2011 (3) TMI 1380 - AT - Central Excise

Tribunal Rules in Favor of Appellant in Goods Valuation Dispute

ADVANCE SURFACTANTS INDIA LTD. Versus COMMR. OF C. EX., MANGALORE

The Tribunal held that Rule 10A did not directly apply as goods were not cleared to ultimate consumers but returned to the principal manufacturer. Rule 8 ... Job work - valuation - waiver of pre-deposit of the amounts confirmed by the adjudicating authority as differential duty. - held that:- By elimination of Rule 2 to 10 as they may not apply in a situation like in this case provisions of Rule 11 will apply and Revenue has to take the recourse to provisions of Rule 11 which talks about using reasonable means consistent with the principles and general provisions of these rules read with sub-section (1) of Section 4 of Central Excise Act, 1944. Keeping this in mind, we find that the ratio laid down by the Hon’ble Supreme Court in the case of Ujagar Prints (1989 (1) TMI 124 - SUPREME COURT OF INDIA) will squarely apply i.e. to ascertain the assessable value on the cost of materials plus processing charges. In our view, the appellants have been correctly valuating their products by adopting this method. Valuation under rule 8 - cost plust 10% - held that:- It can be seen that in Ultrapack (2009 -TMI - 76599 - CESTAT, BANGALORE), Rule 8 was invoked because it was undisputed that repacking was done on behalf of Reckitt Benckiser India Ltd. which would clearly attract the provisions of Rule 8. The situation in the current appeal before us is totally different which has been set out by us in the earlier paragraphs. In view of this, the decision of this bench in the case of Ultrapack will not be applicable. Issues Involved:1. Applicability of Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.2. Applicability of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.3. Correct method for valuation of goods manufactured on job work basis.Issue-wise Detailed Analysis:1. Applicability of Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:The core issue is whether Rule 10A applies to the valuation of goods manufactured by the appellant on a job work basis for M/s. HUL. The appellant argued that Rule 10A would apply only when goods are cleared from the job worker's premises directly to the market, depot, or consignment agent of the principal, which is not the case here. The goods (LABSA) were sent back to M/s. HUL for further consumption in manufacturing soaps and detergents. The Tribunal noted that Rule 10A(i) and (ii) do not apply as the goods are not sold or transferred to a depot/consignment agent but returned to the principal manufacturer. Hence, Rule 10A(iii) applies, which mandates using the provisions of the foregoing rules for determining the value. The Tribunal concluded that Rule 10A does not directly apply to the appellant's case as the goods are not cleared to the ultimate consumers but returned to the principal manufacturer.2. Applicability of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:The Tribunal examined whether Rule 8, which applies when excisable goods are consumed by the assessee or on his behalf, is relevant in this case. The appellant contended that Rule 8 is inapplicable as the goods (LABSA) are not consumed by them or on their behalf but by M/s. HUL in their manufacturing process. The Tribunal agreed, stating that Rule 8 requires the goods to be consumed by the assessee or on their behalf, which is not the situation here. The Tribunal found that Rule 8 does not apply because the appellant is not consuming the LABSA, nor is it consumed on their behalf by HUL.3. Correct method for valuation of goods manufactured on job work basis:The Tribunal addressed the correct method for valuing goods produced on a job work basis. The appellant followed the method laid down by the Supreme Court in the Ujagar Prints case, which includes the cost of materials, processing charges, and profit margin. The Tribunal found this method consistent with Rule 11 of the Central Excise Valuation Rules, which applies when other specific rules do not. The Tribunal also referenced the CBEC Circular dated 31-3-2010, which suggested using Rule 8 for valuation but found it inconsistent with the provisions of Rule 8 and hence, untenable. The Tribunal reaffirmed that the valuation method used by the appellant, based on the cost of materials plus processing charges, is correct and consistent with the principles laid down by the Supreme Court.Conclusion:The Tribunal concluded that the provisions of Rule 10A(i) and (ii) do not apply, and Rule 10A(iii) directs the use of the preceding rules for valuation. Rule 8 does not apply as the goods are not consumed by the appellant or on their behalf. The correct method for valuation is the one laid down by the Supreme Court in Ujagar Prints, which the appellant followed. Consequently, the impugned orders were set aside, and the appeals were allowed.