Supreme Court of India

COMMISSIONER OF CENTRAL EXCISE, PUNEversusM/S. KRIPA CHEMICALS PVT. LTD.

Citation: 2004 INSC 641
Decided: 4 November 2004
Disposal: Disposed off
Bench: ARIJIT PASAYAT

Holding

Excise duty on modvatted raw material is excluded from cost of production, and the profit of the job worker, together with raw material value, job work value, manufacturing profit and processing expenses, must be considered in determining the excisable value.

Summary

The appeal before the Supreme Court concerned the method of calculating the cost of production for excisable products under the Central Excise Act. Two questions were posed: whether excise duty paid on raw material, if modvatted, should be included in the cost of production, and whether the profit earned by a job worker should be taken into account. Relying on the earlier decision in Collector of Central Excise, Pune v. Daiichi Karkaria Ltd, the Court held that modvatted excise duty on raw material is excluded from the cost of production. Referring to Ujagar Prints Ltd. v. Union of India, the Court clarified that the valuation must include the value of raw material, the value of job work performed, the manufacturing profit and the processing expenses. Accordingly, the excisable value is determined on this composite basis. The appeal was dismissed.

Issues considered

Whether excise duty paid on raw material, if modvatted, is to be included in the cost of production of excisable products.
Whether the profit earned by a job worker is to be included in the valuation of excisable value, and if so, to what extent.

Legislation cited

Subjects

excise dutycost of productionmodvatjob work profitvaluationCentral Excise ActCentral Excise Rules

Judgment

 A                 COMMISSIONER OF CENTRAL EXCISE, PUNE
                                           v.
                        M/S. KRIPA CHEMICALS PVT. LTD.

                                 4 NOVEMBER, 2004

 B                  [ARIJIT PASAYAT AND C.K. THAKKER, JJ.]


             Central Excise Rules, 1944:

          Modavt-Cost of production-Held, excise duty on raw material. if
 C   modvaued is not to be included in determining cost ofproduction of excisable
     products.

         _Collector of Central facise, Pune v. Daiichi Karkaria limited, (1999)
     112 EL T 353 SC, relied on.

 D           Central Excise Act, 1944:

            Excisable product-Valuation-Job work-profit earned by job worker-
     Held, value ofraw material, value ofthe job work done and the manufacturing
     profit and the expenses for the processing have to be taken into consideration.

.E        UjagG1: Prints etc. etc. v. Union of India and Ors .. (1989) 39 EL T 493
     SC, relied on.

             CIVIL APPELLATE JURISDICTION              Civil Appeal No. 5000 of
     1999.

 F        From the Judgment and Order dated I 0.5.99 of the Central Excise
     Customs and Gold (Control) Appellate Tribunal, Bombay in A.No.E/1719/
     94-A in F.0.No. C-I/930/WZB/1999.

           Mohan Parasaran, Additional Solicitor General and B. Krishna Prasad
 G   with him for the Appellant.

             C.N. Sree Kumar and Ms. M.L. Shyjatha for the Respondents.

             The Judgment of the Court was delivered by


 H                                         970
                                                                                       ;_




       COMMIR. OF CENTRAL EXCISE v. KRIPA CHEMICALS PVT. LTD. (PASAYAT, J.] 971

       ARIJIT PASAYAT, J. Heard.                                                   A
      This appeal involves two issues. One of them relates to the calculation
of cost of production and whether excise duty paid on raw material, if
modvatted, is to be included. in determining the cost of production of excisable
products. This issue has been examined by this Court by a three Judge Bench
in Collector of Central Excise, Pune v. Daiichi Karkaria Limited (1999) 112        B
353 SC and it was held that excise duty paid on raw material, if modvatted,
is not to be included in determining the cost of production of excisable
products. The other issue raised is the question as to whether profit earned
by the job worker is to be included and to what extent? In the clarificatory
order passed by this Court in Ujagar Prints etc. etc. v. Union of India and        C
Ors., (l 989) 39 EL T 493 SC, it was explained by way of an illustration that
the value of the raw material, the value of the job work done and the
manufacturing profit and the expenses for the processing have to be taken
into consideration. The determination of the excisable value shall be done on
that basis. The appeal is, accordingly, disposed of.
                                                                                   D
R.P.                                                      Appeal disposed of.

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