TMI Blog2008 (6) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... , it may be appropriate to briefly indicate the factual background giving rise to the dispute as follows: M/s. Eicher Motors Ltd. (in short 'Eicher') is engaged in the manufacture of chassis and ultimate sale of complete motor vehicle viz. bus and truck. M/s. Bhagirath Coach Metal Fabricators Pvt. Ltd. (in short 'Bhagirath') is engaged in the body building for motor vehicles. Eicher supplies chassis to Bhagirath for building the bodies of bus/truck on job work basis. At the time of clearance - not being sale to Bhagirath - central excise duty is paid by Eicher on the value of the chassis worked out in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 i.e. 110% of the cost of manufacture of chassis. On receipt of the chassis, bodies of bus or truck are fabricated and mounted, atop the chassis, using some more raw materials received directly by Bhagirath though on the account of Eicher. After completing the job, the complete motor vehicle is returned to Eicher. At the time of clearance at their end, Bhagirath pays excise duty after availing the cenvat credit of the duty paid on the chassis as well as the directly received raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cost of the product. Doubting the correctness of the decision in Bhilwara Processors Ltd. The Division Bench referred the appeals to Larger Bench on the following questions :- (1) Whether the value of the excisable goods used for manufacture of other article, which is required to be worked out under rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, read with Rule 2( c) thereof which are made for the purpose of Section 4(1)(b) of the Central Excise Act, 1944, will be considered to be the value of such inputs, while assessing the value of such other article manufactured by the job worker? (2) Whether in arriving at the assessable value of the product manufactured by a job worker, the actual cost of the inputs supplied by the principal should be taken into account or the value of the inputs, as worked out under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 should be taken into account? 5 . Having regard to the term of reference, the correctness of the impugned order of the Commissioner as to imposition of penalty etc. was not gone into, and the hearing was confined to the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which such fabrics are sold for the first time in the wholesale market. That is the effect of Section 4 of the Act. The value would naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any paid on the grey fabrics will be given proforma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the Rules 56A or 96D of the Central Excise Rules, as the case may be." 7. It would not be out of place to, also, quote the observations in the order by which Ujagar Prints' case was referred to Larger Bench - extracted in paragraph 10 of the judgment in Ujagar Prints (supra) (at pages 544-45 of the Report). While dealing with methodology of valuation regarding the assessable value of processed fabric, the Referring Bench had observed:- "10. It was common ground between the parties that the procedure followed by the Excise authorities was that the trader, who entrusted cotton or man-made fabrics to the processor for processing on the job-work basis, would give a declaration to the processor as to what would be the price at which he would be selling the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried out of processing operations on job work basis, in the other class of cases, as it not unoften happens, the goods would have to be valued differently only for the reason the same processing house has itself purchased the grey fabric and carried out the processing operations on its own". 9. Not satisfied with the declaration of law in Ujagar Prints affirming the decision in the Empire Industries, a miscellaneous application was filed on behalf of the processors seeking clarification of the judgment which came to be decided by the Five Judges Bench vide order-known as Ujagar Prints III - reported in 1989 (39) ELT 493 (SC). Having regard to the significance of the findings and the observations in the said clarificatory order, the same may be quoted in extenso as under :- "In respect of the civil miscellaneous 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a complete motor vehicle. If-in the illustration given by the Supreme Court-the value of grey cloth in the hands of processor is Rs.20/- and the value of the final product is Rs.30/- - comprising of the value of the grey cloth plus value of the job work plus the manufacturing profit and expenses, it would follow that the value of complete motor vehicle would the value of chassis i.e.110% of the cost of manufacture, say, Rs.3,30,000/- plus value of the job work done by Bhagirath, say, Rs.1,00,000/- plus the manufacturing profit and expenses of Bhagirath, say, Rs.70,000/- again, that is, in all, Rs.5,00,000/- which would be the correct assessable value of the complete vehicle. The value of the complete motor vehicle cannot be arrived at de hors the additional 10% of the cost of manufacture which is part of the value of the intermediate product i.e. chassis. In other words, the assessable value of complete motor vehicle cannot be determined on the basis of the cost of chassis without including the additional 10% of the manufacturing cost of chassis, which is part of the statutorily fixed value of the chassis (in case of non-sale) in terms of Rule 8 of the Excise Valuation Rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that judgment is to be understood as an authority on the point which is decided and not what follows from it. Reference in this regard was made to Mittal Engineering Works Vs. CCE 1996 (88) ELT 622 (SC) and Sarva Shramik Sanghatana Vs. State of Maharastra (2008) 1 SCC 494. In sum, the submission of the counsel was that the decision in Ujagar Prints cannot be relied upon for the proposition that the value of the chassis is includible at the hands of the job worker. 