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TMI Blog2007 (10) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts of TDCEL would be carried out by TDESCO. 2.1 Investigations conducted by the department revealed that, (a) The branches of DVL were occupied by TDCEL and TDESCO after DVL became job worker. (b) TDCEL supplied all the raw materials, both indigenous and imported required for the manufacture of 'Thomson' brand TVs by DVL and the job charges varied from Rs.500 to Rs.615 for TV whereas the price of TVs varied from Rs.13401/- to Rs.14742/-. (c) Machinery, tools and jigs supplied by TDCEL to DVL were used by staff of TDCEL deployed in the premises of DVL for testing TVs before removal by DVL. (d) TDCEL undertook warranty through TDESCO for the sets sold by them and incurred expenditure on the same. Warranty charges and advertisement charges incurred by TDCEL were not included in the assessable value. (e) The conversion charges fixed between DVL and TDCEL appeared to be too low. (f) The agreement between DVL & TDCEL appeared to be artificial and contrived and the conversion charges fixed by them was not on principal to principal basis. (g) The department alleged that the relegation of DVL to the status of job worker was a scheme planned and execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncorporated much earlier to TDCEL and DVL could not be termed as a dummy unit of TDCEL. (7) The question of notionally working out the rent of the godown or office premises occupied by TDCEL would not arise as the cost was already apportioned to the job charges. (8) The expenses by way of machinery and tools and jigs supplied by TDCEL to DVL were to be included in the assessable value by way of apportionment and that (9) The profit margin of the job worker was to be determined with reference to the job charges alone and not to the wholesale price of the goods that were made up of items supplied free of cost by TDCEL. 3.1 Commissioner restricted the demand of duty to Rs. 4,49,594/- on the value of cost of machinery supplied by TDCEL and labour of TDCEL and expenses incurred by DVL on account of TDCEL's incorporation, registration etc., and imposed penalty of Rs.1,00,000/- on DVL under Rule 9(2) read with Rule 173Q of Central Excise Rules. 4. It was submitted in the appeal filed by the Revenue that the job work arrangement was a setup to evade duty. TDCEL had supplied total kits, various important machinery items for assembly, and services to DVL. Huge amounts of fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders of TDCEL. 5. These arguments in the appeal were countered by the respondents. DVL had theirown factory with plant & machinery. They were a joint sector Company with TIDCO holding 26% share capital. There was no evidence to suggest any mutuality of interest or financial flow back from TDCEL to DVL Hence the Assessable Value had to be determined is as per the principles laid down by the Apex Court in the case of Ujagar Prints. Any attempt to revise the Assessable Value taking into account advertising or after-sales-service incurred by TDCEL could not be justified in terms of the Supreme Court's judgment applicable to job workers. The goods cleared by job worker were to be assessed on the value arrived at by including only landed cost of raw materials plus job work charges. The profit which worked out to 1% of the sale price of TDCEL was already built- in the job charges. Job charges worked out to 11% of DVL's cost. No evidence had been let in by the Revenue to show that job charges recovered were lower when compared to any other unit doing similar job work. The Revenue also had not challenged the costing of job work charges recovered to show that it was not realistic. AEA w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch testing equipments cost to be apportioned to the value of job charges and it should not be taken as suppression of fact with intention to evade payment of duty. in this respect, reference was invited to the Supreme Court ruling in the case of Padmini Products [1989 (43) E.L.T.195 (S.C.)]. It was therefore prayed that the demand of Rs. 4,49,594/- confirmed by the ld. Commissioner was erroneous and was required to be set aside, with direction to grant refund of the above amount deposited. The imposition of penalty under Rule 173Q was unwarranted. it was therefore, pleaded that the penalty of Rs.1,00,000/- imposed by the ld. Commissioner in the impugned order was required to be set aside. Moreover, the respondents had every reason to bona fidely believe that these costs did not form part of their expenses. 6. Heard both sides. 7. DVL and TDCEL are two public limited Companies. DVL is a joint venture company with 26% of its shares held by TIDCO (Tamil Nadu Industrial Development Corporation), a Tamil Nadu Government Undertaking. DVL manufactured 'Thomson' brand televisions and other electronic products for TDCEL on job work basis. TDCEL supplied materials required for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It cannot be said that such amounts were an accommodation extended by TDCEL to DVL, DVL being a limited company. And interest thereon cannot be held to have depressed the conversion charges paid to DVL. Besides AEA advanced the loan before the job work arrangement between TDCEL and DVL came into existence. Department has not supported its claim that the job charges collected by DVL was unreasonably low or was depressed by its relationship with TDCEL. Revenue has. Not demonstrated that the job charges received by DVL were lower compared to those charged by any similarly placed manufacturer. In this context, the argument of the assessee that the department had incorrectly worked out the job charges to be 1% of the sale price of TVs as against the actual 11% of the cost incurred by DVL carries considerable force. Commissioner had found that the rent for the space occupied by TDCEL had been built into the conversion charges. He correctly held that the advertisement expenditure and warranty charges incurred by TDCEL were not to be included in the value of job worked goods. We do not find that the impugned order calls for interference except to reduce the penalty on DVL, it being a sick ..... X X X X Extracts X X X X X X X X Extracts X X X X
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