TMI Blog2013 (6) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... d provisions very clearly indicate that the cost of the free supply of moulds needs to be included in the transaction value, for the discharge of duty liability. See case of ISPAT Industries Limited [2007 (2) TMI 5 - CESTAT, MUMBAI]. The said cost of moulds has to be amortized and included in the value of goods manufactured and cleared by M/s. Abhishri. We find that the application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. Thus by applying such norm, rule 6 of the Valuation Rules should the correct Rule, as it is more specific rule than the Rule 10A, for the purpose of valuation of the goods manufactured and cleared by M/s. Abhishri as invoking the provisions of Rule 10A of the Valuation Rules in this case, does not arise. Thus if any assessee manufacture final products, independently procuring inputs, paying for the same, utilizing his own manpower and sells the finished products to a purchaser based upon the price agreed between them, the said transaction will be covered by Section 4(1)(a) of the Central Excise Act, 1944. Trying to bring such type of transactions under provisions of Rule 10A of Valuation Rules, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under various provisions of Central Excise Act read with rules made there under. 3. Learned Counsel appearing on behalf of appellants would draw our attention to the facts of the case. He would then read the agreement entered into by M/s. Abhishri with M/s. Symphony. He would submit that adjudicating authority has confirmed the demand mainly on the following grounds:- (a) Employees of M/s. Symphony are supervising and monitoring the production of Air Coolers on random basis. (b) The moulds required for manufacture of Coolers were supplied by M/s. Symphony on returnable basis. (c) The sale price of cooler was decided by M/s. Symphony and the purchase agreement nowhere provides for determination of price of Air Coolers, price was based upon the cost of material plus processing charges and is nothing but cost of production. (d) M/s. Abhishri has no right to decide the supply, rate and quantity of inputs. (e) The transaction is disguised as sale against purchase order, but in reality M/s. Abhishri had engaged in contract for manufacturing of products under brand name 'Symphony'. He would then read the various clauses of the purchase agreement entered into b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oulds needs to be amortised, for the goods manufactured and cleared by M/s. Abhishri. It is his submission that rule 10A, which was inserted from 01.4.2007, is not attracted in the transaction of sale of goods, even if moulds are supplied free of cost by customer. It is his submission that explanation to Rule 10A of the said Valuation Rules, cannot override the statutory provisions made under Section 4(1)(a) read with Valuation Rules, 2000. It is his submission that the sale price of the product is based upon the cost of material and processing charges, which included the appellant's profit is absolutely a correct proposition in the law. It is his submission, that a sale price is determined between the seller and buyer, based upon their mutual understanding of the trade in the business. It is his submission that the appellant herein had manufactured coolers and sold the same to M/s. Symphony based upon the agreement and also on the basis of purchase orders placed by M/s. Symphony. It is his submission that the purchase orders which are placed by M/s. Symphony and further sale of the said coolers by M/s. Abhishri is not in doubt as the invoices are indicating the purchase order numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated and the entire transaction therein was in such a way that appellant could get rebate of duty paid by manufacturer. It is his submission that the case in hand of M/s. Abhishri is factually different than the facts in the case in the case of Lamina International (supra). It is his submission that the M/s. Abhishri is not facade of Symphony as they are an independent Company having their separate registration under various Acts. It is his submission that the provisions of Rule 10A will not apply as the appellant had purchased all the goods from their own vendors and made payments to them. It is his submission that the provisions of Rule 10A will apply only when all the inputs and goods are supplied by the principle manufacturer to job worker and job worker only manufactures the goods. It is his submission that invoking extended period of limitation will also not apply as the appellant has been regularly filing the returns with the lower authorities which indicate sale of goods as discharge of duty. It is his submission that the show cause notice issued on 29.7.2011 is blatantly time barred. 