1996 (11) TMI 422 - AT - Central Excise

Summary

Issues Involved:
1. Determination of the manufacturer.
2. Assessment of the assessable value for excise duty purposes.
3. Relationship between the appellant and BIL and its impact on the assessable value.
4. Application of legal precedents and principles from previous judgments.

Detailed Analysis:

1. Determination of the Manufacturer:
The primary issue was to ascertain who the actual manufacturer was in this case. The department argued that BIL, by supplying raw materials and supervising the manufacturing process, should be considered the manufacturer. However, the Tribunal rejected this argument, stating that the appellant was the actual manufacturer. The Tribunal referred to the Supreme Court's decision in Empire Industries and Ujagar Prints, emphasizing that the taxable event for Central Excise is the manufacture of excisable goods, irrespective of the ownership of the raw materials or the end-product.

Key Judgment Excerpt:
> "It is therefore seen that mere fact that there was supervision by M/s. BIL over the manufacture and the other clauses in the agreement is not sufficient to hold that M/s. BIL is the actual manufacturer. It is the appellant who is the manufacturer of the goods and therefore the taxable event is the manufacture of excisable goods and the moment there is transformation into a new commodity the liability of duty is attracted."

2. Assessment of the Assessable Value:
The next issue was to determine the correct assessable value for excise duty. The department contended that the assessable value should be the price at which BIL sold the goods in the wholesale market. The appellant argued that the assessable value should be based on the intrinsic value of the raw materials, the cost of manufacture, and the job work charges, as per the principles laid down in the Ujagar Prints case.

Key Judgment Excerpt:
> "In such circumstances, it is seen that the assessable value is not the value of the goods at which they are sold by M/s. BIL at their factory gate. But the assessable value is the sum total value of the raw material plus the value of jobwork done and the manufacturing profit and expenses on processing and would take in anything more."

3. Relationship Between the Appellant and BIL:
The Tribunal examined whether the relationship between the appellant and BIL was that of principal-to-principal or principal-to-agent. The appellant maintained that their relationship with BIL was on a principal-to-principal basis. The Tribunal agreed with this view, relying on several precedents, including the TNEB and Sagar Corporation cases, which established that mere supervision and supply of raw materials by BIL did not change the relationship to principal-agent.

Key Judgment Excerpt:
> "There is nothing in the contract to indicate that three contractors would be in the position of hired workmen or that transactions were not on principal to principal basis. The fact that the Board would accept only those products which are according to the specifications of the Board and the contractors have to indemnify the Board for damaged poles are additional circumstances to hold that the Board was not the manufacturer and the transactions were on principal to principal basis."

4. Application of Legal Precedents:
The Tribunal extensively relied on the Ujagar Prints case and subsequent clarificatory orders. It also considered other relevant judgments like Pawan Biscuits and Pharmasia Ltd. The Tribunal concluded that the principles laid down in these cases were applicable, affirming that the assessable value should be based on the intrinsic value of the raw materials, job work charges, and manufacturing profit.

Key Judgment Excerpt:
> "It is therefore clear that the case of M/s. Pawan Biscuits and other cases relied on the adjudicating authority and which was canvassed before us by the learned SDR considered by the Tribunal in the light of the clarificatory order passed by the Supreme Court in the case of Ujagar Prints."

Conclusion:
The Tribunal allowed the appeal, determining that the appellant was the manufacturer and that the assessable value should be based on the intrinsic value of the raw materials, job work charges, and manufacturing profit, as per the principles laid down in Ujagar Prints. The decision provided consequential reliefs to the appellant.