SRF LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS is a matter in second round of litigation before Tribunal. The issue involved is differential duty demanded on dipped nylon/polyester fabrics manufactured by the appellant on job -work basis on account of valuation dispute on goods manufactured during the period June, 1983 to June, 1988. The demands confirmed are Rs. 3,51,425/ - out of demands made vide SCN dated 9 -11 -1988 for the period 1 -7 -1983 to 15 -12 -1984 and Rs. 4,16,882.36 out of demand made vide SCN dated 19 -11 -2008 for the period 17 -12 -1984 to 28 -2 -1986. The appellants manufactured dipped industrial fabrics using imported filament yarn supplied by a few customers on job -work basis charging just job -charges from the customers. The process of manufacture of dipped fabrics include 1. Twisting the yarn, 2. Beam warping wherein the twisted yarn is loaded to beam warpers and warps are prepared, 3. Pirn winding - winding of twisted yarn on wooden pirns, 4. Weaving of twisted yarn into fabrics (gray stage), 5. Dipping - the grey fabrics are dipped in resorcinol formaldehyde latex solutions and 6. Drying. The names of five such parties who got job -work done are mentioned in the SCNs. The appellants were also manufacturing such fabrics on their own account out of raw materials imported by them and clearing such manufactured goods on payment of duty based on sale price of the goods. The assessable value at which duty was discharged for job -work goods were lower than the assessable value of goods which were manufactured by appellants on their own account and sold to customers.

(2.) THE appellant had worked out the assessable value of the fabrics manufactured on job -work basis based on cost construction certified by a chartered accountant and paid duty on such assessable value. The dispute involved in the present appeal is that the appellant did not include bank charges for opening of letter of credit, to -bond and de -bond charges and C & F charges incurred by their customers while importing yarn and process loss of yarn for arriving at the assessable value of the goods manufactured by them on job -work basis. Revenue argues that when the appellants were importing such yarn for manufacturing fabrics, they were incurring such expenditure and they were aware of such cost components and also about wastages of yarn in process of manufacture through specific agreements with each of the parties, they but did not include such cost components in the cost of raw materials used in manufacturing done on job -work basis. The Show Cause Notice was issued on the basis of charges incurred by the appellant when similar yarn was imported by appellant. In the case of one company, that is M/s. Andrew Yule and Company, Revenue is also relying on a declaration dated 28 -10 -1987 of the cost of the material from that company.

(3.) THE facts based on which case is made out in the SCN dated 9 -11 -1998 against the appellant is slated in para 12.3 through reproduction of a statement of Shri R. Ravi Product Manager. The appellant had worked out the cost of material received based on GIF value up to the port of import, customs duty and transportation cost from the port of import to the factory of the appellant along with a buffer cost of 1% to 5%, towards variation in exchange rate calculations, at different periods of time to ensure that the cost declared is not less than the actual cost that may be incurred. But they did not include various other elements like such as C & F charges, handling charges, insurance, L.C. Charges, etc. in the cost to arrive at the landed cost of yarn at the factory premises of the appellant. Here it is necessary to mention that the cost of yarn is actually incurred by the party supplying the yarn. During the relevant time there was a practice of filing price list in advance and getting approval from the department and such approval was taken in these cases. Such price lists were filed along with cost certificates given by chartered accountants.