TaxTMI 
TaxTMI 
Recommandations - JOB WORK VALUATION REPORT
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....onerates of Central Excise, seeking their feedback on several aspects related to the job work valuation. It is heartening to find that seventy Commissionerates out of ninety three Commissionerates of Central Excise in the country responded promptly with facts, figures and views. Coming from the field formations as they have, these facts and views have provided the base on which the present study has been conducted. The Sub-Group is grateful to the officers of these Commissionerates and the respective Chief Commissioners incharge. The Sub-Group also had the benefit of studying two earlier reports on the matter, one submitted by a Sub-Group led by Shri J.K. Batra in 2003 and the other submitted by a Sub-Group led by Shri T.R. Rustagi in 2004. The Sub-Group also studied the observations / objections raised by the Comptroller & Auditor General on the issues of job work valuation, which were provided by Commissioner (Public Accounts Committee) in the Central Board of Excise & Customs. In the course of the study, the Sub-Group also carefully examined two Circulars issued by the Central Board of Excise & Customs, viz. the Circular No. 619/10/2002 CX dated 19.02.02 and the Circular No. 643....
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....e Board so that the duty could be charged on the price at which the principal manufacturer sells the goods. The terms of the reference to the Sub-Group were as follows: a) To conduct study on various practices relating to valuation of goods on job work basis and examine all relevant aspects. b) To take cognizance of observations raised by CAG in this regard. c) To take cognizance of various Apex Court judgements in this regard. d) To study the commodity wise impact and revenue implications. e) To suggest suitable changes in Central Excise law along with draft of amendments required in Act / Rules. 1.02. The Sub-Group comprised the following members: 1) Shri S. Dutt Majumder, Chief Commissioner, Customs, Mumbai III zone ; 2) Shri N.Sasidharan, Commissioner, Customs ( General ), New Customs House, Mumbai ; 3) Shri K.K.Sharma, Central Excise, Mumbai Commissioner, II Commissionerate; 4) Shri M.Srinivas, Additional Commissioner of Central Excise, Mumbai II (co-opted); and 5) Shri S.K.Rahman, Joint Commissioner, Directorate General of Valuation, Mumbai (co-opted). Approach of the Sub-Group: 1.03. In order to conduct a meaningful study on th....
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....APTER II. STUDY OF COLLECTED MATERIALS The Batra Report (Annex 'D'): 2.01. The Study-Group on Central Excise during the Chief Commissioners' conference held on 15th and 16th July, 2003 had made a recommendation to define the manner of determining the transaction value in the case of job work, by incorporating suitable amendments in the Central Excise Act 1944 and the Valuation Rules. Accordingly the Sub-Group referred to in para 6 hereinbefore, submitted a report on the implications of the aforesaid recommendation. Broadly speaking, the said report, i.e. the Batra Report, made the following recommendations / observations: a) introduce a new rule in the Valuation Rules declaring that the sale price of a person on whose behalf the goods have been manufactured shall be the transaction value for the purpose of Central Excise assessment; b) there would be no need to value the goods under rule 11 on the basis of best judgment, since the specific rule covering the situation of job work would now be available; c) there was no need to amend the definition of 'manufacture' under Section 2 (f) of the Act; d) there is no need to amend the provisions of Section 4 (3) (c) relat....
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....2.05. The Recommendations / Observations in the Rustagi Report are summarized below: a)The Rustagi Report observed, on the basis of data available in respect of nineteen zones, that there was no serious risk to revenue on account of valuation of cenvatable goods. Further, with the exemption provided to textile fabrics, the other most prominent commodity relevant in the context of assessment on job work was pharmaceuticals. b) As for the pharmaceuticals, the Rustagi Report observed that the order passed by the Commissioner of Central Excise, Goa in August, 2004 (Annex 'F') holding the loan licencee as the manufacturer of the pharmaceuticals had given a new dimension to the dispute. Having regard to the history of litigation on the question of job work, it opined that it would be desirable to continue the job workers of pharmaceuticals to pay the Excise duty. According to the report, the ideal way to deal with the pharmaceuticals was to notify it under Section 4A of the Central Excise Act. c) Have a separate rule in the Valuation rules to specify the assessable value of the goods manufactured on job basis in different situations. d) Amend Section 4 of the Act, to say that....
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....er on the assessable value arrived at after adding the cost of material, processing charges and the profit of the job worker or the processor. The C&AG was however, of the view that the absence of the suitable provision in the present valuation rules to charge duty at the normal price (i.e. the sale price charged by the principal owner on the basis of wholesale market) has led to revenue leakage. In respect of para 11.4.3 of CAG report No. 7/2006, where at the time of removal to the job-worker's place, the goods were cleared in bulk and packaging was done at the job-worker's premises, the C&AG observed that necessary provisions in Central Excise Act are needed to check avoidance of payment of duty under Section 4A in such cases where, by getting the goods repacked through the job workers and eventually selling branded goods, the assessee avoided payment of duty under Section 4A of the Act and paid duty under Section 4 of the Act. Thus the Sub-Group finds that the C&AG in the aforesaid two paras has recommended insertion of suitable provisions in the present Valuation Rules to charge duty at the price charged by the principal manufacturer and it has also recommended in respect of it....
