TMI Blog2017 (11) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... unable to entirely appreciate the same. Moreover, we find that the details were not considered by the adjudicating authority and in the absence of detailed discussions by the adjudicating authority on the processes involved, we are unable to take a firm view in the matter. In the absence of the details of the processes employed by the appellant on record, we are not in a position to give due consideration to all the factors and come to a judicious conclusion - we deem it necessary to remand the matter to the adjudicating authority to consider in detail the process of manufacture after ascertaining the same and decide the question whether it is a process of manufacture. In the event a view is taken that the processes amount to manufacture, the adjudicating authority will re-examine the issue of valuation of such food flavour for payment of duty. Appeal allowed by way of remand. - E/590 & 591/2004; E/1051/2004 & E/563/2005 - 22787-22790/2017 - Dated:- 14-11-2017 - Dr. Satish Chandra, President And Mr. V. Padmanabhan, Member (Technical) Mr. G. Shivadass, Advocate For the Appellant Mr. P.R.V. Ramanan, Special Counsel For the Respondent ORDER Per: V. Padm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturing IMFL, were to purchase raw materials such as rectified spirit, extra neutral alcohol and blending and packing materials in accordance with the standards and specifications set forth in the agreement and from the suppliers approved by the Appellant. 4. The CBUs sold IMFL either to the Appellants or to the customers identified by the Appellants or the Government owned corporations. 5. The considerations specified in the manufacturing agreement are as follows: i) Sale price: The price at which the IMFL is sold by the CBUs. This Sale Price is determined by the Appellant and State Excise Duty is paid on this sale price. ii) Ex-Distillery Price (EDP): The sole consideration payable by Appellant to CBUs for manufacture and sale of IMFL. The EDP consists of costs of raw materials, packaging, service charges and incentive payment. B. Usership Agreement 6. Apart from the Manufacturing Agreement, the Appellant also entered into an Usership Agreement in terms of which the CBU was permitted to use the Appellants Trade Marks / Brand Name in respect of the IMFL manufactured and sold by the user. 7. For use of the Appellant's trademark, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amanan, Special Counsel for the Revenue. 7. Shri G. Shivadass, learned counsel for the appellant, he justified the earlier order dated 17.3.2006 passed by the Tribunal. He submits that by following the said order, another appeal in the case of Shaw Wallace Co. Ltd. was decided by the Tribunal ( CCE Vs. Shaw Wallace Co. Ltd.: 2008-TIOL-884-CESTAT-BANG.). The said order, according to him, attained finality as no appeal has been filed. Hence, he prayed that the impugned order may be set aside. 7.1 It is the submission of the learned counsel that the food flavours were purchased by CBU from appelant, which were duty paid and physical mixing was done by the appellant in its factory premises. The appellant has incurred a lot of expenses for marketing, advertising, administration, etc., for the final product, which is under the Trade Mark of the appellant. It is his submission that food flavour is used in very low quantities from 0.0001 to 0.0019 per litre. He submits that, thus, the flavour content in the IMFL is negligible. He also submits that there are various instances where food flavours were sold and used in IMFL but no royalty was received by them so there is no question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nexus between the supply of food flavour and royalty received in all such cases and that the same constitutes additional consideration and should form part of assessable value of food flavours. Finally, the learned Special Counsel submits that the impugned order passed by Commissioner may be upheld. 9. To counter it, learned counsel for the appellant submits that there no royalty is payable on the food flavour, so the duty cannot be demanded on the food flavour. He also argued that the demand was time barred. 10. We heard the learned counsels of both sides and perused the material on record. 11. First of all on limitation aspect, it appears from the record that show-cause notices were issued for the demands under consideration. Collection of service charges/royalty charges was not at all brought to the notice of the Department. None of the declarations under the then Rule 173C or 173CC of extant Central Excise Rules, 1944 contained any disclosure about receipt of such charges. Further, even when asked for, appellant delayed furnishing of details of such charges and hence, invoking of extended period is justified in respect of first show-cause notice. The second show-caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity of manufacture for one assessee and not an activity of manufacture another assessee. 14. We have considered the submission and also the decision of the Tribunal in the Shaw Wallace Company Ltd. (supra) . We find that it is no more good law because the decision in that case was based on this Tribunal's decision in the appellant's case which, upon further appeal by Revenue, stands set aside by the Apex Court resulting in the matter before us. Hence, it is necessary for us to examine, ab initio, whether the process undertaken can be considered as a process of manufacture . 15. The Apex Court, while remanding the matter has referred to several case laws on the subject of manufacture including the following. 1. Union of India Vs. Delhi Cloth General Mills Co. Ltd. [AIR 1963 SC 791] ; 2. Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes), Ernakulam Vs. Pio Food [ 207 US 556 (1908)]; 3. Collector of Customs, Bombay Vs. S H Kelker Co. Ltd. [2000 10 SCC 478]; 4. Income Tax Officer, Udaipur Vs. Arihant Tiles Marbles P Ltd. [2010 2 SCC 699] 5. Shyam Oil Cake Ltd. Vs CCE-I New Delhi [2005 1 SCC 264] Finally the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flavour/essence emerges in the process. Inputs lose their identity and are never the same after such mixing with other flavours. Trade name / descriptions of resultant products are different from the trade names / descriptions of inputs. Further, inputs cannot be used in the original form in which it is received by appellant. It has to undergo a process of mixing with other essences to be fit to be used in the particular brand of IMFL. (iv) Mixing of ingredients has been found to be amounting to manufacture in several cases [ eg. [2005(188)ELT(251)SC] - Gopal Zadra; 2005(187)ELT(106) Trib- Crane Betel Nut] (v) Description of inputs in input invoices is different from the description of final products. Final products are known by a different name in the market. There is value addition. Inputs are not capable/are not used in the manufacture of IMFL, whereas the final products are capable of being used in a particular IMFL. Thus, the process of manufacture undertaken by Appellant has resulted in a product different in character and use vis-a-vis the inputs. Appellant had not contested the issue of manufacture at the time of adjudication of their case in 1995. During hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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