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2014 (2) TMI 211 - AT - Central ExciseValuation of goods - Whether OEM are Job Workers - Whether valuation of the goods manufactured by the appellants needs to be made 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 read with Rule 6 of these Rules - Held that - Transactions between the appellants and M/s. Symphony are held to be Sales transactions. Under Section 4(1) of the Central Excise Act, 1944 even if the price is not the sole consideration but still certain additions are required to be made then also Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 6 of the Valuation Rules, 2000 has to be pressed into service when the transactions are one of Sales and parties are not related persons or inter connected undertakings. In all the situations where price is not the sole considerations, it does not mean that invariably valuation has to be done as per Rule 10A of the Central Excise Valuation Rules. 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 - Valuation of goods has been correctly determined by the appellants - Following decision of COMMISSIONER OF CENTRAL EXCISE, HYDERABAD Versus INNOCORP LTD. 2013 (9) TMI 382 - CESTAT BANGALORE - Decided in favour of assessee.
Issues Involved:
1. Whether the valuation of the goods manufactured by the appellants should be done 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 read with Rule 6 of these Rules. 2. Whether the transactions between the OEMs and M/s. Symphony constitute a sale or a job work. 3. Whether the additional considerations provided by M/s. Symphony should be added to the assessable value under Rule 6. 4. Whether penalties and confiscation of goods were justified. Issue-wise Detailed Analysis: Issue 1: Valuation of Goods The core issue was whether the valuation should be done under Rule 10A or Section 4(1)(a) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation Rules, 2000. The appellants argued that their transactions were sales where price was the sole consideration and the buyer and seller were not related persons. Conversely, the Revenue contended that M/s. Symphony had full control over the valuation and negotiations regarding the supply of raw materials and supervised the manufacturing activities of the OEMs, making Rule 10A applicable. The Tribunal analyzed the relevant sections and rules and concluded that the transactions were indeed sales and not job work, thus valuation should be done under Section 4(1)(a) read with Rule 6. Issue 2: Nature of Transactions The Tribunal examined whether the transactions between the OEMs and M/s. Symphony were sales or job work. The Revenue argued that the agreements did not convey the price at which goods would be sold but only mentioned charges for moulding plastic parts. The Tribunal, however, noted that the agreements included clauses for adding the cost of bought-out parts to the final product cost and provided a 60-day credit term for payment. These clauses indicated a sale transaction. The Tribunal also observed that the OEMs were not exclusively manufacturing for M/s. Symphony and were not dummy manufacturers, thus reinforcing the sale nature of the transactions. Issue 3: Additional Considerations The Tribunal addressed whether additional considerations provided by M/s. Symphony, such as moulds and assembly lines, should be added to the assessable value. It was noted that under Rule 6, the money value of additional considerations flowing directly or indirectly from the buyer should be quantified and added to the assessable value. The Tribunal found that the Revenue had not established that inputs were predominantly supplied free of charge by M/s. Symphony. Therefore, the transactions were deemed sales, and any additional considerations should be added under Rule 6, not Rule 10A. Issue 4: Penalties and Confiscation Given the Tribunal's decision on the nature of transactions and valuation, it found no justification for the penalties and confiscation of goods. The Tribunal held that since the transactions were sales and not job work, and the valuation was correctly determined by the appellants, the penalties and confiscation were unwarranted. Conclusion: The Tribunal concluded that the transactions between the OEMs and M/s. Symphony were sales, and the valuation should be done under Section 4(1)(a) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation Rules, 2000. The appeals filed by the appellants were allowed, and the orders passed by the Adjudicating authority were set aside with consequential relief.
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