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....y to include the trader's profits who gets the fabrics processed, because those would be post manufacturing profits. 2.11. The aforesaid judgment in the case of Ujagar Prints was followed by the Apex Court in the case of Pawan Biscuits Company, wherein it was held that the assessable value of the biscuits manufactured in terms of Principal to Principal agreement with M/s. Britannia Industries, using raw materials supplied by the latter, would be the value of the raw material plus the job charges and the manufacturing expenses of the job worker, and it would exclude the trader's (i.e. M/s. Britannia Industries) profit. The Apex Court , therefore, held that the wholesale price charged by M/s. Britannia Industries could not be taken as the basis for determining the assessable value in respect of M/s. Pawan Biscuits. 2.12. The Apex Court in a subsequent judgment in the case of CCE Indore V S.Kumar [2005 (190) ELT 145 (SC)] further clarified, while referring to the Apex Court's judgment in the case of Ujagar Prints and Pawan Biscuits that if raw material supplier and job worker were both related, then duty could be charged on the sale price of the raw material supplier (i.e. princ....
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....s attempt has been made to arrive at the definite price at which the transaction has taken place. Thus, the element of approximation in the old Section 4 appears to be the main rationale behind the Apex Court's judgment in the case of Ujagar Prints and Pawan Biscuits. In the case of the new Section 4 however, this element of approximation is absent. The Sub-Group is, therefore, of the view that the ratio of the Apex Court judgments in respect of valuation of goods manufactured on job work in the case of Ujagar Prints and Pawan Biscuits will not be strictly applicable in valuation treatment of goods manufactured on job work under the new Section 4. 2.15. Further, in the said Circular, the Board clarified that Valuation would be governed by Rule 11 read with Rule 6 of the Valuation Rules,2000. Rule 6 reads as follows: "Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing dir....
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....other articles, the value shall be one hundred and ten percent of the cost of production or manufacture of such goods". 2.17. It is felt that the principle laid down under the Rule 7 is more appropriate in respect of the goods manufactured on job work basis and sold as such, without subjecting the same to any other process involving further value addition, by the principal manufacturer or his agent, since such goods are not sold at the time and place of removal, but are transferred to another place from where they are sold after the clearance from the place of removal. On the other hand , in respect of the goods manufactured on job work basis and received by the principal manufacturer or any other person on his behalf, for further use in the manufacture of other goods/ articles, the principle of valuation laid down under the Rule 8 is applicable , as in the case of the goods manufactured and consumed captively. 2.18. Although a view can be taken that in terms of Rule 11 of the Valuation Rules, 2000 , the principle laid down in the said Rule 7 and Rule 8 ibid , as the case may be , can be adopted for valuation of the goods manufactured on job work basis , the Sub- Group fee....
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....ed views in favour of legislative amendments. Each one of them has also given the reasons why they recommend such legislative amendment. Some of them have even proposed the text of the proposed Rule to be inserted in the Valuation Rules. Besides, four Commissionerates have recommended inclusion of all items manufactured on job work under the provisions of Section 4A of the Act. It is only six Commissionerates which felt that there was no need for further legislative amendment. Seven Commissionerates, while explaining their valuation practice, have however, not expressed any clear cut view regarding desirability or otherwise of legislative amendment. There is another set of fourteen (14) Commissionerates who has given no comments to the query regarding the need for legislative amendment, although they have given the details of the job workers in their jurisdiction. Reasons for proposing Legislative Amendment 3.04. The common suggestion of the Commissionerates which have proposed legislative amendment is to treat the transaction value of the principal manufacturer as the assessable value of the goods manufactured and cleared on job work. The following is the summary of the r....
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....extra consideration when compared with the assessable value adopted and the MRP printed on the packaged product. The example given below explains the problem. Description of Goods MRP Printed Assessable adopted Value Remarks Fairever face cream 9 Gms. Rs. 5.00 Rs. 1.71 AV adopted under Section 4 Fairever face fream 25 Gms. Rs. 28.00 Rs. 16.80 AV adopted under Section 4A h) Certain job workers manufacturing plastic chairs and plastic containers supply to the depots of the reputed brand owners under franchise agreement after paying duty only on the cost of raw-materials plus manufacturing profit plus amortized value of moulds. The brand owners however, sell the same very manufactured goods at a much higher price leading to the leakage of revenue. i) The value of the goods manufactured by a manufacturer on his own account, when removed at the factory gate is determined under Section 4(1)(a). However, if the same manufacturer gets similar goods manufactured on job work basis out of raw materials supplied by him or his customers, the assessable value would be much less in comparison with the assessable value of the goods manufactured by himself. The manufacturers of re....
