2018 (2) TMI 1305 - AT - Central Excise

Valuation - furniture with Nilkamal brand name - principal job worker arrangement - Revenue held that the value of branded furniture by the appellant supplied to M/s.Nilkamal Ltd. should be in terms of Rule 10A of Central Excise Valuation Rules, 2000 - Held that - On careful perusal of the MOU, we note that same cannot be considered as arrangement for job work - The fact M/s. Nilkamal has sold the said furniture with much higher price and hence Rule 10A of Central Excise Valuation Rules, 2000, apply to manufacture of the appellant is not tenable. The goods sold by M/s. Neelkamal is on the higher price as it includes expenses like storage, advertisement and sales after the goods were received from the appellant. Hence, the difference between the sale price of the appellant and sale price of Neelkamal by itself will not justify the inference of job work arrangement. Appeal allowed - decided in favor of appellant.

Issues: Valuation of branded furniture for Central Excise duty payment; Determination of job worker arrangement

Valuation of Branded Furniture:
The case involved an appeal against an order of the Commissioner (Appeals) regarding the valuation of branded furniture for Central Excise duty payment. The main appellant, engaged in manufacturing plastic furniture under various brand names, faced a dispute over the valuation of furniture manufactured with the 'Nilkamal' brand name in accordance with an MOU with the brand owner, M/s. Nilkamal Ltd. The Revenue contended that the appellant did not value the excisable goods properly, treating the arrangement as that of a principal-job worker. The Revenue insisted on applying Rule 10A of the Central Excise Valuation Rules, 2000, to determine the value of branded furniture supplied to M/s. Nilkamal Ltd. The lower authorities upheld the Revenue's view, leading to demands for differential duty and penalties on the appellants.

Job Worker Arrangement Determination:
The appellants argued that the MOU clearly outlined the manufacturing process as per the brand owner's requirements, emphasizing that the arrangement did not constitute a job worker relationship. They asserted that they had the liberty to set prices independently, not dictated by the brand owner. The appellants also highlighted similar arrangements between M/s. Nilkamal Ltd. and other manufacturers. The Revenue contended that the arrangement resembled a job worker setup, citing the brand owner's control over the appellant concerning branded goods and supporting their stance with Rule 10A application.

Detailed Analysis:
The Tribunal carefully examined the MOU and concluded that it did not establish a job work arrangement but specified the quality and raw material requirements for furniture manufacturing. The price structure outlined in the MOU included various cost components and profit margins, with payments scheduled on a weekly basis. The Tribunal noted a previous decision involving a similar MOU in another case where the original authority ruled out a job worker relationship. Additionally, the Tribunal highlighted that the higher selling price of furniture by M/s. Nilkamal included additional expenses like storage and advertisement, making Rule 10A inapplicable to the appellant's manufacturing process. The difference in selling prices alone did not justify inferring a job work arrangement. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellants.

In conclusion, the Tribunal's analysis focused on the specifics of the MOU, the pricing structure, and the control dynamics between the main appellant and the brand owner to determine the nature of the manufacturing arrangement. By emphasizing the distinct features of the agreement and the pricing mechanisms, the Tribunal rejected the Revenue's characterization of the arrangement as a job worker setup and allowed the appeals, deeming the impugned order legally unsustainable.

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