2016 (7) TMI 1075 - SC - Central Excise

Supreme Court affirms duty assessment for processed goods. Decision based on raw material cost + job charges.

The Supreme Court affirmed the Tribunal's decision regarding the assessment of goods returned from a job worker's premises after processing. The Court ... Valuation of job-worked goods at the point of clearance from job-worker - transaction value - Rule 12B valuation of job-worked goods - Board Circular No. 557/53/2000-CX interpretation - Ujagar Prints principle - manufacture versus process - classification as fabric under Chapter 52/54/55Valuation of job-worked goods at the point of clearance from job-worker - Rule 12B valuation of job-worked goods - Board Circular No. 557/53/2000-CX interpretation - Ujagar Prints principle - manufacture versus process - transaction value - classification as fabric under Chapter 52/54/55 - Whether goods returned from the job worker after processing, and subjected to further cutting, stitching, ironing, folding and packing by the assessee, are to be assessed at transaction value or at the cost of grey fabric plus job charges in terms of Rule 12B and the judgment in M/s. Ujagar Prints. - HELD THAT: - The Tribunal found that duty liability crystallises on clearance from the job worker and, following the Board's Circular and the Ujagar Prints principle, valuation for duty is to be based on the cost of raw material plus job charges at the end of the job-worker's premises. The further operations undertaken by the assessee (cutting to length, stitching ends, ironing, folding and packing) were held to be processes which do not amount to manufacture and therefore do not attract valuation at the assessee's sale (transaction) value. The Supreme Court examined Rule 12B and the cited Circular, agreed with the Tribunal's interpretation that the appropriate value is the value at the end of the job-worker's premises (raw material cost plus job charges), and accepted the conclusion that the appellant's subsequent processes did not constitute manufacture that would displace that valuation rule.The valuation must follow Rule 12B and the Board's Circular in accordance with the Ujagar Prints principle; the processes carried out by the assessee do not amount to manufacture and the duty was correctly discharged on the basis of raw material cost plus job charges.Final Conclusion: Appeal dismissed; the Tribunal's finding that valuation for excise duty is to be made on the basis of raw material cost plus job charges at the end of the job-worker's premises (and that the assessee's subsequent operations do not amount to manufacture) is affirmed. Issues involved:Determining the assessment of impugned goods returned from job worker premises after processing, whether to be assessed at transaction value or at cost of grey fabric and job charges in terms of M/s. Ujagar Prints judgment.Analysis:The central issue in the present appeal revolves around the assessment of goods returned from a job worker's premises after processing. The question at hand is whether these goods, which undergo further manufacturing processes like cutting to short length, stitching ends, ironing, folding, and packing, resulting in an enhanced value, should be assessed at the transaction value or at the cost of grey fabric and job charges as per the precedent set by the M/s. Ujagar Prints case. The Tribunal, in its judgment, emphasized that when the job worker returns the processed goods to the appellant, it amounts to clearance, and duty liability crystallizes at that stage. The Tribunal referred to Rule 12(B) and Circular No. 557/53/2000-CX dated 03.11.2000, stating that valuation should be based on the principles enunciated in the Ujagar Prints case. It highlighted that the value for duty payment should be based on the raw material cost plus job charges. The Tribunal concluded that the processes undertaken by the appellant, which involve cutting and packing the materials received, do not amount to manufacture. Therefore, the duty liability should be based on the value at the end of the job worker's premises, not on the sale value of the goods sold by the appellant. Consequently, the Tribunal dismissed the appeal, upholding the interpretation of Rule 12(B) and the Circular.Upon reviewing Rule 12(B) and the Circular cited by the Tribunal, the Supreme Court found that the Tribunal's interpretation of these provisions was correct. The Court concurred with the Tribunal's reasoning that the value for duty payment should be determined based on the raw material cost plus job charges, as per the principles laid down in the Ujagar Prints case. The Court, therefore, upheld the Tribunal's decision and dismissed the appeal, affirming that the processes carried out by the appellant did not amount to manufacture. Consequently, the demand for duty liability on the sale value of the goods sold by the appellant, amounting to Rs. 46 lakh, was deemed unsustainable.