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....ork valuation, as expressed by some of the Commissionerates, is not well-founded, inasmuch as proper drafting of the amended provisions with vetting by the Law Ministry should allay any such apprehension. The socio-economic ground for not effecting the amendment on the plea that such amendment will make the job work less attractive does not appear to be a sound one, inasmuch as the Revenue Department cannot refrain from plugging the leakage of revenue merely on the ground of socio economic factors. 3.08. As for Goods and Service Tax (GST) proposed to be implemented in 2010, one is not really sure as to its form and content. Therefore a legislative amendment, if considered appropriate now, cannot be postponed keeping an eye on the future provisions of the GST. The Sub-Group, therefore, does not find the reasons given by the six (6) Commissionerates against any legislative amendment to be tenable. Widening the scope of Section 4A. 3.09. As for suggestion by four Commissionerates for including all items manufactured on job work under the provisions of Section 4A of the Act, the Sub-Group feels that it would not be feasible. In terms of Section 4A (1), the coverage of that ....
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....edom to prescribe the method of valuation. In this context, the Sub-Group analyzed the grounds that would support the introduction of the concept of transaction value of principal manufacturer for the job work valuation. The grounds are given below. 4.03. The principal manufacturer is exempted from getting registered and the liabilities otherwise bestowed upon the manufacturer vide Notification No. 36/2001 - CE (NT) dated 26.06.2001. While granting exemption from registration and other liabilities, the aforesaid notification 36/2001 however, enjoins a condition that a principal manufacturer shall furnish information including his selling price to enable determination of value of the said goods. A view may be taken that the purpose behind this condition was to charge Central Excise duty at the selling price of the principal manufacturer; because, while the principal manufacturer was granted exemption from registration, the goods were still chargeable to duty, and the legislature is free to decide the measure of that charge. A purposive interpretation of the aforesaid condition in the notification 36/2001 thus indicates the legislative intent of charging duty on the value at wh....
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....ect of the new Section 4. 4.07. The Sub-Group had extensive deliberation on the issue of the desirability of amendment of definition of 'manufacture' and 'manufacturer' in the Section 2(f) of the Act. A principal manufacturer has been indirectly accepted as an assessee ( manufacturer) by virtue of Notification No:36/2001 CE(NT) dt: 26-06- 2001 , whereby his liability to pay duty and observe other Central Excise procedural formalities have been allowed to be discharged by the job worker. A view therefore can be taken that there was no need to go in for further amendment in the aforesaid Section 2(f). The Sub-Group however, feels that as an abundant precaution, it would be necessary to amend Section 2(f) so as to make it explicit that the principal manufacturer and the job worker are both covered by the definition of 'manufacturer'. In this regard, the Sub-Group also draws support from the opinion given by the Ministry of Law in the context of examining the recommendation of the Batra Report. In the aforesaid opinion the Law Ministry opined that alongwith amendment of Valuation Rules, it would be necessary to amend certain relevant provisions of the Central Excise Act as well. ....
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....one under Section 4 of Central Excise Act. In this context, the Sub-Group also noticed that some of the principal manufacturers are clearing finished goods in bulk-packing which are covered under the Standards of Weights and Measures Act, 1976 for the goods covered under Section 4A on the basis of retail sale price (MRP). The job worker does the work of converting bulk packing into retail packing. Even though this is covered under the definition of `manufacture' under the relevant chapter notes, most of these units are SSI Units. Even if the job worker has to pay duty, he would be paying duty on landed cost of raw material and the job work charges as per Ujagar Prints judgment. But the correct position would be to charge duty on the basis of MRP for the goods being ultimately sold. The MRP printed on the retail packing done at the job worker should be the basis for assessment of duty from the principal manufacturer. After detailed deliberations, the Sub-Group took the view that further amendment of Section 4A would not be necessary, once the proposed amendment in the definition of 'manufacturer' in Section 2(f) is undertaken. In that event, even in the situations described hereinab....
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....commends the following text for the proposed Rule 8A of Central Excise (Determination of Price of Excisable goods ) Rules , 2000 ) : "Rule 8A :- Where the excisable goods are manufactured for or on behalf of other persons, including a principal manufacturer, and the excisable goods are not sold by the assessee, including a job worker, at the time and place of removal but are transferred to any other place (hereinafter referred to as 'such other place') from where the excisable goods are sold, the value shall be the transaction value of such goods sold from such other place at or about the same time, and where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment, and where the goods are not sold but consumed at such other place, the value shall be one hundred and ten percent of the cost of production or manufacture of such goods". CHAPTER-VI CONCLUDING REMARKS 6.01 Summing up, the Sub-Group has based their study on the following :- ? Feedback from the Central Excise Commissionerates on various aspects of job work valuation; - feedback has been received from 70 Commissionerates out of 93 Commissionerate....
