TMI Blog2018 (8) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... The facts herein are squarely covered by the Precedential rulings of this Tribunal in the case of CCE vs Innocorp Ltd. [2013 (9) TMI 382 - CESTAT BANGALORE], where it was held that the respondents in these appeals were not manufacturing the subject goods as job workers on behalf of TUPPERWARE. Needless to say, therefore, that Rule 10A was not applicable to the assessment of the subject goods Demand set aside - penalties also not warranted - appeal allowed - decided in favor of appellant. - Excise Appeal No. 51653 - 51656 of 2017 - Final Order No. 52571-52574/2018 - Dated:- 19-7-2018 - Hon ble Mr. Anil Choudhary, Member ( Judicial ) And Hon ble Mr. C L Mahar, Member ( Technical ) Shri V Lakshmikumaran, Shri Rahul Tangri, Consultant for the Appellants Shri R K Mishra, AR for the Respondent ORDER Per Anil Choudhary The issue in these appeals is, whether the valuation of wall putty manufactured and cleared by the appellant M/s. Miraj Drymix Pvt. Ltd., has been rightly done for the purpose of levy of duty; and whether the extended period of limitation has been rightly invoked. The other appellants are the Director and officers of M/s. Miraj Drymix Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 Kgs Rs.620/ - 35% Rs.403/- Rs.49.81 Rs.2.49 2 30 Kgs Rs.810/ - NA Rs.266.61 Rs.32.95 Rs.1.01 3 40 Kgs. Rs.1095 /- NA Rs.344.55 Rs.42.59 Rs.1.06 5. Thereafter, further investigation was taken up and statements of one Raj Kumar Yadav, the authorised signatory, Shri Sanjay Mahagaonkar AVP (Technical) were recorded on three different dates being 22nd May, 2014; 26th February, 2015; and 06th December, 2016. On 12.2.015, the officers of Anti-Evasion wing of Central Excise, Alwar visited the factory premises of the appellant for investigation. During the course of investigation, statement of Shri Raj Kumar Yadav was recorded, who inter-alia stated that he was holding the post of Factory-incharge and looks after the work related to purchase of raw material, production and clearance of finished goods. The company is en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. He also stated that the ratio of raw material provided by Asian Paints Ltd. cannot be changed by them unilaterally. 10. Shri Rohit Gupta, Manager Taxation of Asian Paints Ltd., was also summoned and his statement recorded. He inter alia stated that, the finished goods, namely, Asian wall putty, can be procured from any of the location of the appellant and, in the same way, such goods can be sold through any of the depots. Accordingly, the Department was given the details of the sale value of the goods procured from the appellant through email on 27/12/2016. 11. It appeared to Revenue that the appellant have not taken permission under Rule 7 of Central Excise Rules, 2002 for provisional assessment. Further, in terms of Rule 10A(ii) of the Valuation Rules, where the excisable goods are produced or manufactured by a job worker on behalf of the appellant (hereinafter referred to as principal manufacturer ), then 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 goods are to be sold after their clearance from the factory of job worke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices in full conformance with the warranties under this Agreement, above within the time specified. Clause 3 (c ) of the agreement dated 15.2.2011 The Seller shall be responsible for monitoring their manufacturing processes, performance and conducting sufficient process control, inspection, testing, proactive and preventive measures in order to ensure that all Products delivered to the Purchaser are in full compliance to the specifications. Statistical sampling is strongly encouraged to ensure that the manufacturing processes are in statistical control. Seller shall share all related information of the Product to the purchaser at any point of time. Regardless, the Seller is responsible for each part confirming to specifications. Clause 10(e) of the agreement dated 15.2.2011 It has the necessary skills, knowledge, experience, expertise, equipments, required capital and net worth to perform its obligation in accordance with the terms of this Agreement. Clause 4(a) Clause 4(d) of the Agreement dated 15.2.2011 provides that the appellants are required to ensure the quality of the raw material in order to maintain the quality of wall putty, which is extracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als approved by Asian Paints for which only actual price was reimbursed to them. Further, they were manufacturing under the brand name of Asian Paints Ltd. by following the specification/formulation supplied by Asian Paints who have the proprietary ownership of the formulation. Thus, Asian Paints Ltd. is the principal manufacturer by virtue of being the supplier of formulation and also defining exact ratio of raw material and their specifications/quality to the appellant. As the goods were cleared from the appellant's factory to the depots of Asian Paints, therefore, the goods were not sold by the principal manufacturer at the time of removal of the goods from the factory