2016 (7) TMI 1075 - SC - Central Excise

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

Commissioner of Central Excise, Cochin Versus M/s. Kitex Ltd.

The Supreme Court affirmed the Tribunal's decision regarding the assessment of goods returned from a job worker's premises after processing. The Court ... Manufacturing activity or not - fabric cut into Dhoties - process like cutting to short length, stitching ends, ironing, folding and packing resulting in enhancement the value of product - Held that:- The Tribunal in the impugned judgment has arrived at a finding that after receiving the product from job worker, at whose end excise duty is duly paid, the assessee simply cuts them into Dhotis and, therefore, in terms of Rule 12(B) read with Circular No. 557/53/2000-CX dated 03.11.2000, it will continue to be classifiable as fabric under Chapter 52/54/55 and such a process undertaken by the appellant does not amount to manufacture. - Order of tribunal held as correct - Decided against the revenue. 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.