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2016 (4) TMI 58 - CESTAT MUMBAI

2016 (4) TMI 58 - CESTAT MUMBAI - 2016 (343) E.L.T. 395 (Tri. - 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 packin .....

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rocessor's expenses, costs and charge 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. - 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 - .....

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& Printing Pvt. Ltd. (hereinafter referred to as Risha'). The factory 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 .....

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ch duty liability has to be discharged cannot include the trader's profit. 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 wou .....

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pon the sale value of the processed fabrics. It is his further submission 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 wherei .....

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e Supreme Court's Constitution bench in the case of Ujagar Prints (supra) 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 cl .....

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idered the submissions made at length by both the sides and perused the records. 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 declara .....

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nd the clearances to Risha's customers took place at the factory-gate 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 .....

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ellaneous petition for clarification of this Court's judgment dated 4th 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 .....

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manufacturing profit and expenses. That would be the correct assessable-value. 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 .....

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he liabilities under the said Act and the rules made thereunder. The price 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 .....

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re being paid by the said Risha to the respondent. In the absence of any such 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 .....

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efore, it is M/s. Britannia's wholesale price which is to be taken into 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 .....

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hose would be post-manufacturing profits." 11. 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. 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 ma .....

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as given a landmark decision in the aforesaid case of Ujagar Prints that the 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 .....

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. 643/34/2002-CX, dated 1.7.2002 [2002 (143) ELT T39]. In view of the above 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 .....

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