TMI Blog2004 (2) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained Central Excise registration for manufacture of different varieties of ENO. M/s. SDP filed declaration under Rule 173B of Central Excise Rules classifying ENO under sub-heading No. 3003.10 of Central Excise Tariff Act and price declaration under Rule 173C of Central Excise Rules declaring the assessable value based on the cost of the raw material plus conversion charges and manufacturing profit in accordance with the principles laid down by the Supreme Court in the Ujagar Prints case. In their declaration, for marketing pattern it was mentioned that the ENO fruit salt, which attracts CED on clearance from the factory is transferred to the godown of M/s. SBCH, Rajahmundry in terms of MOU. The Central Excise officers of Rajahmundry investigated the valuation adopted by SDP for payment of duty and in the course of investigation, they came to the conclusion that M/s. SBAL, the principal and M/s. SDP the so called job worker and M/s. Smithkline Beecham Consumer Healthcare Ltd. (hereinafter referred to as 'SBCH'), the so called consignment agent are related persons as per Sec. 4 of Central Excise Act. The assessable value arrived at by M/s. SDP under Rule 6(b)(ii) of Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He also imposed penalty of Rs. 5 lakhs each on M/s. SBCH under Rule 209A, Shri Raghavendra Rao, Managing Partner of M/s. SDP under Rule 209A. He also imposed penalty of Rs. 1 lakh each on Shri Nandan Das Gupta, Director, M/s. SBAL; Shri P.N. Haridas, Company Secretary, M/s. SBAL; Milan Chakravarthi, General Manager, M/s. SBCH and R. Seshadri, Manager (Accounts), M/s. SBCH under Rule 209A. 3.Shri G. Shivadass, Advocate appeared for the appellants and Smt. Radha Arun, ld. SDR appeared for the Revenue. 4.Shri Shivadass, the ld. Advocate for the appellants stated that M/s. SDP is a partnership firm with Shri K. Raghavendra Rao and Shri B. Laxman Prasad as the main partners. This firm was earlier in the name of M/s. Southern Packaging who were undertaking job work of repacking ENO fruit salt manufactured and supplied by M/s. SBCH into small sachets of 5 gms. Around July 1998, M/s. SBAL was on the look out for a contract manufacturer on job work basis who could manufacture ENO fruit salt. M/s. SDP offered to set up a factory for the said purpose and entered into an agreement in September 1998 for manufacture of ENO fruit salt in the manufacturing facility to be set up by SDP. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been provided by SBAL. (c) Funds have been sanctioned to SDP by the financial institutions on the basis of MoU with SBAL and the underlying support of SBAL. (d) The entire project is tailor-made to manufacture ENO fruit salt. (e) SDP did not own any existing facilities and that all facilities were created pursuant to the MoU." 7.He pleaded that in the MoU between SDP and SBAL, the terms, rights duties of the respective parties are set out. In the contract for manufacture, technical knowhow is invariably provided by the supplier of raw material. In the contract for manufacturing facility there would be tailormade manufacture of the particular product only. The entire funds were obtained by SDP for purchase of land, plant and machinery and interest on such finances is being given by SDP only. No financial guarantee or security was offered by M/s. SBAL. The entire land where the facility has come up belongs to the partner of SDP and machinery has been purchased in the name of SDP out of finance obtained by them. The profit from entire activity is of SDP alone and there is no flowback to SBAL. SBAL only reimbursed the conversion charges and do not provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eutical v. CCE, Mumbai [1998 (102) E.L.T. 223] and Mayo India Ltd. v. CCE, Aurangabad [1999 (113) E.L.T. 1036], the Tribunal has held that job worker is the actual manufacturer. In the present case that is from March 2000 to February 2001, the Department itself has been accepting SDP to be the manufacturer and monthly RT-12 returns were filed by M/s. SDP indicating clearances and payment of duty on such clearances. The Assistant Commissioner has also passed an order dtd. 20-8-2003 finalising the assessments of the clearances made by SDP and no show cause notice was issued to SBAL. On the same facts arising out of same MoU, Department cannot take two different stands at two different point of time. It cannot be that SDP would not be considered as manufacturer for the period from March 2000 to February 2001 and would be considered a manufacturer for the period from March 2001 to June 2003. M/s. SDP cannot be considered as hired labour of SBAL but ought to be considered a real manufacturer and valuation of the goods manufactured by SDP has to be done in terms of principles laid down by Apex Court in the case of Ujagar Prints v. Union of India [1989 (39) E.L.T. 493 (S.C.)] and Pawan Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithstanding anything hereinbefore contained, if the Central Government is satisfied that it is necessary or expedient in the public interest so to do, it may by notification in the Official Gazette, and subject to such conditions or limitations as it may specify in such notification, exempt from the operation of Rule 174..."(b) any class of manufacturers who get their goods manufactured on their account from other person or persons"... The aforesaid procedure clearly postulates that for the purpose of the Excise Act and the rules, there can be a manufacturer who get his goods manufactured of his own account from other person or persons, meaning thereby, utilizing infrastructures of others. It is, therefore, obvious that such loan licensees who are entitled to manufacture PP medicines and who are having relevant licences under the Drugs and Cosmetics Act read with relevant rules, can utilize factory premises of other persons where they can get their goods manufactured under their own control and supervision and if they manufacture excisable goods, they would be treated as manufacturers within the meaning of the Excise Act and the Rules. The learned Advocates for the petitioners in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Act and the Rules, and especially when they get their goods manufactured under their own control or supervision and out of their own raw material at the factory premises belonging to someone also and which premises they might have hired for the time being shiftwise or otherwise." Thus, it is clear that for the purpose of Central Excise Act and Rules, there can be manufacturer who gets his goods manufactured on his own account from other person or persons thereby utilizing infrastructure of others. It is therefore, obvious that such loan licencees who are entitled to manufacture PP medicines and who are having relevant licences under the Drugs and Cosmetics Act read with relevant rules, can utilize factory premises of other persons where they can get their goods manufactured under their own control and supervision and if they manufacture excisable goods, they would be treated as manufacturers within the meaning of the Excise Act and the rules. It is also possible for a person who himself does net employ labour but gets goods manufactured through an independent contractor hired by him, that is to say that he was not manufacturer for he had not brought into existence an article ..... X X X X Extracts X X X X X X X X Extracts X X X X
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