of the job worker appellant, but were transferred to some other place from where the said goods were sold after their clearance from the factory of the job worker. The price of the finished goods, so cleared, was determined as per agreement/purchase order and thus appellant was not aware of the price at which Asian Paints Ltd. further sold from the depots. In other words, the product under the brand name Asian wall putty , was cleared to the principal manufacturer depots without taking into account the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of raw material / semi-finished goods by the principal manufacturer. In the facts of the present case, there was no supply of raw materials and consequently the findings in the impugned order that the contract was of job work nature is erroneous and legally unsustainable. It is further submitted that, in terms of Section 4(1)(a), the assessable value, for the purposes of excise duty, is the transaction value where the following conditions are duly specified: there is sale of excisable goods, the sale is for delivery at the time and place of removal, the assessee and buyer are not related, price is the sole consideration for the sake. When any one of the conditions specified under section 4(1)(a) is not satisfied, then the value of excisable goods is determined under section 4(1)(b). It is for this purpose [section 4(1)(b)] that the Central Excise Valuation Rules, 2000 have been prescribed. 16. In explanation to Rule 10 A of the Valuation Rules, job worker have been defined as follows: explanation for the purposes of this Rule, job worker means a person engaged in the manufacture or production of goods on behalf of the principal manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at of normal commercial sales. 20. The Hon ble Supreme Court in the case of Prestige Engineering (India) Ltd. vs. CCE, Meerut, 1994 (73) ELT 497 (SC) held that, the contract of job-work is largely and substantially that of labour and skill of the job-worker done with the help of their tools, gadgets or machineries. When the job-worker contributes its own raw materials in significant quantities to the articles supplied by the customers to manufacture the final goods, then it does not amount to job-work. 21. In CCE vs. Innocorp Ltd. [2012-TIOL-956-CESTAT-Bang] the Department had sought to raise a duty demand on similar grounds as in the case in hand. The Department alleged in the above case, that stringent quality standards, including the right to inspect the goods and reject them when they are deficient in quality, would make the manufacturer-assessee a job-worker of the buyer. However, the Tribunal dismissed the appeal of the Department and held that activities undertaken by the Appellant were normal commercial transactions. The Tribunal also held that, the quality tests etc. did not suggest that there was extensive control and held that the transaction was not in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t manufacture air coolers for anybody else during the existence of the said contract. Activities of monitoring, assistance, supervision and payments to vendors on Appellant‟s behalf as advance to Appellant, in the nature of assistance for timely supply of raw material, were purely professional and commercial in nature. These do not suggest that the contract was one of job-work. The transaction was one of sale and it was held that when price is not the sole consideration. Rule 10A cannot be said to have automatic application. 4 Nirmal R Ruparel vs. CCE, 2014 (304) ELT 711 (T) Prices were mutually agreed. Specifications for manufacture were provided. Held that monitoring of inputs used etc. were all irrelevant considerations, since it was undisputed that the seller/ manufacturer paid for the raw material. 23. It is submitted that under the agreement dated 15.2.2011, APL had right to reject the goods, if found to be of inferior grade. It is humbly submitted that such a right exposes the fallacy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken by the Appellant only and are in consonance with the finding of the Commissioner himself, therefore, the issue stands covered in Appellant s favour. The impugned order has placed reliance on the statements recorded during the investigation, which do not suggest that the Appellant was undertaking job-work manufacture. Further, the agreement dated 15.02.2011 prescribes general guidelines to be followed by the Appellant so as to ensure that the final product is of certain quality, since APL enjoy massive reputation in the market. 26. The finding of the Ld. Commissioner vide the impugned order holding that APL supplied formulation of pre-mixture over which they had propriety interest is contended to be factually incorrect. The Appellant was provided with the specifications of the final product, from which they prepared pre-mix by way of backward integration of such specifications. This is clear from the cross-examination of Shri Sanjay Mahagaonkar, which though conducted before the Ld. Commissioner, however, has been brushed aside on flimsy grounds. 