A job worker may undertake manufacturing of excisable goods on account of others from the raw material supplied to him free of cost, and on return of the goods so-manufactured to them he takes job charges i.e manufacturing expenses plus his manufacturing profits. In some cases, the jo .....

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he value of goods manufactured on job work basis, would be the value of raw materials in the hands of job worker plus job charges including manufacturing profit; but it does not include the selling expenses and trader's (ie. Supplier of raw materials) profits because those would be post manufacturing profits. To make the position clear, the Hon'ble Supreme Court has issued a clarification in the aforesaid case of M/s Ujagar Prints, reported in1989 (39) ELT 493 (SC). This decision is foll .....

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e decisions of the Hon'ble Supreme Court, the equation for valuation of goods manufactured on job work basis is determined as under Value of goods manufactured on job work = Landed cost of raw materials in the hands of jobworker + job charges including profit of the job worker. Thus in the instant case, even if goods are delivered at factory gate by job worker under the instruction of Trader manufacturer the valuation has to be taken as per aforesaid decision and price of the said goods sold .....

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