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.... : Order-in-original passed by the Commissioner of Customs & Central Excise, Goa in August, 2004. (7) Annex 'G' : Reports received from various Commissionerates. [No extractable content on page 35] Document 2 ANNEX - A QUESTIONNAIRE ON JOB WORK VALUATION Introduction: 1.This questionnaire is relevant for the commodities: (i) manufactured on job work basis and cleared on payment of duty by the job worker with out availing exemption under Ntfn.No 214/86 CE dt. 25.03.86. (ii) manufactured on job work basis and cleared with out involving the act of "sale" ; and (iii) which are chargeable to duty on ad valoram basis as per the provisions of the Sec.4 of the CEA'1944 , but not under the Sec.4A ibid. 2. The details are required both in respect of the goods manufactured by the job worker and returned to the principle manufacturer / owner of the goods, for further manufacture of any other goods as well as those which are sold as such by the latter in the course of normal trade with out subjecting them to any other process . Name of the Commissionerate: Name of the Zone: Q1. What are the commodities( CTH & Description) which are being manufactured by t....
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....aluation pertaining to your Commissdionerate in the following Proforma: S.No NAME OF THE ASSESSEE (JOB WORKER) CITATION OF THE DECISION OF THE COURT / TRIBUNAL GIST OF THE DECISION WHETHER ACCEPTED/ APPEALED FURTHER ANY OTHER FACTS WORTH REPORTING (1) (2) (3) (4) (5) (6) Q8. Do you think that there is a need for any amendment to the law pertaining to the issue of job work valuation , particularly since the judgement in the case of Ujagar Prints does not give the Department any leeway to consider the price at which the owner sells the final product, to be the assessable value? If so suggest what sort of amendment is desirable? ANNEXURE-I Name of the Commissionerate Name of the Zone. DETAILS OF THE COMMODITIES BEING MANUFACTURED BY THE JOB WORKERS ( Pl. furnish the information separately for each commodity) 1. Description of the goods 2. Tariff Heading (4-Digit) 3. Whether the job worker and the owner of the goods are related? 4. Whether the job worker is manufacturing similar goods on his account as well as on job work basis? (Y/N) 5. Whether the goods manufactured on job work basis are sold under the brand name of the owner of the goods? (Y/N) ....
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....e cleared to another job worker for manufacture of components for motor vehicles on payment of duty on the assessable value arrived at on cost basis. Scrutiny of cost sheets revealed that the assessee did not include special additional duty of four per cent incurred on imported coils, Central Sales Tax paid on indigenous coils and freight charges incurred on procuring CRCA coils and sheets. This resulted in short payment of duty of Rs.1.03 crore during April 1999 to December 2000. On being pointed out (February, April and May 2001), the Ministry of Finance admitted the objection (August 2002). CAG's Report No.11 of 2004 (Indirect Taxes - Central Excise & Service Tax) Review on determination of Assessable value under New Section 4 (Transaction Value) Paragraph No. II 2.8 Goods cleared by job workers on behalf of principal owners not to be considered as sale Pursuant to the Supreme Court's decision in the cases of Ujagar Prints Limited { 1989(34) ELT 493(SC)} and Pawan Biscuits Company Limited {2000(120) ELT 24(SC)} upholding valuation of goods in the hands of job workers, certain big brand owners have been resorting to the modus operandi of getting their goods clea....
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....nt cited the Supreme Court's judgment in the case of Ujagar Prints supra, according to which the duty was to be paid by job worker on the assessable value arrived at after adding the cost of material, processing charges and the profit of the job worker or the processor. The absence of a suitable provision in the present Valuation Rules to charge duty at normal price (i.e. the sale price charged by the principal owner on the basis of whole sale market) has led to revenue leakage. CAG's Report No.11 of 2005 (Indirect Taxes - Central Excise & Service Tax) Valuation of Excisable goods. Paragraph IX 9.2 Undervaluation of goods manufactured on jobwork The Supreme Court in the case of M/s. Ujagar Prints and others { 1988(38) ELT 595}, ruled that the value of goods manufactured on job work basis shall be determined by adding processing charges (job work charges) to the landed cost of raw materials, including all costs incurred for bringing the raw materials to the premises of the job worker. 9.2.1 M/s. Mandovi Pellets Limited, in Goa Commissionerate of Central Excise, converted iron ore fines into pellets for M/s. Ispat Industries Limited (IIL) and M/s. Vikram Ispat Limit....
