2016 (10) TMI 64 - AT - Central Excise

Job-work - Demand alongwith interest and penalty - differential duty - revision of assessable value, in spite of increase in cost of raw materials - Held that - it is seen that in the impugned order it has been held that the transactions between appellant and buyer is on principal to principal basis. The appellants contention that they are selling the paints on principal to principal basis and sale prices are arrived at after taking into account various cost of production for manufacturing the product was held as correct. The issue has been analysed by the Tribunal in their own case reported in 2010 (9) TMI 315 - CESTAT, BANGALORE where it was categorically held that the conclusion of lower authority that the relationship between appellant and Sigma is that of job worker and principal manufacturer is incorrect. Therefore, by following the same, we hold that the demand is not sustainable. - Decided in favour of appellnat

Summary

Issues:
1. Assessment of central excise duty based on enhanced cost of imported raw materials.
2. Determination of assessable value for payment of central excise duty.
3. Interpretation of the relationship between the appellant and the buyer regarding job work basis.
4. Applicability of Rule 6 of Central Excise Determination of Value Rules 2006.
5. Time bar for issuing the show cause notice based on an adjudication order of Customs.

Analysis:
1. The case involved the appellants manufacturing Marine grade paints for a company on a job work basis. The Commissioner of Customs enhanced the value of the imported raw materials, leading to an increased duty liability. The appellant contested this, arguing that they were selling the paints on a principal-to-principal basis and the enhanced raw material cost did not affect their transaction value. The original authority confirmed the duty demand and penalty, which was upheld by the Commissioner (Appeals), prompting the appeal before the Tribunal.

2. During the hearing, the appellant's counsel contended that there was no additional consideration or flow back, and the demand under Rule 6 of Central Excise Determination of Value Rules 2006 was beyond the scope of the show cause notice. The appellant also argued that the notice was time-barred due to involving interpretation and being based on a Customs adjudication order. They cited relevant case laws to support their contentions.

3. The Tribunal noted that the issue was previously addressed in a Final Order where it was held that the relationship between the appellant and the buyer was on a principal-to-principal basis, not that of a job worker and principal manufacturer. The Tribunal cited a similar case to support this finding and concluded that the demand was not sustainable based on the nature of the commercial transaction between the parties.

4. Ultimately, the Tribunal relied on its earlier decision in the appellant's own case to set aside the impugned order, holding that the demand was not sustainable. The appeal was allowed with consequential reliefs, if any, in favor of the appellant. The operative part of the order was pronounced in court at the conclusion of the hearing.