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TMI Blog2023 (11) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the jurisdictional authorities as one merely of valuation, engendered by insistence of the assessee that their obligation to the exchequer finds legitimacy in judicial determination that is more of a archival legacy in the context of legislative certainty that obtained during the period of dispute and attempt at resuscitation by opportunistic clutching of a random straw by Revenue from a bale that drifts in another direction, it is conceptual commotion that is abundantly evident in this tale of happenings that has brought the dispute before us. 2. To start with, two entities, M/s Kilitch Co (Pharma) Ltd and M/s Kilitch Drugs (India) Ltd, have been placed on notice for recovery of short-levied duty with the orders of the lower authorities fastening, and upholding, the recovery of duty on the same set of goods on both. This is contradictory to the essence of Central Excise Act, 1944 which authorizes levy of duty on manufacture of goods, as the taxable event, and obligates the manufacturer to discharge the statutory liability therefrom. Adjudication proceedings, that are expected to culminate in determining the tax to be paid by the person liable to pay the tax, permit no lati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000, owing to operation of section 4(1)(b) of Central Excise Act, 1944, mandated identification of the most appropriate provision therein towards which Learned Authorized Representative pressed for adoption of rule 9 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 implying that the transaction was between 'related' companies. Notwithstanding the absence of recourse thereto in the show cause marring such resort at this stage, the elements relevant to determination of applicability of 'related person' mechanism are not on record and it is not within the competence of Learned Authorized Representative to infer conclusions in the absence of tried and tested evidence of such relationships at the second stage of appeals. More so, when it is common ground that M/s Kilitch Co (Pharma) Ltd undertakes 'jobwork' for M/s Kilitch Drugs (India) Ltd and, from the terms of the contract as well as judicial determination, such transactional engagement is tantamount to 'captive consumption' in which duty liability arises on 'intermediate product' when the final product is not subject to duties of central excise. It is also worth noting that, as on the date of dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods, such value shall- (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation.-- For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods. xxxx (3) For the purposes of this section,-- (a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent; xxxxx (c) "place of removal" means- (i) a factory or any other place or premises of production or manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein and smoothly transitioning from one section to another, came to be notified and output of 'job-workers' fell within its ambit. The 'job-worker', an industrial coinage with no relevance to levy of central excise, was, from henceforth, a 'manufacturer' within the meaning of section 2 of Central Excise Act, 1944. However, taking note of a firmly entrenched commercial model of manufacture, the Central Government found it to be in public interest to issue notification no. 214/1986-CE dated 25th March 1986 that enabled 'escapement from duty' on such 'job-working' subject to assumption of responsibility for discharge thereof at the time of clearance from their premises by the 'principal manufacturer' thus acknowledging this contractual engagement, and only for the limited purpose of exemption at the 'job work' stage, in the tax lexicon. Too much, therefore, should not be read into this categorization that is entirely irrelevant when the 'job worker' is the 'assessee' for discharge of liability under Central Excise Act, 1944. For the purposes of this dispute, during the relevant period, the distinction of 'principal manufacturer' and 'job-worker' is not material. 8. According to Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng conclusion : "Learned SDR reiterated the points in the OIO. We have gone through the records of the case carefully. M/s. USV Ltd., Mumbai hold loan licence under the Cosmetics and Drugs control Act. They supplied raw materials to the appellants. The appellants manufacture the required goods as per the specification of M/s. USV and supplied to them for the above work. They get processing charges. There is an agreement between the appellants and M/s. USV, Bombay. On going through the agreement we are convinced that the appellant is a job worker who carried out the entire manufacturing process in their factory after receiving raw materials from M/s. USV. The agreement has got a termination clause also. According to Clause 13.2 cited, each party may terminate the agreement at any time by giving to either party three months notice in writing. The adjudicating authority has mainly relied on the Indcia decision of the Gujarat High court and held that M/s. USV are the manufacturers of the goods manufactured in the appellants premises. The Indica case, has been elaborately gone through in the Lupin Lab case. In the Lupin Lab case, the Hon'ble Tribunal observed as follows : "After con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial relief."' to urge setting aside of the impugned order. 