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....ort payment of duty of Rs. 79.85 lakh during the period from April 2000 to March 2002. On this being pointed out (July 2003), the Ministry stated (November2004) that liability for short payment of duty lay with the Job worker and that the transaction between Job worker and M/s. Indlon Chemicals Limited were on principal to principal basis. The fact remains that full job charges as well as freight expenses were not included in assessable value and hence differential duty was recoverable. 9.2.3 M/s. Ferro Alloys Corporation, in Nagpur Commissionerate of Central Excise, manufactured iron and steel products on job work basis out of raw material supplied by M/s. Tata Iron and Steel Company. Audit scrutiny revealed that the assessable value was declared at Rs.25,112 per tonne during 1995-96 taking into account the cost of raw material as Rs.17,230 per tonne and the burning loss of 10 percent. The cost of raw material had increased to Rs.20,030 per tonne during 1997-98 and to Rs.22,500 per tonne during November 1998 to March 1999 but the assessable value for payment of duty had not been revised. Non-revision of assessable value resulted in undervaluation of goods and consequent s....
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....roduction of the new valuation provisions w.e.f. 1.7.2000. 2. The matter has been examined by the Board. It is observed that the system of getting goods manufactured on job-work basis is not new. Under the provisions of the earlier section 4 and the Rules made thereunder the matter has been finally decided by the Apex Court in the case of Ujagar Prints Ltd [1989(039)ELT0493(SC)] and the case of Pawan Biscuits Co. Pvt Ltd [2000(120)ELT0024(SC)]. It was clearly held that in respect of goods manufactured on job-work basis, assessable value would be the job charges (including the profit of the job-worker if not already included in the job-charges) plus the cost of the materials used in the manufacture of the item (including the cost of the materials supplied free of cost to the job-worker). The assessable value in such cases will not include the profit or the expenses (like advertisement and publicity, overheads etc ) incurred by the buyer (or the supplier of the raw materials), where the dealing between the two are on principal to principal basis . The mere fact that the buyer is supplying some raw materials free of cost to the job-worker, will not be sufficient ground to contend t....
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....manufacturer (job-worker). Since the job-worker receives some items free of cost from the copyright owner, price is not the sole consideration for the transaction between the copyright owner and the job-worker. Therefore, resort will have to be taken to the Central Excise Valuation Rules. No specific rule covers such a contingency. Resort will therefore have to be taken to rule 11 of the valuation rules read with rule 6, read with the Apex Court decisions cited above. The money value of the additional consideration will have to be added to the job-charges. The cost elements which have to be included are the cost of the items supplied free by the music company to the job worker, namely inlay cards, jackets, jewel boxes and the DAT/disc. 6. The DAT/discs contains the original recorded music/movie. Its cost would include the royalty amount paid/payable by the music company for acquiring exclusive rights for the music/movie and the cost incurred in getting the original score recorded in a studio (if this has been incurred by the copyright owner). In such cases the most reasonable method would be to ascertain the royalty amount and studio hire charges contained in the wholesale price....
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....n that case depreciation taken/shown during the relevant year under this head would be added to the expenditure incurred on royalty/copyright during the said year. Some companies sell part of their acquired copyrights to other companies and the income on this may be shown under the head license fees. In that case total expenditure on royalty/copyright during a year would be the gross amount spent under this head in a year minus the amount received for sale of part of the rights during the same year. 9. Pending cases on valuation of goods manufactured on job-work basis may be decided on the basis of these instructions. 10. Suitable Trade notices may be issued for the information of the Trade 11. Hindi version will follow 12. Receipt of these instructions may be acknowledged. Document 5 ANNEX-G REPORTS RECEIVED FROM THE COMMISSIONERATES SR. NO COMMISSIONERATE COMMODITY WITH TARIFF HEADING VALUATION PRACTICE VIEWS ON NEED FOR AMENDMENT 1. Mumbai - I No unit under job work - hence Nil report 2. Mumbai - II 1.Ch. 3402-AOS Paste 2.Ch. 7310-Steel Tanks/Drums 3. Ch. 8538 Control panels and parts 1. Rule 11 r/w Rule 6 and 8 of the Valuation Rules 2000. As per Dec....
