2019 (4) TMI 1342 - AT - Central Excise

Valuation - manufacture of cakes and pastries falling under chapter CTH 1905 Brand Name Monginis - relationship between appellant and dealer - principal and consignment agent relationship - Rule 7 of the Central Excise (Valuation) Rules, 2000 - HELD THAT - On perusal of the agreement, it does not reveal that M/s. Banami was acting as a consignment agent of the appellant. A consignment Agent is required to receive the goods manufactured and dispatches them to customers, identified by the manufacturer (Principal), accompanied by invoices issued on behalf of the manufacture. On perusal of the terms of agreement indicates otherwise. There is absolutely no restriction as to whom the goods are being sold further. The goods are sold under the invoices of M/s. Banami at MRP fixed by the appellant - there is nothing on record to conclude that M/s. Banami was acting as a consignment Agent of the appellant. The transaction between appellant and M/s. Banami is on Principal to Principal basis and hence, Excise Duty is to be paid only in terms of Section 4 (1a) of the Act - there is no justification for resorting to valuation in terms of Rule 7 of the Central Excise Valuation Rules, 2000 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of agreement between the appellant and M/s. Banami Enterprises.
2. Whether M/s. Banami was acting as a consignment agent or a dealer.
3. Application of Rule 7 of the Central Excise Valuation Rules, 2000.

Analysis:

Issue 1: Interpretation of agreement
The appeal challenged an Order-in-Original regarding the appellant's manufacturing activities of cakes and pastries sold through M/s. Banami Enterprises. The Departmental officers alleged that M/s. Banami could not be considered a dealer due to the appellant's substantial control over the goods post-production. The agreement between the parties was scrutinized, focusing on clauses related to the handling of goods, return policy, and exclusive dealership. The appellant contended that the agreement was on a principal-to-principal basis, emphasizing clauses allowing return of unfit goods without payment. Legal precedents were cited to support the appellant's position.

Issue 2: Consignment agent or dealer
The Department argued that M/s. Banami functioned as a consignment agent based on the agreement clauses mandating the use of specific packaging, return of unfit goods, and restriction on selling other products. They relied on legal cases to support their stance. However, upon review, the Tribunal found no evidence in the agreement indicating M/s. Banami acted as a consignment agent. The goods were sold under M/s. Banami's invoices at MRP set by the appellant, suggesting a dealer relationship. The Tribunal concluded that M/s. Banami operated as a dealer and not a consignment agent.

Issue 3: Application of Rule 7
The Department sought to re-determine the value under Rule 7 of the Central Excise Valuation Rules, 2000, based on their interpretation of M/s. Banami's role. However, the Tribunal disagreed, stating that the transaction was on a principal-to-principal basis, necessitating Excise Duty payment under Section 4(1a) of the Act. Consequently, the Tribunal set aside the impugned order, allowing the appeal and rejecting the valuation under Rule 7.

In conclusion, the Tribunal's decision centered on the interpretation of the agreement, determining the nature of the relationship between the parties, and rejecting the application of Rule 7 for valuation. The appeal was allowed in favor of the appellant, emphasizing the principal-to-principal basis of the transaction with M/s. Banami Enterprises.