2007 (6) TMI 128 - AT - Central Excise

Valuation(Central excise) - Alleged that the transaction between appellant and other party(PGIL) is not on P to P basis and also he is not an independent job worker and therefore liable to pay duty on the price charged at the depots from other party - Allegation not sustained and demand set aside

Summary

Issues involved:
Valuation of Vicks Cough Drops manufactured on job work basis; Allegation of not being an independent job worker; Duty payment liability; Interpretation of agreement terms; Application of relevant legal precedents.

Analysis:
The appeals revolve around the valuation of Vicks Cough Drops manufactured on job work basis by the appellants for M/s. Procter & Gamble India Ltd. (PGIL) and other companies. The central issue is whether the appellants are an independent job worker or not, impacting their duty payment liability. The Commissioner imposed duty and penalties, alleging the transaction was not on a principal-to-principal basis.

The appellant argued their status as a job worker based on the agreement with PGIL and cited the decision of the Hon'ble Supreme Court in Ujagar Prints case. They emphasized the independence in manufacturing, machinery, and resources. The Commissioner, supported by the Departmental Representative (DR), contended the appellant was not independent, citing the S. Kumars Ltd. case.

Upon reviewing the agreement between the parties, the Tribunal found that the appellant undertakes manufacturing using their own resources, contradicting the Commissioner's stance. The agreement clearly delineated the roles and responsibilities, establishing the appellant as an independent job worker. The termination clause further supported the independent nature of the relationship.

The Revenue failed to demonstrate any extra commercial considerations influencing the transaction. The appellant clarified the circumstances regarding working capital and advertisement expenses, emphasizing their independence as a job worker. The Tribunal deemed the advertisement expenses irrelevant to the valuation of goods produced on job work basis.

The DR relied on the S. Kumars Ltd. case, emphasizing related persons and profit considerations. However, the Tribunal noted the absence of evidence establishing the appellant as a related person of PGIL. The Tribunal reiterated the appellant's status as an independent job worker, applying the principles from the Ujagar Prints case.

In conclusion, the Tribunal upheld the original valuation and duty payment, setting aside the Commissioner's order and granting relief to the appellant. The judgment highlighted the independent status of the appellants as job workers, emphasizing the importance of contractual terms and operational independence in determining duty liability.