Manufacturer wins appeal against duty demand for alleged undervaluation on job work basis.

Wellman Hindustan Ltd. Versus Commissioner of Central Excise, Thane-I

Wellman Hindustan Ltd. Versus Commissioner of Central Excise, Thane-I - 2019 (369) E.L.T. 1806 (Tri. - Mumbai) Issues:
- Undervaluation of goods leading to duty demand
- Applicability of Central Excise Valuation Rules
- Assessment based on price declarations by supplier

Undervaluation of Goods Leading to Duty Demand:
The case involved the appellant, a manufacturer of excisable goods, who faced duty demand due to alleged undervaluation of goods manufactured on job work basis for a supplier. The department contended that the supplier had undervalued the cost of input, leading to undervaluation of the final product by the appellant. Show cause proceedings were initiated, and duty demand was confirmed on the appellant. Appeals filed against the adjudication orders were also upheld by the Commissioner (Appeals). The appellant argued that it had no control over the prices declared by the supplier and had discharged duty liability based on assessable value as per relevant judgments. The Tribunal noted that the appellant had appropriately discharged the duty liability as the goods were subject to valuation as required by law. The Tribunal held that the appellant had followed proper procedure in determining the sale value and set aside the adjudged demands in favor of the appellant.

Applicability of Central Excise Valuation Rules:
The appellant contended that Rule 6 of the Central Excise Valuation Rules, 1975 is applicable only to captive consumption and not to job workers. The Tribunal agreed with this argument, stating that Rule 6 is not applicable in the case of goods manufactured on job work basis. It was emphasized that the assessable value for duty determination should be based on Section 4 of the Central Excise Act, 1944, and there was no need to apply Valuation Rules for such determination. The Tribunal highlighted that the factory of the job worker is deemed as the factory for the purpose of the Act, and post-manufacturing profit of the main manufacturer should not be considered in the assessable value.

Assessment Based on Price Declarations by Supplier:
The appellant argued that since the supplier's assessments were final and accepted by the Central Excise authorities, demanding differential duty from the appellant would amount to reviewing the supplier's assessment. The Tribunal noted that the impugned order did not address this submission of the appellant. It was clarified that when a value is to be used for implementing the Central Excise Act, only the ascertainable value under Section 4 can be adopted. The Tribunal held that a different value cannot be utilized at the appellant's end if the value is challenged at the principal manufacturer's end. Consequently, the Tribunal set aside the impugned orders confirming the duty demands on the appellant.