Commissioner Of Central Excise vs Sdm International

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/1851 to 1860/06 Appln.E/CO/429, 370, 430 & 385/06

(Arising out of Order-in-Appeal No.PII/47-56/2006 dated 28/02/2006 passed by Commissioner of Central Excise (Appeals), Pune)

For approval and signature:

Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

Commissioner of Central Excise, Pune-II Appellant Vs. SDM International G Tex Inc. Fair deal Exports Swastik Dyeing & Bleaching Factory Banbury Exports Respondents Radha Kanhiya Textile Processors Reghunandan Processors Vinifine Textiles Mills Atlas Exports Shantinath Synthetics Pvt. Ltd.,

SDM International Appellants G.Tex Inc. Banbury Exports Vinifine Textiles Mills

Vs. Commissioner of Central Excise, Respondent Pune-II

Appearance:

Shri.Sanjay Hasija, Supdt. (AR) for appellant/Revenue Shri.TC Nair, Advocate for Appeal No.E/1852/06, E/1856/06 Shri RB Pardesi, Advocate with Shri NS Patel, Advocate for Appeal No.E/1851, 1858, 1859, 1860 and Shri C.S.Biradar, Advocate for E/1857/06R

CORAM:

Honble Mr.Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

Date of Hearing : 20/07/2015 Date of Decision : 20/07/2015

ORDER NO

Per: Raju

1. M/s.Swastik Dyeing & Bleaching Factory are processors of fabrics. Various exporters supply fabrics to M/s.Swastik Dyeing & Bleaching Factory, who processes the fabrics and hand it back to exporters. In this bunch of cases, all the exporters were receiving the processed fabrics within the factory of processors and undertaking certain activities like folding and packing etc. before exporting the same from the premises of the processors under ARE-1 forms. Revenue issued notices to the processors and various exporters claiming that they have not followed the principles of valuation laid down in Ujagar Prints judgement. It was alleged that they have valued the goods in such a manner, so as to inflate the value for the purpose of levying excess credit. The various heads under which the costs were sought to be included in the assessable value are listed in the show-cause notice. There costs were:

a) For working out the Value of Gray Fabrics they have considered following elements:

i) Value of Yarn

ii) Wastage 5%

iii) Sizing charges

iv) Weaving charges

b) In addition to the above to work out the cost of processed fabrics following elements have been considered:

v) Transportation charges @ 10% covering loading/unloading, shrinkage, manufacturing expenses

vi) Processing/job charges including processors profit.

c) Further for working out the assessable value of fabrics for export following elements are considered

vii) Export Packing (including packing material)

viii) Gradation/value loss @ 5%

ix) Manufacturing profit of supplier of raw materials @ 15%

2. The demand was confirmed by the Additional Commissioner. In appeal, the Commissioner (Appeals) allowed the appeal of the processors and the exporters. Aggrieved by the order of the Commissioner (Appeals), the department is in appeal before us. Four exporters were also filed cross objections.

3. The crux of the Revenues argument is that law laid down by the Honble Supreme Court in the case of Ujagar Prints and Pawan Biscuits has not been followed. The Commissioner (Appeals) in her order has observed that in case of Ujagar Prints, the processed goods were returned to the suppliers of the raw materials. In those cases the buyers had not done any processes in job workers premises. In this case the goods were directly cleared from the job workers premises for export and no processes were done by exporters in job-workers premises. It was therefore, necessary to clear the goods at export price which the processors has done. On this ground, she has differentiated the facts from those of Ujagar Prints. Another arguments forwarded by the Revenue is that the value of the process was done by the exporter within the processors premises should not be included in the value of export products. In this regard the respondents relied on the decision of this Tribunal in the case of Steel Authority of India Ltd., Vs. CCE, Raipur  2006 (197) ELT 113 (Tri-Del) the Tribunal observed as under:

12. Now the issue remains about the assessable value of this scrap for levy of excise duty. Appellants have paid excise duty on the basis of the price received by them in response to their tender noticed submitted by M/s. AMR Associates. However, it is observed that the appellants have allowed M/s. AMR Associates to bring their machinery and labour force inside their factory for sorting out iron lumps, breaking of the lumps, removing slag from the lumps and then clearing the iron scrap from the factory. They have also given them facility for installation of weigh-bridge. They have allowed them to maintain the approach roads and converts from operation at their own cost. No ground rent was charged by the appellants from M/s. AMR for making use of the company land, for their canteen and labour etc. Therefore, all these facilities which were provided free of charge form value of the iron scrap which is being cleared from the factory of the appellants. All the charges incurred inside the factory for bringing scrap up to the factory gate are required to be included for assessment purpose in the assessable value of the goods whether incurred by the appellants or by M/s. AMR Associates on behalf of the appellants. Therefore, the tender price at which the goods were assessed by the appellants does not represent the correct assessable value. Since the goods were cleared from the factory of the appellants and were further processed by M/s. AMR Associates before these were finally sold to the customers, the normal price of these goods cannot be determined under Section 4(1)(a) of the Central Excise Act. Therefore, the value has to be determined under Section 4(1)(b) of the Act read with Valuation Rules, 1975.