9. According to Learned Authorized Representative, the contention of the appellants that the formula set out in re Ujagar Prints would apply to their transactions was not tenable in view of the decision of the Hon'ble Supreme Court in Commissioner of Central Excise, Indore v. S Kumars Ltd [2005 (190) ELT 145 (SC)] which held that '24. We therefore do not agree that Ujagar Prints III would apply even to a processor who is not independent and, as is alleged in this case, the merchant manufacturers and the purchasing traders are merely extensions of the processor. In the latter case, the processor is not a mere processor but also a merchant manufacturer who purchases/manufactures the raw material, processes it and sells it himself in the wholesale market. In such a situation, the profit is not of a processor but of a merchant manufacturer and a trader. If the transaction is between related persons, the profit would not be "normally earned" within the meaning of Rule 6(b)(ii). If it is established that the dealings were with related persons of the manufacturer the sale of the processed fabrics would not be limited to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity control standard and other technical knowledge information relating to the manufacture processing, packaging, sales and distribution of the patent or proprietary medications and of the pharmaceutical preparations. On the basis of above, it is observed that while arriving at the assessable value, marketing expenses, distribution, administrative expenses, brand name expenses and other expenses have not been included in the cost of the product. The assessable value is required to be fixed on the basis of "Transaction Value' of M/s Kilitch Drugs. (India) Ltd as per Section 4(3) (d) of the Central Excise Act, 1944. "Transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Excisable Goods) Rules, 2000. The stay granted by Hon'ble CESTAT is applicable to the subject Order-in- Appeal or Show Cause Notice only. Moreover there is nothing on records to show show that final order has been passed by Hon'ble CESTAT. In view of foregoing the arguments & relied case laws do not come to their help. Hence there is no reason to interfere with the orders of lower authority. Accordingly I pass the order.' 11. The original authority found it appropriate to discard circular supra owing to '17. From the above, it is clear that the Transaction value includes all elements right from the production of the goods till the same are sold in the course of wholesale trade, Thus, in the instant case, the soiling prices of M/s. Kilitch Drugs (India) Ltd. forms the assessable value, as all the elements such as production cost, advertising or publicity expenses, marketing and selling expenses, storage and transportation expenses, outward handling expenses and Research and development expenses are required to be covered in the said value, However, it is observed that the assessee has arrived at the assessable value only after considering the raw material cost + pac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontours of the present dispute to the formulation in section 4(1)(a) of Central Excise Act, 1944 is in doubt on counts such as 'sale' by assessee to 'buyer who is not related' besides 'price not being consideration for the sale' espoused in the orders of the lower authorities. Owing to the placement, and deployment, of expressions, in so far as the latter two are concerned that are inextricably linked to 'sale', the deviation from the formulation is primarily that 'sale' has not taken place from M/s Kilitch Co (Pharma) Ltd to M/s Kilitch Drugs (India) Ltd; neither is there a finding to that effect in the orders of the lower authorities. Consequently, none of the mechanisms in Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 that relate to 'sale' may be invoked in the present dispute thus ruling out rule 6 as well as rule 9 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 leaving only rule 8 and rule 11 among those that may be. 14. We have no doubt that the decision of the Hon'ble Supreme Court in re Merino Panel Product Ltd has held that exercise of statutory power is not vitiated by any error in citing the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he true nature and effect of the Circulars issued by the Board in exercise of its power under Section 37B of the Central Excise Act, 1944? This question is no more res integra in view of the various judgments of this Court. This Court in a catena of decisions has held that the Circulars issued under Section 37-B of the said Act are binding on the Department and the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. These judgments have also held that the position may be different with regard to an assessee who can contest the validity or legality of such instructions but so far as the Department is concerned, such right is not available."' 16. The appellant has also failed to establish that rule 8 has been conformed to even while contending that formulation in the decision of the Hon'ble Supreme Court, pertaining to a time when these rules did not exist, had been. It is necessary to determine the assessable value for the purpose of discharge of duty liability in accordance with section 4 of Central Excise Act, 1944 and the rules framed thereunder. The appellant must, needless to state, be accorded opportunity to contest facts and infer ..... 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