KITEX LTD. Vs. COMMISSIONER OF CENTRAL EXCISE, COCHIN

JUDGEMENT

(1.) THIS appeal has been filed against Order -in -Original No. 54/2005, dated 15 -2 -2006 passed by the Commissioner of Central Excise and Customs, Cochin.

(2.) THE appellants are engaged in the manufacture of grey fabrics since 1988. The grey fabrics were exempted from payment of duty till 31 -3 -2003. With effect from 1 -4 -2003, the grey fabrics were subjected to duty. Moreover, a new Rule 12B was introduced with effect from 1 -4 -2003. In terms of the new Rule, a trader or a person can get the textile items manufactured by a job worker by supplying raw materials. Either the person who supplies the raw materials or the job worker can opt to follow all the Central Excise procedures like taking the registration, maintaining records, payment of duty, etc. In terms of the above Rule, duty is payable on the goods manufactured by the job worker on their clearance from the job workers premises. This is very clear on going through the provisions of Rule 12B. In the present case, the appellants who manufacture grey fabrics sent the grey fabrics to the job worker. The job worker undertook certain processes like bleaching, dyeing, printing, etc., which amounted to manufacture. Up to July, 2003, in terms of Rule 12B, the job worker maintained all the Central Excise formalities and cleared the goods on payment of duty. The valuation adopted was based on the Apex Courts decision in the Ujagar Prints case. In other words, the value is equal to the cost of the raw materials plus the job charges. However after July, 2003, the appellants who were the suppliers of raw materials viz., Grey Fabrics to the job workers opted to pay the duty on the goods manufactured by the job worker. After the goods had been processed by the job worker, they were returned to the appellants. The appellants cut the processed fabrics to specific lengths, folded and packed them. The finished product in the hand of the appellant was Dhotis, lungies, bed -sheets, etc., and the appellants sold these goods. Now, the dispute involved is regarding the correct valuation of the goods cleared by the job worker to the appellants and which were sold by the appellants after undertaking certain processes. Even in these cases where the processed goods were returned by the job worker and cleared by the appellant after subjecting them to certain processes, the appellant paid duty on the basis of the Ujagar Prints case viz., the value of the raw materials supplied to the job worker plus the job charges. The duty was discharged in the above manner. However, Revenue proceeded against the appellants on the question of valuation. According to Revenue, the appellant is deemed to be the manufacturer because the job worker manufactures the goods on appellants account and when the appellant sells these goods, duty should be paid on the sale price of the appellants and not on the valuation at the job workers end as adopted in the present case. Therefore, proceedings were initiated and duty demand amounting to Rs. 53,40,117/ - was made in the adjudication order. Equal penalty under Section 11AC was imposed. The period involved in the case is from April, 2003 to July, 2004 (up to 8 -7 -2004). In the show cause notice, the longer period has also been invoked. The appellants strongly challenge the impugned order the Commissioner.

(3.) SHRI G. Shivadass, learned Advocate appeared on behalf of the appellants and Shri K. Sami Reddi, learned JDR appeared for the Revenue.