3. Learned Additional Commissioner (A.R.) on the other hand reiterates the findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction and job charges and hence it cannot be termed as transaction value under the provisions of Section 4(1) (a) of the Central Excise Act, 1944. It is his submission that the contention of the appellants herein that the transaction is principle to principle basis is also incorrect for the same reasons as the purchase agreement entered into between M/s. Abhishri and M/s. Symphony is misnomer as the agreement itself says as, M/s. Symphony inclined to get the Air Coolers manufactured from the appellant M/s. Abhishri and the agreement does not indicate the value or consideration to be paid by M/s. Symphony to M/s. Abhishri. He would rely upon the stay order dated 10.09.2012, in the case of M/s. Ravikiran Plastics, M/s. Shaily Engineering Plastics Limited, M/s. Polyset Plastics Pvt. Limited M/s. Kisan Containers Pvt. Limited and others wherein an identical issue was heard by the Bench in stay petitions. It is also his submission that condition No. 12 of the agreement would indicate that M/s. Abhishri and M/s. Symphony will sit together to agree upon the prices in specific months for the quarters ended earlier. It is his submission that the transaction between M/s. Abhishri and M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod January 2010 to June 2010, wherein such amortisation has been indicated. He would refer to the said invoices which are annexed to the submissions made by them. He would submit that the appellant during the relevant period had filed returns with the lower authorities very clearly indicating therein the details of Central Excise duty paid on the clearances made by them. The revenue authorities having not raised any query at that time cannot now invoke the extended period and demand duty on the ground of suppression/misstatement of facts. 6. Learned counsel Shri Uday Joshi appears on behalf of M/s. Symphony and their employees and submits that the adjudicating authority has imposed penalty on them for the provisions of Rule 26 of the Central Excise Rules, 2002. It is his submission that M/s. Symphony had always considered the agreement between them and M/s. Abhishri as principle to principle agreement and it is not a case of job work. He would rely upon the meaning attributed to word "Job Worker" by the Apex Court in the case of Prestige Engineering (India) Limited 1994 (73) ELT 497 (SC) and submit that their Lordship have very clearly settled the law, as to what would amount to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer; (ii) in a case where the goods are not sold by the principal manufacturer at the time of removal of goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of job-worker and where the principal manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of said goods from the factory of job-worker; (iii) in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever applicable, shall mutatis mutandis apply for det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le recording his finding on the above points has not considered the agreement in its correct perspective. The agreement very clearly indicates that M/s. Abhishri is a seller and M/s. Symphony is the buyer/purchaser. The said agreement also does not indicate that M/s. Abhishri is required compulsarily to purchase raw materials/inputs from the vendors identified or specifically short listed by M/s. Symphony. The said agreement also does not indicate that M/s. Symphony had control over the manufacturing activities of M/s. Abhishri. The said agreement only provides for the random supervision in order to control the quality of Air Coolers manufactured and cleared by M/s. Abhishri. The plain reading of the above said agreement would indicate that it is the agreement entered between the contracting parties for sale and purchase of Air Coolers, although with brand name of Symphony. The above said agreement also does not indicate any Clause which would show that M/s. Abhishri needs to manufacture Air Coolers only for M/s. Symphony. The above said agreement does not preclude M/s. Abhishri from contracting with any other parties for manufacturing of Air Coolers and also does not restrain M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctured and cleared by M/s. Abhishri. We find that the application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. We find that by applying such norm, rule 6 of the Valuation Rules should the correct Rule, as it is more specific rule than the Rule 10A, for the purpose of valuation of the goods manufactured and cleared by M/s. Abhishri. This ratio is laid down by the Larger Bench Decision in the case of ISPAT Industries Limited - 2007 (209) ELT 185. Applying the said ratio, since Rule 6 covers the issue more specifically, invoking the provisions of Rule 10A of the Valuation Rules in this case, does not arise. The conditions which are required for invocation of provisions of Rule 10A are also not satisfied in this case. We are fortified in our views as to the agreement between M/s. Abhishri and M/s. Symphony is on principle to principle basis and interpretation of the provision of Rule 10A is not applicable in this case, by the decision that the