The Bangalore Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) upheld the use of the Ujagar Prints method for valuing job-worked goods, rejecting Rule 8 of the Central Excise Valuation Rules, 2000, as inapplicable since the assessee supplied the goods to the principal manufacturer for further production rather than captively consuming them.
Rima Transformers and Conductors Pvt. Ltd.,appellant-assessee,manufactured transformers and undertook job work for M/s. Bharat Heavy Electricals Ltd. (BHEL), processing raw materials supplied by BHEL and returning the goods on payment of excise duty.
Show-cause notices issued in 2011 alleged undervaluation of job-worked goods and demanded differential duty of Rs. 1,06,280/- for 2007–2010 and Rs. 18,867/- for 2010–2011. The demands, along with interest and penalty, were confirmed. The assessee’s appeals to the Commissioner (Appeals) were dismissed, prompting the present appeals.
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The assessee counsel argued that they followed the Ujagar Prints formula i.e., cost of raw materials plus job work charges (including profit) to determine assessable value but faced objections from the Department, which demanded differential duty under Rule 8. He contended that Rule 10A’s applicability, effective from 01.04.2007, was settled in Cosmo Conductors Pvt. Ltd. vs. CCE (2023).
The tribunal reviewed the arguments and records and addressed whether the goods manufactured by the assessee on a job-work basis and supplied to the principal manufacturer for captive use should be valued under the principles laid down in the Ujjagar Prints case or Rule 8 of the Central Excise Valuation Rules, 2000.
The appellate tribunal ruled that the issue had already been settled by earlier decisions, including the case of Cosmo Conductors Pvt. Ltd., which was upheld by the Supreme Court in CCE, Pune vs. Mahindra Ugine Steel Co. Ltd. It was determined that Rule 8 did not apply because the goods were not consumed by the assessee but were used by the principal manufacturer for further production. Instead, the assessable value should be determined based on the Ujjagar Prints principles.
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The two member bench comprising D.M.Misra(Judicial Member) and R Bhagya Devi(Technical Member) also clarified that the introduction of Rule 10A in 2007 did not change the position where the conditions of Rule 8 or specific sub-rules of Rule 10A were not satisfied. Following these precedents, the tribunal set aside the impugned orders and allowed the appeals, granting consequential relief to the assessee as per law.
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