Whether transportation charges for inputs includible in the assessable value by job worker?

PJ/CASE LAW/2015-16/2755

Case:- ANITA PRINTS Vs COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II

Citation:-2015 (317) E.L.T. 257 (Tri. - Mumbai)

Brief Facts:-This appeal is directed against Order-in-Appeal No. AT/51/M-II/2007, dated 21-2-2007.
The relevant facts that arise for consideration are the appellant is engaged in processing of grey fabrics on job work basis; the valuation of the said fabrics is done on the basis of cost of manufacture and job work cost as per the judgment of the Apex Court in the case of Ujagar Prints - 1988 (38) E.L.T. 535 (S.C.). The lower authorities have held that the appellant herein had incorrectly done the valuation of the grey fabrics received by holding that the appellant had not attributed the value towards the shrinkage and has not taken into consideration the amount of transportation charges which would be incurred for movement of grey fabrics to them for processing. Coming to such conclusion, both the lower authorities have held that the appellant has short paid the Central Excise Duty. The matter was taken up in appeal before the Tribunal and the Tribunal, after hearing both sides, remanded the matter back for reconsideration of the authorities. In the de novo proceedings, the adjudicating authority as well as the first appellate authority have dropped the proceedings initiated against the appellant in respect of the inclusion of the value of shrinkage losses but confirmed the demands on an amount which is considered as transport, octroi etc., which was not considered for valuation purposes. The Revenue is not in appeal against the impugned orders as regards the dropping of proceedings on the value not included in respect of shrinkage.

Appellant contentions:- The learned Counsel would bring to our notice the show cause notices and submit that the amounts considered by the lower authorities towards the transport/octroi are unsubstantiated and despite seeking the details how they have arrived at these figures, nothing was informed to them. It is his submission that if the department wants to justify the demand, they should give the details based upon which such demand is raised. It is also his submission that the department has not discharged any onus by a tangible evidence. He would rely upon the following judgments :-
(a)       CCE v. Jalan Dyeing & Bleaching Mills - 2010 (253) E.L.T. 663 (T);
(b)       Ample Industries v. CCE - 2007 (218) E.L.T. 456 (T);
(c)       CCE v. Batliboi & Co. Ltd. - 2004 (178) E.L.T. 329 (T);
(d)       Radha Madhau Corpn. Ltd. v. CCE - 2012 (284) E.L.T. 369 (T).
On merits, it is his submission that the valuation of the goods which are processed in the hands of the appellant as a job worker, is to be done based upon the price of raw material + job working charges including profit, which is the law that has been settled by the Apex Court in Ujagar Prints. It is also his submission that the grey fabrics are delivered on the door of the appellant by the merchant manufacturers and hence the cost of such delivery in the hands of the appellant cannot be included for demanding duty from them. It is also his submission that since the demand itself is unsustainable, the question of imposition of any penalty on the appellant does not arise.

Respondent contentions:- The learned departmental representative would defend the impugned order by trying to bring to our notice that the certificate issued by a Chartered Accountant does not indicate any details as to whether the C.A. has undertaken the exercise by scrutinizing the records. He would also submit that the C.A. certificate specifically states that he has relied upon the declaration of the management of the appellant as to the prices which were inclusive of inward transportation and octroi. He would submit that the adjudicating authority as well as the first appellate authority have correctly confirmed the demand as there was no evidence on record which indicated that inward transportation and octroi charges were borne by the suppliers of grey fabrics.

Reasoning of Judgment:- We have considered the submissions made at length by both sides and perused the records.
The only issue that falls for our consideration is whether the Revenue has made out a case of undervaluation. The Revenue’s case is that the appellant has not included the cost of inward transportation and the octroi, which was paid on the grey fabrics received for processing by the appellant.
We find considerable force in the submissions raised by the learned counsel. On perusal of the show cause notice issued to the appellant, we find that the said show cause notice does not rely upon any documents which indicate the value which is attributed to the transport and octroi in the said show cause notice. The said show cause notice blindly states that transport charges and octroi are to be included in the assessable value of the goods without evidencing that the said transport charges and octroi are paid by the appellant and the amount which is indicated in the show cause notice is the amount which has been deduced from the records maintained in the appellant’s premises. It is a settled law that when the department raises demands on the assessee, the onus has to be discharged by the department by submitting tangible evidences. In the absence of any such evidence which indicates the specific amounts as have been paid by the appellant, the entire fulcrum of the show cause notice is displaced and any order confirming the demand raised on such show cause notice has to go. We find that this is the ratio that can be derived from the judgments of this Tribunal in the case of Jalan Dyeing & Bleaching Mills (supra), Radha Madhav Corporation (supra) and other cases.
We also find strong force in the contentions raised by the learned counsel that the appellant being a job worker, the duty liability which has to be discharged by them, is to be worked out on the basis of price of raw material + job working charges including profit. A casual perusal of the Chartered Accountant’s certificate which is annexed to the appeal memoranda, would indicate that the appellant had followed the law as has been settled by the Apex Court in the case of Ujagar Prints.
In view of the foregoing, we find that the impugned order is unsustainable and liable to be set aside and we do so.
The impugned order is set aside and the appeal is allowed with consequential relief, if any.

Decision:- Appeal allowed.

Comment:- The crux of the case is that in case of job worker duty liability prior to Rule 10A was required to be assessed on the basis of price of Raw Material + Job Working Charges Including Profit as held in the case of Ujagar Prints case by the Apex Court.Moreover, when any demand is raised by department, onus shall be discharged by Revenue by submitting tangible evidence. In absence of such evidence entire fulcrum of show cause notice is displaced and order based on such show cause notice shall be set aside.

Prepared By:Meet Jain

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PJ/CASE LAW/2015-16/2755

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