coordinate Bench in the case of Innocorp Limited. In the said case of Innocorp Limited (supra), an identical issue was raised by the Revenue holding that M/s. Innocorp Limited being job work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of both sides. For the above rule to apply, the subject goods should be shown to have been produced or manufactured by the assesses qua job workers on behalf of TUPPERWARE. According to the appellant, the manufacturing activities carried out by the assesses under the relevant agreements constituted job work for TUPPERWARE who is sought to be presented as principal manufacturer. The appellant considers the assesses as job workers of TUPPEERWARE. As per Explanation to Rule 10 A, job worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorized by him. According to this definition, any person to enter within its ambit of the definition should satisfy three requirements viz. (i) he should manufacture or produce goods; (ii) he should do it on behalf of a principal manufacturer; (iii) he should do it from any inputs or goods supplied by the principal manufacturer or by any other person authorized by him. In the present case, INNOCORP and DART satisfied the first condition, which is not in dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purchase Orders of TUPPERWARE, (i) that the agreement left the assessee free to manufacture goods not similar to the products for third parties and (j) that TUPPERWARE was free to source that products from other manufacturers. All these features of the contract would clearly indicate that the assessee was manufacturing the goods or TUPPERWARE and selling the goods to them for a price at arms length on principal-to-principal basis. Therefore, the contention of the appellant that the respondents were manufacturing the goods as job workers "on behalf of" TUPPERWARE cannot be accepted. The second requirement noted in para (7.1) was, therefore, not satisfied in this case. 7.4 It is true that stringent quality standards were prescribed by TUPPERWARE to be strictly maintained by the manufacturers at every stage of the manufacture. TUPPERWARE could inspect the process of manufacture to ensure that the specified quality standards for the products were being maintained. They also had to liberty to reject the finished goods which did not conform to the specified standards. These things are part of normal commercial practice in respect of business hoses who insist on the quality of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eared, to the Department, to be a job work and therefore show-cause notices were issued to them demanding differential duty on the basis of Rule 10 A o the valuation Rules, 2000. The assessee resisted this demand mainly on the ground that they were not job workers and that the transaction between them and SIPL was on principal-to-principal basis. This contention of the assessee was rejected by the adjudicating authority which held that the assessee was job worker of SIPL and hence liable to pay the differential duty on the basis of Rule 10 A. the orders of the adjudicating authority came to be upheld by the Commissioner (Appeals). Aggrieved, the assessee approached this Tribunal. After examining the various clauses of the "Agreement for Manufacture and supply of Paints", between COROMANDEL and SIPL, this Bench found (a) that both parties had understood the arrangement to be on principal-to-principal basis, (b) that COROMANDEL procured the raw materials and packing materials and manufactured paints as per SIPL's specification and sold the paints to SIPL, (c) that there was nothing on record to indicate that SIPL had supplied raw materials or other goods to COROMANDEL and (d) that ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ependently procuring inputs, paying for the same, utilizing his own manpower and sells the finished products to a purchaser based upon the price agreed between them, the said transaction will be covered by Section 4(1)(a) of the Central Excise Act, 1944. Trying to bring such type of transactions under provisions of Rule 10A of Valuation Rules, is not in consonance with the settled law, even if the finished products are sold at higher price by the buyer. 14. We find from the written submission filed by learned counsel that ld counsel has attached the copies of invoices for the period January 2010 to June 2010, wherein it is clearly indicated that the cost of amortization of the moulds has been included. Though they have included the cost of amortization for a specific period, subsequent period, it seems there is no invoice which is produced before us for coming to conclusion that M/s. Abhishri has amortized the value of the moulds while discharging the duty liability. We hold that the appellant M/s. Abhishri is required to amortize the cost of the moulds supplied by M/s. Symphony, we direct the lower authorities to quantify amount of duty liability on the appellant on such amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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