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....and a portion of the excisable goods are not sold but are consumed by or on behalf of the owner of the goods , which are not sold but consumed , shall be based on principle of valuation envisaged at (i) above. 3. Mumbai -III 1.Ch.7409.10, 7409.20, 7410.11 & 7410.12-Copper strips/sheets/foils. Brass strips/sheets/foils. 2.Ch.3907 30 10-Asain CED paste 603 grey, Asain CED Emul 611 grey, Asain CED Emul 601. 1.Rule 11 2.Goods are cleared from Job worker's premises at rate similar to which owners are selling to their customers. No comments. 4. Mumbai-IV Ch. 7409- brass / strips /coils/sheets. No Comments 5. Mumbai - V 1. Ch.3923,3915 (Scrap of Plastics) Rule 8 of C. Ex. (Valuation) Rules, 2000. No Comments 6. Thane-I 1. Ch.5513-MMF 2. Ch.5402-Texturised Polyester Yarn 3. Ch.3915 Plastic Containers & Caps 1.Rule 11 of C. Ex. (Valuation) Rules, 2000. 2 Rule 11 of C. Ex. (Valuation) Rules, 2000 3.Rule 11 r/w Rule 8 of Valuation Rules, 2000. No specific provision has been made in case of job work. Strictly speaking there is no ' sale ' in job work and Rule 6 should not apply. Even Rule 4 or Rule 5 cannot apply as goods are not sold by assessee in case of job work. As per decisio....
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....tion for the sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment. 9. Raigad 1. Ch.2710-Lubricating oils 2.Ch 7200-Roundes Hexagon 1.Rule of Valuation Rules 2000 2. N.A. It is observed that in majority of the case where goods are manufactured on job work basis for Principal manufacturers are under an agreement. These agreements are made to show that the 3. Ch.2939-Theophylline 3.N.A. job worker and the principal manufacturer/buyer./owner of the goods are doing transaction principle to principle and no relationship is there and the transaction between them is sale. But a careful study of the agreements and the arrangements shows that either the job worker is creation of the Principal manufacturer or supplier of the materials and services. The entire activity is totally controlled by them by putting various conditions. Obviously after all these conditions the job worker entirely depends on the principal manufacturer and in such circumstances the valuation of goods and sale, though....
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....rectly or indirectly from the buyer to the assessee. This provision also includes elements like drawing, designing, plans, sketches engineering, development, etc. Suggestions for amendment to Section 4 of the Central Excise Act, 1944 and to bring the fresh Rule under Central Excise Valuation Rules 2000 similar to the provisions of the Rule7 where the gods are sold other than at the time and place of removal. In job work case no sale is involved but the duty is recovered on the costing basis instead of "Transactional Value". Therefore the following Rule proposed. Proposed Rule "Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to any other place from where the excisable goods are sold, the value shall be the normal "transaction value" of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the sametime or at the time nearest to the time of removal of such goods under assessment." 12 Pune- III 1. Ch. 3004-Anti - Cancer Drugs 2. Ch.2942-Organic Chemicals 3. Ch. 3923-Plastic Container lid & handles. 4. Ch.7310-Metal Tin Container Rule 11 read with 8 Valuation of goods ....
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....d under Section 4A. basis, since pharmaceuticals No comments 16. Ahmedabad -II 1. Ch.7616-Aluminum Alloy Castings 2. Ch.4013- Butyl Inner Tubes 1.Rule 4 read with Rule 8 2.Rule 4 of valuation Rule 2000 There is need of specific Rule in Central Excise Valuation Rules 2000 for the goods manufactured on the job work basis. 17. Ahmedabad -III 1. Ch. 2921-DASA (4, 4 Diamine sulfunilide) 2. Ch. 2922- H. Acid 3. Ch. 7304- Stainless Steel Seamless Tubes / pipes Section 4 Ujagar Prints Goods manufactured on job work valuation is governed by Rule 11 r/w Rule 6 of Central Excise Rules, 2000 i.e. all costs (including the cost of transporting the inputs to the job worker premises plus job worker's profit). 18. Vadodara-I 1. Ch.2715-Crumb Rubber Modified Bitumen 2. Ch. 2904- PNCB Flakes 3. Ch. 2922-Paracetamol I.P. 1. Sale Price of the principal is considered as the transaction value/Assessable value for payment of duty. 2. Rule 11 r/w Rule 8 of Valuation Rules 2000 3. As per section 4 (i)(a) of No comments. No unit manufacturing on job work are now covered under Section 4A. C.Ex.Act.1944 19. Surat -II 1. Ch.320890.90- 1K FLAH PRIMER SOLID MONOCOAT 1K ACRYLIC Section 4 As....
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....ated 19.02.2002.(material cost + labour) 3. As per Board Circular No. 619/10/2002-CX dated 19.02.2002.(material cost + labor ) YES. The recent decision by the Supreme Court in the case of S.Kumar as reported in 2005 (190) ELT 145 (SC) gives legal backing for charging duty on the sale price of the raw material supplier, if both are related persons. However, in other cases disputes are continuing. It is, therefore, suggested that a specific Rule may be incorporated in the valuation Rules, 2000 for valuation of goods manufactured on job work basis. In this connection, the following suggestions are made :- (i) If the goods manufactured on job work basis are sold as such or after certain processes which do not amount to manufacture, then the assessable value shall be based on the sale price of such goods adopted by the raw material supplier.(ii) If the raw material supplier uses the job worked goods for further manufacture of excisable goods as defined under Section 2 (f) of Central Excise Act, then the assessable value of job worked goods shall be arrived at on the basis of the landed cost of the raw material plus the conversion charges received, either directly or indirectly. 25. C....