13. It was submitted that in subsequent judgments viz. Pawan Biscuits Co. (P) Ltd. Vs. CCE 2000 (120) ELT 24(SC) and General Engineering Works Vs. CCE 2007(212) ELT 295 (SC), the Supreme Court interpreted the word 'value' referred to in Ujagar Prints to mean the actual cost of the raw materials. It was submitted that the Board (CBEC) also understands 'value' to mean 'cost' which is evident from Circular No.619/10/2002-CX. Dated 19.2.2002 wherein it has been clarified that the actual cost of raw material is to be added at the hands of the job worker. Reference was also made to the Board's letter No.B.3/1/2003-TRU dated 18.6.2003. It was submitted that circulars are binding on the departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ujagar Prints' case, it was the grey cloth which was given to the processor whereas in the present case it was the raw material for the manufacture of biscuits given to the appellant. After the biscuits are made, they are given back to or are delivered under the instructions of Britannia. The appellant was entitled to receive processing charges which include its expenses plus profits for the purpose of determining the excise value. However, the cost of the raw material supplied by Britannia will have to be included in addition to the appellant's manufacturing costs and profit. What cannot be included on the ratio of Ujagar Prints' case is any profit of Britannia or expenses which are incurred after the manufacture of the biscuits by the appellant. Despite repeated attempts made by the learned counsel for the respondent, we are unable to distinguish this case from the ratio laid down by this Court in the aforesaid two decisions of Ujagar Prints' case". [Emphasis added] 17. From a bare reading it is clear the Supreme Court squarely followed the decision in Ujagar Prints case and the judgment cannot be read as laying down a different proposition. As a matter of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 658 Brindavan Tex Processors Pvt. Ltd. Vs. CCE 2006(204) ELT 121 and Simpson Co. Ltd. Vs. CCE, Chennai 2008 (84) RLT 832. Counsel submitted that these decisions of the Tribunal were not challenged by the Revenue and attained finality. The Revenue, cannot pick-and - choose and take a different stance in the instant case. In this regard reference was made to on Steel Authority of India Vs. CC, Bombay 2000 (115) ELT 42(SC), CCE, Pune vs. Tata Engineering Locomotives 2003 (158) ELT 130 (SC), Birla Corporation Ltd. vs. CCE 2005 (186) ELT 266 (SC), CCE vs. Amar Bitumen Allied Products 2006 (202) ELT 213 (SC), Boving Fouress Ltd. vs. CCE, Chennai 2006 (202) ELT 389 (SC), CCE, Chennai-I vs. ITC Ltd. 2006 (204) ELT 363 (SC). Counsel also submitted that if profit element of the principal manufacturer is taken into consideration in determining the assessable value of the product, it may result in anomalies. 20. The submissions do not cut any ice. What has to be seen is whether Bhilwara Processors was decided in accordance with the ratio of Ujagar Prints-III. After noticing the decisions in Ujagar Prints-III and Pawan Biscuits Co. (P) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the demand is confirmed in the instant case, it would result in discrimination as in all other similar cases demand has been dropped holding that notional profit of 10% or 15% under Rule 8 of the Valuation Rules is not includible in the hands of job worker. In this connection, reference was made to Steel Authority of India vs CC, Bombay, 2000 (115) ELT 42 (SC); CCE, Pune vs Tata Engineering Locomotives, 2003 (158) ELT 130 (SC); Birla Corporation Ltd. vs CCE, 2005 (186) ELT 266 (SC); CCE vs Amar Bitumen Allied Products, 2006 (202) ELT 213 (SC); Boving Fouress Ltd. vs CCE, Chennai , 2006 (202) ELT 389 (SC); and CCE, Chennai vs ITC Ltd., 2006 (204) ELT 363 (SC). 23. At this stage, the scheme of law of central excise on the point of valuation may briefly be noticed. The basic rule of valuation of excisable goods is the ' ad valorem' rule as laid down in clause (a) of Section 4(1) of the Act in terms of which assessable value is the transaction value of the goods where the goods are ordinarily sold for delivery at the time and place of removal, and buyer is not a related person and price is the sole consideration for the sale. 'Transaction value' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale involved again, the value cannot be determined under Section 4(1)(a). Rule 8 cannot be applied at that stage for the simple reason that the goods are no more to be consumed for manufacture of some other goods. They are ready-for-sale goods. There being no separate specific rule regarding the valuation of goods cleared or returned by the job worker to the principal, it would follow that the residuary provision contained in Rule 11 will have to be applied. Rule 11 lays down :- "If the value of an excisable goods cannot be determined under the foregoing rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of Section 4 of the Act." 26. As a matter of fact, the Valuation Rules did not contain any specific provision to deal with the valuation of goods returned by job worker to the principal until March, 2007 when Rule 10A was inserted. It was for this reason, absence of any specific provision regarding valuation of goods cleared by job worker to the principal, that the question as to valuation remained in contention until the law finally came to be settled in Ujagar Prints-III. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade to Customs Valuation Rules, the Commentary on GATT, Customs Valuation Code by Saul L. Sherman and also Cost Accounting Standard (CAS-4). It was also submitted that if profit is included, it will give rise to several anomalies. We find no substance in any of these submissions. We are of the view that the statutorily determined value under Rule 8 would apply at all stages and for all purposes whenever the question of ascertaining the value of goods in non-sale transactions arises. 28. We are not able to appreciate as to how having taken credit of the duty paid on chassis on the basis of 110% of the cost of production/manufacture, Bhagirath would not include the additional 10% of cost in the assessable value of the vehicle, particularly when in respect of other goods procured directly by them on the account of Eicher, used as raw material, their transaction value is taken into account and credit is taken of the duty paid on those goods. 29. In the above premises, we conclude that the value of chassis for the purpose of arriving at the assessable value of the complete motor vehicle shall be the assessable value of the chassis worked out by Eicher under Rule 8 of the E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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