2012 (4) TMI 44 - HC - Central Excise

Waiver of pre-deposit - In the present case, by a showcause notice dated 24th June 2008, the assessee was called upon to showcause as to why the price charged by Thomson India to Tata Sky Limited (instead of the price charged by the assessee to Thomson India) in respect of the goods cleared during the period from 1st April 2007 to 23rd January 2008 should not be treated as the transaction value of the goods sold by the assessee to Thomson India under Rule 10A of the 2000 Rules and the duty be recovered accordingly - Advocate appearing on behalf of the assessee submitted firstly that in the present case, the sale effected by the assessee is governed by the provisions contained in Section 4(1)(a) of the Act and, therefore, the transaction value alone should be the basis for determining the central excise duty liability - the Adjudicating Authority concluded that the price of the raw materials purchased by the assessee are controlled by the Thomson India and, therefore, Thomson India indirectly supplied the inputs to the assessee through its sister concerns set out in the approved Vendors List at the price controlled / approved by the Thomson India - the prima facie view of the CESTAT that the Adjudicating Authority was justified in holding that Thomson India supplied the inputs to the assessee by persons authorized by Thomson India and, therefore, the assessee being a jobworker manufacturing goods on behalf of Thomson India would be covered under rule 10A of the 2000 Rules cannot be faulted.

Summary

Issues:
1. Justification of CESTAT's directive for predeposit by appellant-assessee.
2. Applicability of Section 4(1)(a) of the Act and Rule 10A of the 2000 Rules in determining central excise duty liability.

Analysis:
1. The primary issue in this appeal was whether the CESTAT was justified in ordering the appellant-assessee to make a predeposit of Rs. 1 crore for entertaining their appeal. The appellant contested this directive, arguing that the valuation of the goods sold should be based on the transaction value under Section 4(1)(a) of the Act, and Rule 10A of the 2000 Rules did not apply to their case. The appellant relied on precedents to support their contentions, but the Court found no merit in these arguments, deferring the decision to the appeal hearing.

2. The crux of the matter revolved around the interpretation and application of Section 4(1)(a) of the Act and Rule 10A of the 2000 Rules in determining the central excise duty liability. The Adjudicating Authority had concluded that the transactions between the appellant and Thomson India were governed by a Memorandum of Understanding, where the inputs for manufacturing settop boxes were supplied by Thomson India through approved vendors at prices controlled by Thomson India. This led to the Authority invoking Rule 10A to determine the value of excisable goods. The Court upheld this decision, noting that the appellant acted as a jobworker manufacturing goods on behalf of Thomson India, as per the terms of the Memorandum of Understanding.

3. The Court dismissed the appellant's appeal, stating that the CESTAT's belief in the applicability of Rule 10A to the case was justified. The Court extended the time for making the predeposit and directed the Tribunal to hear and dispose of the appeal on its merits. The judgment emphasized that the Tribunal should decide independently without being influenced by the current order.