27. It is humbly submitted that the contention of the Appellant is that, the manufacture of the final product was undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overable. Without prejudice to the above, it is also submitted that the Appellant had no intention to act dishonestly and had acted in accordance with the legislative provisions inasmuch as every relevant fact on record and has not engaged into any suppression, willful mis-statement etc. with intent to evade duty. Further, the audit of the appellant s unit took place in December 2012 and December 2013, for the period upto September 2013. All the documents and records pertaining to the unit were before the departmental auditors. Inasmuch as the Appellant manufactures the goods only for APL, thus, the said fact was very much in the knowledge of the Department during the audit. Therefore, the demand raised by the SCN is substantially time barred, being beyond the normal period of one/ two years, and the same is not sustainable and is liable to be set aside. 31. It is further submitted that in light of the arguments above, the Appellant had correctly determined the assessable value of final products manufactured and sold to APL in terms of Section 4(1)(a) of the Excise Act. The issue is one of pure interpretation of provisions of law and the position adopted by the Appellant is in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture making use of the technical knowhow and specifications of the goods as supplied by M/s. Zydus Wellness Ltd. The process was subject to quality control and supervision of the M/s. Zydus Wellness Ltd. and goods were to be cleared exclusively, bearing the trade name of M/s. Zydus Wellness Ltd. Further, as per the agreement, the raw materials were to be procured by Hershey India only from the suppliers identified by M/s. Zydus Wellness Ltd. The sale price of the goods was agreed to between the two parties, as specified in the agreement. The goods were cleared to the said M/s. Zydus Wellness Ltd. on payment of excise duty on the transaction value. The Department was of the view that the inputs were manufactured by the appellant on job work basis for M/s. Zydus Wellness Ltd. and hence, the valuation of the goods for the purposes of charging duty was to be done in terms of Rule 10 A of the Valuation Rules, 2000. This Tribunal taking note of the terms and conditions held it is evident from the agreement that the goods are to be manufactured from inputs supplied by suppliers identified by M/s. Zydus Wellness Ltd, which clearly satisfies the third condition in the Explanation to Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also find that the facts herein are squarely covered by the Precedential rulings of this Tribunal in the case of CCE vs Innocorp Ltd. in favour of the appellant wherein the facts are similar and this Tribunal held as follows: 7.3 It is easily discernible from the agreement (a) that the assessee was appointed by TUPPERWARE, on a principal-to- principal basis, to manufacture the products as per the latter s specifications and to sell the goods to TUPPERWARE, (b) that TUPPERWARE was liable to pay to the assessee the price of the goods invoiced by the latter as per the settled cost quotations for the product, (c) that the raw materials and packing materials required for the manufacture of the goods were to be sourced by the assessee from suppliers named by TUPPERWARE, (d) that none of the suppliers was authorized by TUPPERWARE to supply the raw materials or packing materials to the assessee, (e) that the moulds supplied by TUPPERWARE to the assessee for manufacture of the goods were returned after use (without availing Cenvat credit), (f) that the brand name of TUPPERWARE was affixed on the products by the assessee as required by the buyer, (g) that the assessee indemnified TUP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not manufactured from any inputs supplied by TUPPERWARE or by any other person authorized by them. It is not in dispute that the necessary raw materials and packing materials were procured by the assessees from suppliers named by TUPPERWARE. The cost of these materials were expressly recognized as expense of the assessees. That the suppliers were chosen by the assessees from a panel furnished by TUPPERWARE does not mean that the actual suppliers were authorized by TUPPERWARE to supply the materials to the assessees. Insofar as the moulds are concerned, undisputedly, they were returned by the assessees to TUPPERWARE after use (without availing Cenvat credit) and the amortised value thereof was included in the assessable value of the finished goods. On these facts, it has to be held that the third condition also remains unfulfilled in this case. In the result, the respondents in these appeals were not manufacturing the subject goods as job workers on behalf of TUPPERWARE. Needless to say, therefore, that Rule 10A was not applicable to the assessment of the subject goods. 40. Accordingly, in view of our findings, we allow this appeal and set aside the impugned order. We al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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