CENTRAL EXCISE CIRCULAR NO. 526/22/2000-CX Dated 19-4-2000.
Subject: Determination of the assessable value of the goods where the subsequent process does not amount to manufacture but the process adds to the intrinsic value of the product to make up full commercial value -Supreme Court decision in Civil Appeal No. 7282 of 1996 dated 3.11.1999 in the matter of M/s Sidhartha Tubes Ltd. Vs CCE.
I am directed to invite your kind attention to the Supreme Court"s decision in civil Appeal No. 7282/96 in the matter of M/s. Sidhartha Tubes Ltd. Vs. CCE decided on 3rd November, 1999. The Apex Court vide this impugned order has dismissed party"s appeal with costs.
2. In this case the assessee was engaged in the manufacture of mild steel pipes and tubes. About 30% of the production was cleared at that stage as black pipe. The balance production was taken to separate shed in assessee"s premises / factory and
galvanised. The assessee contended the clearance of the galvanised pipes as black pipe as in their view the process of galvanisation is not a process of manufacture and no addition can be made to the assessable value of the black pipe on account of the galvanisation that subsequently occurred. However, the tribunal rejected their contention.
3. The assessee agitated the matter before the Apex Court. The honourable Apex Court, in its order mentioned above has held that even if manufacture may be complete at some stage and excise duty leviable at that stage, but if assessee subjects the goods to some further process before marketing - where such process does not amount to manufacture - duty has to be paid on value of goods being cleared for marketing and not just on value when manufacture was technically complete. This is an important decision of the apex court which upholds the tribunal"s decision reported in 1996 (82) ELT 399 and reiterates the right to levy duty on the value of goods in the form finally cleared from the factory.
4. The Board desires that the above mentioned apex court decision may be circulated to lower field formations.
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(K K Jha)
Director (Review)
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7282 OF 1996
Sidhartha Tubes Ltd. ........................Appellant
versus
Collector of Central Excise .......................Respondent
ORDER
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The order under appeal was passed by the Customs, Excise and Gold (Control) Appellate
Tribunal.
The appellants manufacture mild steel pipes and tubes. About 30% of the production is cleared at that stage, and the product is then known as black pipe. The balance production is taken to a separate shed in the appellants" factory premises and
galvanised. The dispute is in relation to the galvanised black pipe. According to the appellants, what they clear is black pipe, the process of galvanisation is not a process of manufacture and no addition can be made to the assessable value of the black pipe on account of the galvanisation that subsequently occurred. The Tribunal rejected the contenction. It said that the appellants themselves had, in their classification list, declared M. S. black pipes and galvanised pipes as their products. In such a situation, the mere fact that galvanisation was done subsequent to paying duty on the M.S. black pipes could not, by itself, be a ground for not
including the cost of galvanisation in the assessable value of the black pipes subjected to the process of galvanisation. While that process did not amount of manufacture, it added to the intrinsic value of the product to make up the full
commercial value which was realised by the appellants by charging a higher price for such pipes covering the cost of galvanisation.
We are m agreement with the view taken by the Tribunal. The mere fact that the process of galvanisation is carried on in another shed can make no difference. When the assessable value is to be calculated of the galvanised black pipe made by the
appellants, the element of the cost of galvanisation must from a part thereof.
Our attention was invited to the judgements of this Court which deal with cases where duty was to be levied at an intermediate stage and again at the final stage. They have no relevance to the point at issue.
The appeal is dismissed with costs, quantified at Rs.25,000/-
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(S P Bharucha)
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(A P Misra)
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