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PETITIONER: UJAGAR PRINTS ETC. ETC.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT27/01/1989

BENCH: PATHAK, R.S. (CJ) BENCH: PATHAK, R.S. (CJ) RANGNATHAN, S. MUKHARJI, SABYASACHI (J) NATRAJAN, S. (J) VENKATACHALLIAH, M.N. (J)

CITATION:  1989 AIR  972            1989 SCR  (1) 344  1989 SCC  (3) 531        JT 1989 (1)   157  1989 SCALE  (1)195

ACT:     Central Excises and Salt Act, 1944/Central Excise Rules, 1944: Sections 2(f),  4/Rule  179  Processed fabric--Assess- able  value-Determination  of--Judgment of the  Court  dated November 4, 1988--Clarified.

HEADNOTE:     On  a civil miscellaneous petition for clarification  of this Court’s judgment dated 4th November, 1988, the Court.     HELD: The assessable value of the processed fabric would be the value of the grey-cloth in the hands of the processor plus  the  value  of the job-work  done  plus  manufacturing profit  and  manufacturing expenses whatever these  may  be, which  will either be included in the price at  the  factory gate  or deemed to be the price at the factory gate for  the processed fabric. [345D-E]     The  factory gate means the "deemed" factory gate as  if the processed fabric was sold by the processor. [345E]     If the trader. who entrusts cotton or man-made fabric to the processor for processing on job-work basis, would give a declaration  to the processor as to what would be the  price at  which  he would be selling the processed  goods  in  the market, that would be taken by the Excise authorities as the assessable-value  of  the processed fabric and  excise  duty would  be  charged to the processor on that  basis.  Such  a declaration would include only the price or deemed price  at which  the  processed  fabric would  leave  the  processor’s factory  plus  his profit. It is necessary  to  include  the processor’s expenses, costs and charges plus profit, but not the trader’s profits who gets the fabrics processed, because those would be post-manufacturing profits. [345G-H; 346B-C]

JUDGMENT:     ORIGINAL JURISDICTION: Civil Miscellaneous Petition  No. 32937 of 1988. 345

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IN Writ Petition No. 12 183 of 1985. (Under Article 32 of the Constitution of India).     K.K. Venugopal, Mrs. Jayashree Wad and Mrs. Aruna Mathur for the Petitioners.     K. Parasaran, Attorney General, A.K. Ganguli, P. Parmes- waran and K. Swamy for the Respondents. The following Order of the Court was delivered: ORDER     In  respect  of  the civil  miscellaneous  petition  for clarification  of this Court’s judgment dated 4th  November, 1988,  it  is made clear that the assessable  value  of  the processed fabric would be the value of the grey-cloth in the hands  of the processor plus the value of the job-work  done plus manufacturing profit and manufacturing expenses whatev- er these may be, which will either be included in the  price at the factory gate or deemed to be the price at the factory gate  for the processed fabric. The factory gate here  means the  "deemed"  factory gate as if the processed  fabric  was sold  by the processor. In order to explain the position  it is made clear by the following illustration: if the value of the  grey-cloth in the hands of the processor is  Rs.20  and the value of the job-work done is Rs.5 and the manufacturing profit and expenses for the processing be Rs.5, then in such a  case  the value would be Rs.30, being the  value  of  the grey-cloth plus the value of the job-work done plus manufac- turing  profit and expenses. That would be the  correct  as- sessable-value.     If the trader, who entrusts cotton or man-made fabric to the processor for processing on job-work basis, would give a declaration  to the processor as to what would be the  price at  which  he would be selling the processed  goods  in  the market, that would be taken by the Excise authorities as the assessable-value  of  the processed fabric and  excise  duty would  be  charged to the processor on that  basis  provided that  the declaration as to the price at which he  would  be selling  the  processed goods in the market,  would  include only the price or deemed price at which the processed fabric would  leave the processor’s factory plus his  profit.  Rule 174 of the Central Excise Rules, 1944 346 enjoins that when goods owned by one person are manufactured by another the information is required relating to the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all the liabil- ities under the said Act and the rules made thereunder.  The price at which he is selling the goods must be the value  of the grey-cloth or fabric plus the value of the job work done plus the manufacturing profit and the manufacturing expenses but  not  any  other subsequent profit or  expenses.  It  is necessary  to  include the processor’s expenses,  costs  and charges plus profit, but it is not necessary to include  the trader’s  profits  who gets the fabrics  processed,  because those would be post-manufacturing profits. N.P.V. 347