The same has been upheld by the Honble Supreme Court as reported in 2008 (221) ELT 831 (SC). Furthermore, in the case of CCE, Pune-II Vs. Jubilee Fabrics Ltd.  2007 (220) ELT 79 (Tri-Mumbai) and identical dispute has been decided by this Tribunal. In the said order, this Tribunal has observed as under:

3.?The ld. Commissioner (Appeals) while allowing the appeal of the respondents had come to the following findings :-

The appellants have now relied upon the Tribunals latest decision in the case of Steel Authority of India Ltd. (SAIL) v. CCE, Raipur [2006 (197) E.L.T. 113 (T.-Del.)], which they had not relied upon earlier. In the said relied upon case, that M/s. SAIL had paid duty on the basis of tender price received from M/s. AMR Associates; that M/s. SAIL had allowed M/s. AMR Associates to bring their machinery and labour force inside their factory for sorting out iron lumps, breaking of the lumps, removing slag from the lumps and then clearing the iron scrap from the factory; that they had also given them the facility for installation of weigh bridge; that they had allowed them to maintain the approach roads and converts from operation at their own cost; that no ground rent was charged by M/s. SAIL from M/s. AMR for making use of the company land, for their canteen and labor etc; that therefore, all these facilities which were provided free of charge from value of the iron scrap which was being cleared from the factory of M/s. SAIL; that all the charges incurred inside the factory for bringing scrap upto the factory gate are required to be included for assessment purpose in the assessable value of the goods whether incurred by M/s. SAIL or by M/s. AMR Associates on behalf of M/s. SAIL.

The ratio of the referred decision will be applicable to this case as because in this case the buyers are also undertaking certain process in the factory premises of the manufacturer. In view of the same, it is clear that the goods have to be assessed in the form the goods leave the factory premises, notwithstanding the fact that some of the processes were done by the buyer at his own expense. In such a situation, the assessable value of the goods while leaving the factory gate will naturally include the cost of all the processes undertaken for making the goods marketable, even if some cost has been incurred by the buyer. The appellants have also referred to CBECs Circular 139/8/2000-CX.4 dated 3-1-2001, wherein the Board has clarified that cost on account of process not amounting to manufacture, if undertaken inside the same factory premises are to form part of the cost of the final product. The said Circular is also relevant to this case. In view of the above, the cost incurred on all processes that are carried out in the factory of production, whether carried out by the manufacturer or by the customer of the final products, will form part of the assessable value of the final product.

In view of the above, the cost incurred towards special export packing (including packing material) gradation/value loss @ 3% and manufacturing profit of the Exporters is includible in the assessable value. It is also seen the appellants were paying duty during the material period on the exporters selling price of the processed fabrics, which included the cost of all processes undertaken by the exporter as well as the manufacturing profit of the raw material supplier i.e. M/s. Banbury Exports & M/s. SDM International and the same was never objected to by the department. The deemed Cenvat credit availed by the appellants is a percentage of the duty payment on the exporters selling price but is not allowing the Cenvat credit on the basis of the same selling price. The departments main allegation is that valuation should have been done on the basis of valuation principles outlined by the Supreme Court in Ujagar Prints Ltd. [1989 (39) E.L.T. 493 (S.C.)]. In the said case of Ujagar Prints Ltd., I find that the facts were different in as much as the buyer of the goods had never undertaken any processes inside the factory premises of the job worker.

As the facts in this case are different, the decision of the Apex Court in the case of Ujagar Prints Ltd., will not be applicable to this case. The appellants have therefore, correctly availed the deemed credit facility. In view of the above, the demand, interest and penalty do not survive and accordingly are set aside.

It can be seen from the above reproduced findings, the ld. Commissioner (Appeals) has correctly come to the conclusion that the Revenue has accepted the amount of the duty, on the value of the goods, which included the value of all the activities which were done by an exporter in the factory premises of the respondent. If that be so, than the value on which the excise duty paid is to be taken into consideration for arriving at the amount of the deemed credit which is eligible to the respondent. If the Revenue is accepting that value as correct assessable value then there cannot be any quarrel regarding the deemed credit which is a percentage of the amount of the assessable value of the goods cleared from the factory premises. I find in the facts and circumstances of this case, the ld. Commissioner (Appeals) as arrived at the correct conclusion and the impugned order is correct and legal and does not require any interference.

4. In view of the above, we find that there is no merits in the appeals filed by the Revenue, accordingly they are dismissed. Cross objections are also disposed of.

(Dictated in Court)

(Anil Choudhary) Member (Judicial) (Raju) Member (Technical)

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