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PJ/CASE-LAW/2015-16/2749

Valuation in case when job worked goods are directly cleared to consignment agents.

Case:-SARAVANA GINNING FACTORY VERSUSCOMMISSIONER OF C. EX., MADURAI
 
Citation:-2015 (318) E.L.T. 297 (Tri. - Chennai)
 
Brief facts:-The brief facts of the case are that the appellants M/s. Saravana Ginning Factory (SGF) and M/s. Sree Snehavalli Textiles Ltd. (SSTL) are engaged in the manufacture of cotton yarns. From November, 2002 onwards SSTL cleared cotton yarn on job work basis on receipt of the raw materials from SGF. The goods were removed to the consignment agents whereas the first appellant has not discharged the excise duty on the value of the goods sold at the premises of the consignment agents, instead they have paid excise duty on the value certified by the Chartered Accountant. The differential duty demand of Rs. 2,25,949/- was raised on SSTL. The adjudicating authority confirmed the demand and also imposed a penalty of Rs. 25,000/- on SSTL and also imposed penalty of Rs. 5,000/- on SGF along with interest. Aggrieved by this, the appellants filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) has upheld the order and dismissed the appeals. Hence, the present appeals filed by the appellants.
 
Appellant’s contention:- The ld. advocate appearing on behalf of the appellant submits that they have paid excise duty correctly as per the cost of production of yarns carried out on job work basis. He submits that as per the agreement between SFG, the raw materials are supplied by SGF and on manufacturing the yarns, they will discharge duty liability by adopting cost construction method. The cost of the raw materials plus job charges was certified by the Chartered Accountant. This fact has not been considered by the adjudicating authority as well as by the lower appellate authority. He further submits that they are not liable for penalty imposed. He relied upon the following case laws :-
1.         Ujagar Prints Etc. Etc. v. UOI & Others - 1989 (39)E.L.T.493 (S.C.)
2.         Pawan Biscuits Co. Pvt. Ltd. - 2000 (120)ELT 24 (S.C.).
The ld. advocate submits that regarding imposition of penalty on the second appellant SGF, since they are not principal manufacturer who supplied the raw materials and got the conversion of yarn from SSTL, the duty has been correctly discharged by the job workers. The penalty imposed on them is not justified and it is to be set aside.
 
Respondent’s contention:-The ld. AR on behalf of the Revenue reiterated the findings of the Commissioner (Appeals), as the job workers have not returned the goods to the principal manufacturer instead they have cleared directly to the consignment agents. Therefore, as per Section 4 read with Valuation Rules, the transaction value is on the price of the goods on which the consignment agent clears the goods to the buyer. The adjudicating authority has rightly determined the value. Hence, confirmed the demand. He also submits that they have not paid duty as per the cost construction method. Whereas they initially paid duty on provisional basis by declaring the value to the department on the ground that SGF has to supply the actual cost of the raw materials and the finished goods. They have not worked out the cost of raw materials and the job charges. Therefore, the duty demanded is liable to be upheld and the penalty imposed also should be sustainable. He relied upon the following case laws :-
1.         Loharu Steel Industries Ltd. v. CCE, Bangalore - 2002 (141)E.L.T.229 (Tri.-Bang.)
2.         I.P.F. Vikram India Ltd. v. CCE, Chandigarh - 2003 (160)E.L.T.1017 (Tri.-Del.)
3.         Hind Lever Chemicals Ltd. v. CCE, Calcutta-II - 2001 (130)E.L.T.82 (Tri.-Kolkata).
 
Reasoning of judgement:-The short issue to be decided in the present appeal relates to valuation of the goods cleared by the job worker directly on payment of excise duty. They find that the appellants have adopted provisional assessable value on cost plus conversion charge basis and paid excise duty. It is also seen that the first appellant instead of returning the finished goods to the principal manufacturer directly cleared the goods to the consignment agents on payment of excise duty. Whereas, it is seen that the consignment agents in turn collected the excise duty and sales tax from the buyers. It is also noticed that SGF has already collected the excise duty as per the value from the customers as per the price at which it was cleared from the consignment agents. Therefore, the excise duty is payable on the goods manufactured and cleared from the job worker directly to the consignment agent on the price at which consignment agents have sold to the buyers. The judgment relied upon by the ld. AR in the cases of Loharu Steel Industries Ltd. (supra) and I.P.F. Vikram India Ltd. (supra), rightly applicable to the present case. The appellants relying on the Hon’ble Supreme Court judgment in the case of Ujagar Prints Etc. Etc. (supra) is not applicable to the present case, as the facts are different in the present case. Accordingly, they do not find any infirmity in the findings of the adjudicating authority in confirming the demand of differential duty. However, they reduce the penalty imposed on SSTL from Rs. 25,000/- to Rs. 5,000/- and the penalty imposed on SGF is set aside. Both the appeals are disposed of in the above terms.
 
Decision:-Appeal disposed of.
 
Comment:- The crux of the case is that when Job worker clears job worked goods directly to consignment agents, assessable value has to be the price at which consignment agents sold the goods to customers and excise duty is payable accordingly. The excise duty is payable on the goods manufactured and cleared from the job worker directly to the consignment agent on the price at which consignment agents have sold to the buyers.
 
Prepared by:- Monika Tak

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