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....y claiming exemption vide Rule 34 standard of weights and measures (packaged commodities) Rules, 1977 in terms of Boards Cir. No. 619/10/20 02 CX. Dated 19.02.2002, Rule 11 read with Rule 6 of the Valuation Rules, 2000 & Ujagar Prints & Board's Circular no. 619/10/2002-CX dt. 19.2.2002. By the above, the job workers are enjoying accumulation of credit due to more production of goods containing less than 10 gm. than MRP goods, and the brand name owners are unjustly enriched by way of getting extra consideration when compared with the Assessable Value adopted and MRP printed on both types of packages. 29. Salem 1. Ch. 5509 - Polyester staple fibre Yarn. 2. Ch. 5205 - Cotton Yarn. Rule 11 of C. Ex. Valuation (Determination of price of Excisable goods) Rules, 2000. (Landed cost of raw materials + job charges (including profit element) = Assessable value & Hon'ble Supreme Court judgment in the case of M/s. Ujagar Prints Ltd. 1. There is no direct provision in the valuation Rules to arrive at the value of goods manufactured on job work basis and recourse is taken to the residuary Rule 11. Therefore, a separate provision may be made in the Valuation Rules, for arriving at the value of ....
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....missioner of Central Excise, Indore Vs. S.Kumar's Ltd. has held that 'deemed price' principle of Ujagar Prints does not apply to processor who is not independent and that it is also inapplicable when processor is not a mere processor but also a merchant manufacturer who purchase/manufactures raw material, processes it and sells it himself in wholesale market. 3) Suggestions have been made for making necessary provisions in the Valuation Rules on the lines of transaction value assessment. procedure under Rule 4(5)(a) of CCR,2004. 33. Madurai 1. Ch .- 7603 Aluminium powder 2. Ch .- 7310 M.S.Drums Rule 11&Circular No. 619/10/2002 CX. Dtd. 19.02.2002. A specific Rule containing the following suggestions may be considered for insertion in the Central Excise (Valuation) Rules, 2000.(a) In case of goods which are in the nature of finished product and are sold as such without further processing, the following provision should be introduced . "Where the excisable goods are not sold by the assessee at the time and place of removal but are removed to the principal manufacturer/supplier of the raw material on payment of duty and where such principal manufacturer / supplier of inputs a....
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....e Goods) Rules, 2000. (a) In cases where the goods are manufactured on job work manufacture basis, an amendment to Section 4 and Valuation Rules may be made by inserting a special proviso that the assessable value has to be determined on the basis of the selling price of the finished goods by the owner of the job worked goods (b) The Valuation of job work goods may also be given under Central Excise Valuation (DPEG) Rules, 2000 based on the principles laid down by Supreme Court. 38. Mangalore 1. Ch.1704- White Chocolate 2. Ch.1806-Milk Chocolate 3. Ch.1806-Dark Chocolate 4. Ch.7318.10 -Articles of iron & steel 5. Ch. 7415.32 - Copper & Articles thereof Rule 11 of Valuation Rules 2000 No Comments 39. Belgaum 1. Ch.3920.32-HDPE strips 2. Ch.3926.90- HDPE Fabrics 3. Ch.3923.90-HDPE- Woven Sacks 4.Ch.7201.00/7214.00-Pig Iron (Solid/Liquid)of Alloy & Alloy & Non Alloy Steel 1.Rule 11 of Valuation Rules, 2000 2.Rule 11 of Valuation Rules, 2000 3.Rule 11 of Valuation Rules, 2000 4.Rule 8 of Valuation Rules 2000 No Comments. 5. Ch.7207.00 5.Rule 8 of Valuation Rules 2000 40. Hyderabad-I 1. Ch.4013- Tubes 2. Ch.7310-Tin Plate Containers 3. Ch.4013 -Inner Tubes of rubber. 1. No....
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....3) of Central Excise Valuation Rules, 2000. In such cases, the price at which the goods are finally cleared at the premises of consignment agent/depot is to treated as "value" for the purpose of assessment. It is pertinent to submit that the manufacturers availing the job work Notification No.213/86 -CE, dt. 25.3.1986 are paying duty on the transaction value whereas Assesses working under loan license or principal and job worker method are paying duty only on the Cost of production. To overcome this, adoption of Section 4 A of CE Act to all such packaged items is another method appears to be worth considering. 46. Tirupati 1. Ch. 7216-M.S. Angles Shapes and Sections of Rim Bars 2. Ch. 1704 - Caramel Rule 11 r/w Rule 6 of Valuation Rules 2000 (i) Board's Circular No. 619/10/2002-CX, dt. 19.2.2002 (In F. No. 6/47/2001-CX-) (ii)Board's Circular No. 643/34/2002-CX,dt.1.7.2002 (In F. No. 6/39/2000-CX-1) (iii) Ujagar Prints decision- 1989(39)E.L.T.493(S.C.) Circular No. 619/10/2002 and Ujagar Prints Case If it is established that the dealings were with related persons of the manufacturer, the sale of the processed fabrics would not be limited to the formula prescribed by Ujagar Prints....
