1991 (1) TMI 249 - AT - Central Excise

Summary

Issues Involved:
1. Nature and scope of the agreement under which the appellants manufacture the biscuits.
2. Determination of assessable value.

Summary:

1. Nature and Scope of the Agreement:
The appellants, engaged in manufacturing and selling biscuits, entered into a job work agreement with M/s. Britania Inds. Ltd. (BIL). As per the agreement dated 15th December 1986, BIL supplies raw materials and controls the manufacturing process, including quality control and specifications. The appellants are paid job work charges and are responsible for compliance with Central Excise Act provisions. The agreement stipulates that the title to the manufactured biscuits vests in BIL immediately upon completion of the manufacturing process, indicating that the appellants act as agents for BIL rather than independent manufacturers.

2. Determination of Assessable Value:
The appellants submitted price lists based on the cost of raw materials and conversion charges following the Supreme Court's judgment in Ujagar Prints. The Asstt. Collector issued a show cause notice proposing to disapprove these price lists, arguing that the assessable value should be based on the wholesale price at which BIL sells the biscuits. The Collector (Appeals) upheld this view, stating that the appellants are essentially an extended arm of BIL and not independent sellers. The Tribunal agreed, noting that the relationship between the appellants and BIL is that of principal and agent. Consequently, the assessable value should be the price at which BIL sells the biscuits in the wholesale market, as the goods are not sold by the appellants to BIL in a wholesale trade.

The Tribunal dismissed the appeal, concluding that the appellants are agents of BIL and the assessable value should be based on the price at which BIL sells the biscuits in the open market. The judgment emphasized that the appellants' contention for determining the assessable value based on job work charges alone would result in an incongruous situation where identical products would be assessed at different values depending on the manufacturer.