2004 (4) TMI 456 - AT - Central Excise

Tribunal Rules Job Workers' Costs Excluded from Assessable Value

The Tribunal set aside duty demands and penalties imposed on appellants for the valuation of goods transferred to a godown for conversion into sacks by ... Valuation Issues:Valuation of goods transferred to godown for conversion into sacksAnalysis:The case involves the valuation of goods transferred to a godown for conversion into sacks by job workers. The appellants, engaged in the manufacture of PP/HDPE fabrics and sacks, faced duty demand and penalties as the department valued the fabric stock transferred to the godown based on the selling price of the sacks. The appellants argued that the value of goods should be determined based on the form in which they are cleared from the factory, not after conversion by job workers. They cited precedents like Savita Chemicals Ltd. v. C.C.E and Castrol India Ltd. v. C.C.E to support their contention.The Departmental Representative contended that the conversion charges by job workers should be added to the assessable value since the sacks received back from job workers were cleared from the appellants' depot. However, the Tribunal found merit in the appellants' arguments, applying the ratio of previous decisions. In the case of Malwa Cotton Spg. Mills Ltd., it was established that the job worker carrying out the manufacturing process is liable for duty on that process, and the assessable value should not include the cost of conversion. Therefore, the Tribunal concluded that the cost of job workers should not be added to the assessable value of fabrics manufactured and cleared by the assessee.In light of the above analysis and applying the principles from previous judgments, the Tribunal set aside the impugned orders and allowed the appeals. The decision clarified that the assessable value of goods should not include the cost of conversion by job workers, affirming the appellants' position on the valuation of goods transferred to the godown for further processing into sacks.