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...., it is felt that no Rule amendment is required 53. Panchkula 1. Ch. 7409 Brass Sheet 2. Ch. 8708 Tractor parts. 3. Ch. 8708 Brake drum casting. 4. Ch. 3003 Medicament Rule 11 & as per Board Circular No. 619/10/02-Cx dated 19.01.2002. It appears that certain principal manufactures are clearing their final product from the premises of job workers only at the rate lower than the value charged by them for the same product which they clear from their own premises. Thus by following this practice they are evading the C. Ex. Duty on the element of differential value on this account. To eliminate this, there should be a legal provision to enable collection of duty on the transaction value on which the goods are actually sold by the principal manufacturers to independent buyer. 54. Rohtak 1. Ch.7220 - S.S. Flats 2.Ch. 5509 & 5510 -Cellulosic and non cellulosic spun yarn 3.Ch. 5402 - Polyester polypropylene Rule 8 of valuation R ules, 2000 Ujagar Prints Vs UOI, 1989 (39) ELT 493 (SC) Rule 9 of valuation Rules, 2000 (Transaction value) NO Amendments suggested. 55. Chandigarh 1. Ch.7217 90 99-bead wire 2. Ch.7326 19 90-rough forging Ch.8708-MV/Tractor parts 1.Rule 7 of Valuation Rule....
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....pecifically clarified by the Hon'ble Court that customer's profits in not includible in the assessable value of such goods. The decision of the Supreme Court being comprehensive and well reasoned. Which has been followed in PawanBiscuits case reported in 2000(120)ELT-24(SC)and still operative without any challenge, there is hardly any need for amendment to law pertaining to the issue of job -work valuation. 61. Allahabad 1. Ch. 8504-Repair of Transformer 2. 3926,3923 & 3915- P.P.Woven Fabric/Sacks/Bags Sec. 4 of Central Excise Act, 1944 No Comments. 62. Kolkatta-I 1. Ch. 3003-Ayurvedic Medicaments 2. Ch. 8504-Transformer & Parts 3. Ch. 4823-Paper Wrapper 1.Rule 11 r/w Rule 8 of Valuation Rules, 2000 2.Rule 11 r/w Rule 6 of Valuation Rules, 2000 3.Rule 11 r/w Rule 6 of Valuation Rules, 2000 Rule 6 of valuation Rules 2000 may be amended to the effect such that, the Traders profit should be added to job workers value of clearance. 63. Kolkatta-IV No unit manufacturing goods on job work basis hence Nil report. 64. Haldia 1. Ch. 7608-Aluminium extruded/Drawn section 1.Rule 6 of the Valuation Rules 2000, No Comments 2. Ch. 8421-ESP Fabricated Components 3. Ch. 8485-Parts....
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....er Section 4 A of Central Excise Act, 1944 may be extended to job worked goods also wherever possible. 67. Siliguri No unit manufacturing goods on job work basis hence Nil report. 68. Dibrugarh No unit under job work - hence NIL report 69. Ranchi 1. Ch. 7603-Aluminium Powder 2. Ch. 7202- MC Ferro Manganese Valuation is being done under Rule 11 r/w Rule 6 of Valuation Rues, 2000. No Comments 70. Jamshedpur 1. Ch. 7210-ETP (Electrolytic Tinplate) 2. Ch. 7209- FHCR Coil (Full Hand Cold Rolled Coils) 3. Ch. 7208 - H.R.Sheet 4. Ch. 7306 - M.S.Black Pipe & Galvanised pipe In case of depot transaction: - Rule 7 of the Central Excise(Valuation ) Rules,2000. In case of Direct Sale at Factory gate: - Section 4 (1) (a) of Central Excise Act ,1944, Section-4 of Central Excise Act' 1944, removal as final selling price . Valuation not done as per Board's Circular No. 619/10/2002-C.Ex.dated 19/2/02 and Apex Court's decisions in the case of Ujagar Prints Ltd. and Pawan Biscuit Co. Ltd. Valuation Rules 2000 does not contain any specific revision covering manufacture of goods on Job-work basis on behalf of Principal. As such, Board has issued Circular No. 619/10/2002- CX dated 19.02.2002....