BHILWARA PROCESSORS LTD. Vs. CCE

JUDGEMENT

(1.) The appellant is a processor of fabric, it received fabrics, carried out processing as per order, and returned the processed fabrics to their senders. It received processing charges/job charges for the processing work carried out. There is no sale in this transaction, only the performance of a job work and receipt of job charges for it.

(2.) Textile processors are required to pay duty on the fabrics processed by them as processing is treated as manufacture. The duty being on ad valorem basis, payment of duty involves valuation of the processed fabrics. The law on valuation remains settled by the decision of the Apex Court in the case of Ujagar Prints Etc. Etc. v. Union of India and Ors., 1989 (39) ECC 11 (SC) : 1989 (39) ELT 493 (SC) wherein the Apex Court held that the value of the processed fabric consists of the value of the fabric received, the processing charges and the profit of the processor. The appellant has been following this principle while discharging duty on the fabrics processed by it. It has several clients. The present appeal is about the valuation of fabrics processed for M/s. BSL Ltd. during the period July 2002 to December 2002. The appellants arrived at the assessable value by adding their job charges to the cost of the fabrics received. Under the impugned order it has been held that the value so arrived at by the appellant was less, and on account of that, there was evasion of duty of about Rs. 34 lakhs. The error in valuation pointed out is that M/s. BSL Ltd. had paid Central Excise duty on the fabrics sent by them by treating 115% of the cost of production as the assessable value of the fabrics. This was done in terms of Rule 8 of Central Excise Valuation Rules. The impugned order has held that the appellant should have treated that assessable value as the value/cost of the fabric. The present appeal challenges that finding.

(3.) The contention of the appellant is that it has discharged duty on the basis of correct valuation law laid down by the Apex Court in the case of Ujagar Prints (supra) and Pawan Biscuits Co. (Pvt. Ltd. v. Collector of Central Excise, Patna, 2000 (70) ECC 653 (SC) : 2000 (120)) ELT 24 (SC). It is being contended that what is contemplated in these judgments is that assessable value must be computed by adding job charges and job charge profit to the cost of fabric received and not the excise assessable value of the fabric. According to the appellant, assessable value is very often an artificial/notional construct like 115% of the cost of the production in terms of Rule 8 of the Central Excise Rules, a notified tariff value under Section 3 or a derived value (form MRP) under Section 4A of the Act). During the hearing of the case, learned Counsel for the appellant pointed out that this distinction between cost and value is made clear by the Apex Court in the Pawan Biscuits Co. (Pvt.) Ltd. (supra) judgment. The learned counsel has referred to para 16 of the judgment in this case. That para reads as under: -