ORDER
Moheb Ali M., Member (T)
1. The appellant is a manufacturer of man-made cotton fabrics. He processes grey fabrics on job work basis. The processed fabrics are valued on the basis of the formula laid down by the Supreme Court in the case of Ujagar Prints v. UOI 1989 (39) E.L.T. 493 (S.C.), that is, the cost of raw material plus job charge. During the process of manufacture, defective fabrics emerge which the appellants call cut-pieces of fabrics. The appellant determined the value of cut pcs. as 25% of the value of first quality fabrics. The dispute pertains to valuation of cut pcs. The Commissioner (Appeals) in the impugned order held that the value of cut-pieces for the purpose of assessment should be the same as that of the value of the first quality fabrics. Hence this appeal.
2. Heard both sides. Learned advocate for the appellant contends that in a situation where the goods were not sold but were returned to the merchant manufacturer, the value of the goods will have to be arrived at only on cost construction method. That principle will hold good whenever first quality goods are returned to the merchant manufacturer but in the case of cut-pieces, the value will have to be determined under the best judgment method envisaged in Rule 7 of the erstwhile Central Excise Valuation Rules. The appellant thought that the value of cut pieces could be determined on the basis of value of first quality goods. This method falls under best judgment method under Rule 7 according to the appellant. He argued that the Assistant Commissioner examined the fabrics in question and found them to be defective, damaged rags. He has accepted the value declared by the appellant. He further submitted that the Commissioner’s finding that the value of cut-pieces should be the sum total of the cost of grey fabrics contained therein plus job charges is erroneous for the reason that cut pcs. do not stand on the same footing as that of first quality fabrics.
3. Learned SDR on the other than [hand] contended that the value of processed fabrics can be arrived at only on the basis of formula laid down in Ujagar Prints case (supra). He submitted that the appellant’s attempt to determine the value in any other manner is not supported by any decision of the Tribunal/Court.
4. We have observed that the appellant was seeking to determine the value of cut-pieces in a manner different from the one which is used for arriving at the value of first quality fabrics. We also notice that all the elements that go into the manufacture of first quality fabrics do go in the manufacture of cut pieces. The appellant’s attempt to determine the value of cut pieces at a lower price is based on the price of cut pieces fetch in the market. Such a basis cannot be adopted for goods manufactured by a job worker. Commissioner’s finding that the value of the cut pieces should be the same as that of the first quality fabrics is based on the fact that when goods are produced by a job worker the formula laid down by the Supreme Court has to be adopted. In the process of such manufacture if some defective fabric emerges its (defective fabrics) price cannot be arbitrarily determined on the basis of what such defective fabric fetches in the market. He rightly rejected the contention of the lower authority that cut pieces are rags. His contention that the value of the cut pcs. should be at par with the first quality is based on sound logic, particularly in the absence of evidence as to which of the elements of costing have not been incurred in the production of cut pcs. The appeal is rejected.
(Dictated and pronounced in open Court)