TMI Blog2012 (2) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue for statistical purposes. - Civil Appeal Nos. 6539-6540 of 2010 - - - Dated:- 13-2-2012 - D.K. Jain, Anil R. Dave, JJ. JUDGMENT D.K. Jain, J 1. These appeals under Section 35L(b) of the Central Excise Act, 1944 (for short "the Act") are directed against a common final order, dated 2nd February 2005 in Appeal No. E/5261-62/04-NB(A), passed by the Customs Excise and Service Tax Appellate Tribunal, New Delhi (for short "the Tribunal"). By the impugned order the Tribunal has quashed the additional excise duty demand of 9,34,89,367/- Under Section 11a of The Act; Penalties of 1.5 crores each on respondent Nos.1 and 2 under Rule 173Q of the Central Excise Rules, 1944 (for short "the 1944 Rules") and Rule 25(1) of the Central Excise Rules, 2001 (for short "the 2001 Rules") read with Section 38A of the Act and a penalty of Rs.2 crores under Rule 209A of the 1944 Rules and Rule 26 of 2001 Rules read with Section 38A of the Act on Respondent No. 2 as confirmed by the Deputy Commissioner of Central Excise. 2. Succinctly put, the material facts giving rise to the present appeals are as under: Respondent No.1-M/s Food and Healthcare Specialities (for short "t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to several clauses of the agreement between the Assessee and Heinz, in particular, clauses (d), (1), (2), (5), (7), (9),(13), (15) and (16), vehemently submitted that the relationship between the Assessee and Heinz was one of principal and agent and not of principal to principal and therefore, the price at which, Heinz sold Rs.Glocon-D' in the wholesale market must be taken as the assessable value. According to the learned counsel, Heinz had complete control over the activities of the Assessee, who was merely a job worker. To bring home his point that the Assessee was merely an extended arm of Heinz, he laid emphasis on the fact that processed Rs.Glocon-D' was stored at the same premises from where Heinz was operating; Heinz had also taken an exemption from registration under Rule 9(2) of the erstwhile Central Excise (No.2) Rules, 2001, in terms of Notification No. 36/2001 dated 26th June 2001, which was available to a manufacturer who got his goods manufactured on his account from any other person, subject to the condition that the said manufacturer authorised the person, who actually manufactured or fabricated the said goods, to comply with all the procedural formalities under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal to principal basis, the principle laid down in Ujagar Prints (II), as clarified in Ujagar Prints (III), for determining the assessable value, was on all fours with the fact-situation at hand and as such the ratio of the judgment in S. Kumars will not apply. In the compilation filed on behalf of the Assessee, reliance is also placed on Circular No.: 619/10/2002-CX dated 19th February 2002, which clarifies that even after the introduction of new valuation provisions with effect from 1st July 2000, in respect of goods manufactured on job-work basis, valuation would be governed by Rule 11 read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (for short "the 2000 Rules") and the decisions of this Court in Ujagar Prints II and Pawan Biscuits. According to the learned counsel, the issue raised by the revenue stands concluded by the ratio of Pawan Biscuits, and therefore, the appeals deserve to be dismissed. 5. The principles of valuation of excisable goods for the purpose of charging excise duty are contained in Section 4 of the Act (as amended with effect from 1st July 2000), which, insofar as it is relevant, reads as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribes that the value of excisable goods shall be the transaction value subject to satisfying the conditions that: (i) the price must be the sole consideration; (ii) the buyer must not be a related person and (iii) the goods must be sold by the assessee for delivery at the time and place of removal. The basic principle underlying Section 4(1)(a) of the Act is the transaction value as defined in clause (d) of sub-section 3 of Section 4 of the Act, which inter-alia, means the price actually paid or payable for the goods when sold, provided the assessee and the buyer of goods are not related. Clause (b) of sub-section (3) of Section 4 of the Act, inter-alia, stipulates that person shall be deemed to be "related" if they are so associated that they have interest, directly or indirectly, in the business of each other. It is clear that if the assessee and the buyer are related, valuation has to be under Section 4(1) (b) of the Act read with the 2000 Rules. We may, however, note that conceptually there is no significant change in the definition of "related person" in the new and repealed Section 4 of the Act. 6. Thus, the pivotal question on which learned counsel for both the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d merely undertakes processing before returning the same to the manufacturer/owner. That common norm was the wholesale price. 8. On an application filed for clarification of the judgment in Ujagar Prints (II), this Court by a short order in Ujagar Prints (III) clarified as follows: "1...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 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. The factory gate here means the "deemed" factory gate as if the processed fabric was sold by the processor..." The Court went on to explain: "2. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turers were selling the processed goods was not taken into consideration. According to the assessee, this was done in light of the decision in Ujagar Prints (II) and (III). A notice was issued to the assessee to show-cause as to why differential duty of Excise along with penalty be not recovered from it as the assessee and the merchant manufacturers were all firms and companies having a common management and control with some of them selling grey fabrics to the assessee, which after processing the fabrics was sold to some independent dealers. All such independent dealers as well as the merchant manufacturers were described as Rs.S. Kumars' and the revenue asserted to treat the price charged by the merchant manufacturers from independent dealers as the assessable value of the processed fabrics and to levy excise duty thereon. The assessee denied that the merchant manufacturers were related persons and thus disputed the basis on which claim for additional excise duty was made. The stand of the assessee was that by virtue of the decision of this Court in Ujagar Prints (III), they were liable to treat the notional sale by the assessee to the merchant manufacturers as the relevant point ..... X X X X Extracts X X X X X X X X Extracts X X X X
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