LexCOMMISSIONER OF CENTRAL EXCISE, JAIPUR versus M/S. RAJASTHAN SPG. & WVG. MILLS LTD., ETC. ETC.
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A COMMISSIONER OF CENTRAL EXCISE, JAIPUR v. MIS. RAJASTHAN SPG. & WVG. MILLS LTD., ETC. ETC. ~ i B NOVEMBER 28, 2007 [S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.) Central Excise (Valuation) Rules, 1975: c rr.6(b)(ij, (iij and 7-Assessable value-Computation of-Textile manufactured at weaving Unit-Processed at process house on job ~ work basis-Unsorted goods received from processing house- / Manufacturer then carrying out work of sorting and thereafter goods D cleared through Depot-Revenue claiming differential duty on the ground that agreement of lease for processing was a sham in order to change the basis of valuation/assessment of fabric processed, from "comparable goods basis/method" to "cost method"-Tribunal holding the lease agreement as genuine and manufacturer right in E invoking cost method under r. 6(b)(ii)-Held: Value of sorted goods cleared at the Depot would be different from value of unsorted goods (semi-finished goods) cleared at factory gate-Thus there was "value addition" and taking this into account, proportionate actual realization on sale of graded fabrics would be more than what is calculated by F Revenue-Different methods have to converge to a common valuation-The aspect of convergence is significant-It is not possible to accept wide variation in the result-Revenue may apply different methods of valuation, but it has to ultimately ascertain by applying .,. rule of convergence the estimated ad valorem value which would G constitute the basis of assessable value-There is no reason to interfere with judgment of Tribunal. 703 H 704 SUPREME COURT REPORTS [2007] 12 S.C.R. A Ujagar Prints & Ors. v. Union of India & Ors., (1989] 3 SCC B c 531, referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 735- 744 of2002. From the final Order No. 134-43/2001-A dated 4.4.2001 of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi in Appeal No.E/489-498/2000-A. wrrn C.A. Nos. 8671-8672/2002 and 2624/2003. R.G. Padia, T.V. Ratnam, B.K. Prasad and Lalit Srivastava for the Appellant. D Lakshmi Kumaran, Alok Yadav, V. Balachandran, Rajesh Kumar E F and M.P. Devnath, for the Respondents. The following Order of the Court was delivered ORDER 1. This batch of civil appeals filed by the Department is directed against the judgment and order dated 4th April, 2001 passed by CEGA T, New Delhi in appeal No.E/489-498/2000-A. 2. The main issue which arose for determination before the tribunal was whether Rajasthan Spinning and Weaving Mills Ltd. (RSWML) was the real manufacturer who carried out textile processing from its process house at Mordi and if so whether the Department was right in invoking best judgment assessment in terms ofRule 7 of Central Excise (Valuation) G Rules, 1975 (1975 Rules for short). H 3. RSWML are the manufacturers of yarn and fabric. It had set up a process house at Mordi in 1994-95. The process house was set up for processing their fabric. The woven fabrics manufactured at their weaving unit was processed on job work basis by Mordi processing house. This \ ; ' i / > ~ _, I __, .,.._. COMMISSIONEROF CENTRAL EXCISE, JAIPUR v. M/S. 705 RAJASTHAN SPG. & WVG. MILLS LTD., ETC. ETC. was with effect from 29th March, 1995. On 16th June, 1995 the said process house was let out by RSWML to Bhilwara Spinners Limited (BSL). Later on the lease agreement between RSWML and BSL stood terminated and the process house was leased out to Purvi Fabrics & Textures (PFTL). 4. The above arrangement was doubted by the Department. Therefore, the Department issued show cause notice dated 22nd September, 1998 claiming differential duty from RSWML for the period from 16th June, 1995 to February 20, 1996 principally on the ground that the real manufacturer was RSWML and that the above arrangement of lease was a sham as it was arrived at to change the basis of valuation/ assessment of fabrics processed from "comparable goods basis/method" to "cost method". 5. On factual analysis the tribunal came to the conclusion that the lease agreement referred to above was genuine and, therefore, RSWML was right in invoking the cost method under Rule 6(b)(ii) of the said 1975 Rules. According to the tribunal the present case stood covered by the judgment ofthis Court in the case of Ujagar Prints & Ors. v. Union of India & Ors., [1989] 3 SCC 531. 6. At the outset we may point out that the question of valuation was not examined b
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