TMI Blog2007 (11) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduced with effect from 1-4-2003. In terms of the new Rule, a trader or a person can get the textile items manufactured by a job worker by supplying raw materials. Either the person who supplies the raw materials or the job worker can opt to follow all the Central Excise procedures like taking the registration, maintaining records, payment of duty, etc. In terms of the above Rule, duty is payable on the goods manufactured by the job worker on their clearance from the job worker's premises. This is very clear on going through the provisions of Rule 12B. In the present case, the appellants who manufacture grey fabrics sent the grey fabrics to the job worker. The job worker undertook certain processes like bleaching, dyeing, printing, etc., which amounted to manufacture. Up to July, 2003, in terms of Rule 12B, the job worker maintained all the Central Excise formalities and cleared the goods on payment of duty. The valuation adopted was based on the Apex Court's decision in the Ujagar Prints case. In other words, the value is equal to the cost of the raw materials plus the job charges. However after July, 2003, the appellants who were the suppliers of raw materials viz., Grey F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gets yarns or fabrics falling under Chapter 50, 51, 52, 53, 54, 55, 58 or 60 or readymade garments falling under Chapter 61 or 62 of First Schedule to the Tariff Act, produced or manufactured on his account, on job work (hereinafter referred to as 'the said person') shall obtain registration, maintain accounts, pay duty leviable on such goods and comply with all the relevant provisions of these rules, as if he is an assessee: Provided that the job worker may, at his option, agree to obtain registration, maintain accounts, pay the duty leviable on such goods, prepare the invoice and comply with the other provisions of these rules. In such a case the provisions of these rules shall not apply to the said person. The job worker, may, at his option, authorize the said person to, on his behalf as his agent, maintain accounts, pay duty, prepare invoice and comply with any of the provisions of these rule except that of Rule 9: Provided further that the job worker may make an option to undertake the activities mentioned in this sub-rule as an agent or person authorized by the said person and in such a case, the said job worker shall be deemed to be the said person. (2) If the said pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name and address of the job worker (the sender). (ii) the description and quantity (in terms of kg./m/Sq. m) of the goods being sent. (iii) the date of despatch of such goods, (iv) the name and address of the job worker/the said person to whom the goods are being sent (the receiver). (d) The responsibility in respect of accountability of the goods, referred to in sub-rule (3) shall lie on the said person. (5) The job worker, on receipt of the goods mentioned in sub-rule (3) or, as the case may be, from another job worker sent by him in terms of clause (ii) to sub-rule (7) shall duly acknowledge the receipt of the goods on the said document. (6) Notwithstanding anything contained in these rules, the job worker shall not be required to get himself registered or shall not be required to maintain any record evidencing the processes undertaken for the sole purposes of undertaking job work under these rules unless he has exercised his option in terms of the first or the second proviso to sub-rule (1). (7) The job worker, with or without completing the job work, may, - (i) return the goods without payment of duty to the said person; or (ii) send the goods without pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... level of Rs. 25 lakhs or Rs. 30 lakhs as the case may be. Consequently, till then, the trader, who is getting his goods manufactured on job work, need not follow the Rule 12B procedure. It is relevant to note that Rule 12B authorizes the trader to pay the duty leviable on the job worker. Once the job worker is no longer entitled to duty exemption, the duty liability has to be discharged by the trader unless the job worker opts to pay the duty. Thus, once the total value of clearance exceeds the threshold limit of Rs. 25 lakhs (or Rs. 30 lakhs, as the case may be), no further exemption would be available. In such cases, after the exemption limit is crossed, duty would be payable and the trader who is getting the job work done would have to be registered, and pay duty. In case, the total clearance levels cross the eligibility limits of Rs. 30 lakhs (or 40 lakhs, as the case may be) all past clearances become dutiable and the trader/traders/weaver, would be required to discharge duty on earlier clearances. (f) The following illustrations are given to explain the above, - * Three traders A, B and C get grey fabrics manufactured from job worker 'X'. The value (raw material cost + jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the trader to pay the duty leviable on the job worker. Therefore, when Rule 12B is followed, the leviability of duty is on the clearances effected at the job worker's premises. In terms of Rule 12B, even a trader who doesn't have any manufacturing facilities can purchase raw material and he can send it to the job worker and job worker undertakes all the processes necessary to have a finished product and duty is leviable at that point. Even though a trader or the principal manufacturer pays duty, we emphasize the point that duty is leviable at the job workers premises . From the examples given by the Board in the circular, it is very clear that the value should be taken in terms of the material cost and job carges . Therefore, there is very strong force in the appellant's contention that the value to be adopted should be based on the clearances at the job worker's premises. Further, the learned Advocate pointed out that even though the processed fabrics are returned to the appellant, the appellant would simply cut, fold and packs them and these processes in terms of Chapter 52 do not amounts to manufacture. Therefore, even though the appellant adds certain values or makes valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue addition can be a criteria to decide whether duty is payable on the enhanced value. It was urged that the Tribunal in the following decision has expressed similar views. (a) CCE v. Shakthi Tubes Ltd . - 2001 (137) E.L.T. 423 (b) Shakthi Tubes Ltd. v. CCE - 2002 (150) E.L.T. 359 5.3 In view of the above submissions, the learned Advocate urged that the demand of duty to the tune of Rs. 42,47,811/- onaccount of valuation cannot be sustained. Out of the total demand of Rs. 53,40,117/-, according to the learned Advocate only Rs. 42,47,811/- pertains to job work valuation. Duty to the tune of Rs. 6,68,405.60 pertain to goods manufactured prior to 31-3-2003 and cleared later to job worker. These goods are actually grey fabrics. Duty amounting to Rs. 4,23,901/- pertain to goods manufactured and cleared prior to 31-3-2003 and sold thereafter. In both these cases, it was urged that the goods were manufactured prior to the imposition of levy of duty on grey fabrics. It was urged that it is well-settled that when there is no levy of duty on the date of manufacture of the goods and when they are cleared after imposition of levy, no duty can be paid on the same. The learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he actual manufacturer. What Rule 12B provides is that it enables the supplier of raw materials to comply with all the Central Excise formalities for the goods manufactured by the job worker. In other words, the trader or the person who supplies raw material should discharge the duty liability on the goods manufactured by the job worker. The Board has issued a Circular on the valuation in the context of Rule 12B. On going through the Circular, it is evident that the Board has clearly stated that the duty liability has to be discharged when the goods are cleared from the job worker's premises. In other words, the liability to pay duty arises at the time of clearance from the job worker's premises. In fact, in the present case the processes undertaken by the job worker amounts to manufacture. Therefore, when the job worker returns the processed goods to the appellants, that amounts to clearance and the duty liability crystallizes at that stage. As per the Board's clarification and the circular issued, the valuation is done on the basis of the principles enunciated in the Ujagar Prints case. That means the value to be adopted for payment of duty is basis of the raw materials cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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