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2013 (6) TMI 4 - AT - Central ExciseUnder valuation of the goods - whether the goods manufactured by the M/s. Abhishri in terms of agreement entered with M/s. Symphony and cleared to godown of latter during the period November 2009 to March 2011 needs to be valued for the purpose of assessment of duty in terms of Rule 10A of the Valuation Rules, 2000 or Section 4(1)(a) of the Central Excise Act, 1944 as done by M/s. Abhishri - Held that - There is no dispute as to the fact that M/s. Symphony had supplied moulds to M/s. Abhishri for manufacturing of Air Coolers. Non-inclusion of the amortized cost of such moulds, in the value of Air Coolers sold by M/s. Abhishri to M/s. Symphony, would, at the most require redetermination of value, read with provisions of Rule 6 of Valuation Rules, which talks about determination of correct value, even for the transaction falling under the ambit of Section 4(1)(a) of Central Excise Act, 1944. When apply the said rules, it is found that the provisions of Rule 6 would apply in this case as the said provisions very clearly indicate that the cost of the free supply of moulds needs to be included in the transaction value, for the discharge of duty liability. See case of ISPAT Industries Limited 2007 (2) TMI 5 - CESTAT, MUMBAI . The said cost of moulds has to be amortized and included in the value of goods manufactured and cleared by M/s. Abhishri. We find that the application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. Thus by applying such norm, rule 6 of the Valuation Rules should the correct Rule, as it is more specific rule than the Rule 10A, for the purpose of valuation of the goods manufactured and cleared by M/s. Abhishri as invoking the provisions of Rule 10A of the Valuation Rules in this case, does not arise. Thus if any assessee manufacture final products, independently procuring inputs, paying for the same, utilizing his own manpower and sells the finished products to a purchaser based upon the price agreed between them, the said transaction will be covered by Section 4(1)(a) of the Central Excise Act, 1944. Trying to bring such type of transactions under provisions of Rule 10A of Valuation Rules, is not in consonance with the settled law, even if the finished products are sold at higher price by the buyer.
Issues Involved:
1. Whether the goods manufactured by M/s. Abhishri and cleared to M/s. Symphony need to be valued under Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 or under Section 4(1)(a) of the Central Excise Act, 1944. 2. Whether M/s. Abhishri is a job worker for M/s. Symphony. 3. Whether the extended period of limitation is applicable. 4. Whether the penalties imposed on M/s. Symphony and its employees under Rule 26 of the Central Excise Rules, 2002 are valid. Detailed Analysis: 1. Valuation of Goods: The main issue was whether the valuation of goods manufactured by M/s. Abhishri should be done under Rule 10A of the Valuation Rules, 2000 or as per Section 4(1)(a) of the Central Excise Act, 1944. The adjudicating authority held that M/s. Abhishri was a job worker and should have valued the goods as per Rule 10A, which considers the transaction value at which M/s. Symphony sold the goods. However, the Tribunal found that M/s. Abhishri was not a job worker but an independent manufacturer selling goods on a principal-to-principal basis. The Tribunal emphasized that the agreement between M/s. Abhishri and M/s. Symphony did not indicate mandatory procurement of raw materials from specific vendors or control over manufacturing activities by M/s. Symphony. Thus, the Tribunal concluded that the valuation should be under Section 4(1)(a) and not Rule 10A. 2. Job Worker Status: The Tribunal examined the definition of a job worker under Rule 10A and the agreement between M/s. Abhishri and M/s. Symphony. The Tribunal found that M/s. Abhishri procured raw materials independently and was not under the control of M/s. Symphony, except for quality checks. The Tribunal referenced the decision in the case of Innocorp Limited, where a similar relationship was held to be on a principal-to-principal basis. Therefore, M/s. Abhishri was not considered a job worker. 3. Extended Period of Limitation: The Tribunal did not explicitly address the extended period of limitation due to its decision on the merits of the case. However, it noted that M/s. Abhishri had regularly filed returns, indicating the sale of goods and discharge of duty, which would make the invocation of the extended period questionable. 4. Penalties under Rule 26: Penalties were imposed on M/s. Symphony and its employees under Rule 26 of the Central Excise Rules, 2002. The Tribunal found that since M/s. Abhishri was not a job worker and the valuation was correct under Section 4(1)(a), the penalties were not sustainable. The Tribunal referenced the decision in Steel Tubes of India Limited, which held that penalties under Rule 26 are applicable to individuals, not firms. Therefore, the penalties on M/s. Symphony and its employees were set aside. Conclusion: The Tribunal set aside the impugned order, holding that the valuation of goods should be under Section 4(1)(a) of the Central Excise Act, 1944, and not under Rule 10A of the Valuation Rules, 2000. M/s. Abhishri was not a job worker, and the penalties imposed on M/s. Symphony and its employees were invalid. The appeals were allowed with consequential relief.
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