COMMISSIONER OF C. EX. Vs. BHILWARA PROCESSORS LTD.

JUDGEMENT

(1.) These appeals arising at the instance of the Revenue are referred for consideration of a Larger Bench under Misc. Order No. 11/2002 -A, dated 18 -2 -2002. The appeals arise out of orders dated 31 -8 -2001 and 1 -6 -2001 passed by the Commissioner of Central Excise (Appeals), Jaipur. Under the above orders the Commissioner (Appeals) had allowed the appeals filed by the assessee relying on the decision of this Tribunal in Sangam Processors (Bhilwara) Ltd. v. CCE, Jaipur - 2000 (122) E.L.T. 45. In the above decision the Tribunal has held that "when the trader gives value as his selling price of the processed fabric, that price given by the trader must be accepted by the job worker for the purpose of payment of duty. The Excise authorities cannot go beyond that declared value". Since the original Bench before which these appeals came up for hearing found it difficult, to accept the above proposition as correct in the light of the decision of the Supreme Court in Ujagar Prints Etc. v. Union of India & Others - 1989 (39) E.L.T. 493 (S.C.), these appeals are referred for consideration by a Larger Bench.

(2.) The respondent M/s. Bhilwara Processors Ltd. are engaged in the processing of woollen fabrics and manmade fabrics for various parties including M/s. BSL Ltd., Mandpam, Bhilwara on job work basis. The assessable value of processed fabrics was determined on cost construction method taking the landed cost of the raw material (grey fabrics) and the processing charges. For this purpose the processor filed price declarations in which the cost of raw material i.e. woven fabrics (grey fabrics) was taken as per the declarations filed by M/s. BSL Ltd. The grey fabrics were being manufactured by M/s. BSL Ltd. in their weaving division from yarn manufactured in their own spinning unit at Bhilwara and from yarn purchased from outside also. Since the value of varieties of yarn manufactured and consumed captively in the manufacture of grey fabrics by M/s. BSL Ltd. was arrived at by the cost construction method and as BSL Ltd. could not furnish complete information regarding the cost of consumption during the period from 1 -4 -95 to 12 -12 -95, the same were assessed provisionally. On finalisation of the assessable value of the yarn, it was found that they had cleared the yarn on a value lower than the value as their prices were revised on higher side. The Revenue took the view consequently the assessable value of grey fabric manufactured out of these yarns which were subsequently processed by the respondents herein also needed to be increased. It was alleged that since in the declarations it was not mentioned that the assessable value has been computed on the basis of the provisional value of the yarn, both respondent -processor as well as M/s. BSL Ltd. wilfully misdeclared the information in the declarations filed by them for clearance of processed fabrics with intent to evade payment of duty. The original authority took the view that the cost of grey fabrics sent for processing should have been revised upwards consequent to the revision in the assessable value of the yarn from which such grey fabrics were manufactured by the supplier of the grey fabrics to the processing units. The Commissioner (Appeals), on the other hand relying on the decision of this Tribunal in Sangam Processors held that the Excise authorities cannot go beyond the declared value. It was also held that there was no material that the processors were aware of the fact of provisional assessment relating to yarn used in the manufacture of grey fabrics. Therefore, they could not have disclosed this fact in the declaration under Notification No. 27/92.

(3.) It is contended before us on behalf of the Revenue that since the grey fabric was sent for processing on job work basis, the valuation for the purpose of payment of duty on the processed fabric at the hands of the processor was on the costing basis in accordance with the principles laid down by the Supreme Court in the case of Ujagar Prints. The cost of grey fabric for this purpose was composed of element of cost of yarn, weaving charges etc. Therefore, there is no doubt that the actual cost of yarn was to be the element for arriving at the cost of grey fabric. The price declarations were filed by the processor containing the authorisation from M/s. BSL Ltd. as well as undertaking to discharge all liabilities under the Act. Therefore, it was the responsibility of the processor to ensure that the value for the purpose of payment of duty on the processed fabrics was correctly determined. M/s. BSL Ltd. has also the responsibility to ensure that the cost was correctly declared to M/s. BPL. According to the learned DR the decision of the Supreme Court in Ujagar Prints would in no way stand against the Revenue enquiring into the real cost of the grey fabric. The observations contained in the decision of this Tribunal in Sangam Processors to the contra has to be reconsidered.