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TMI Blog1994 (1) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of Peico, and supplied to Peico, at suppressed prices, without taking into consideration the various factors, that build up the cost of production, and whose cost was borne by Peico. Central Excise duty amounting to Rs. 40,56,907.12 was demanded in the show cause notice. 4. The Collector, Central Excise, Calcutta-II, in his Order-in-Original dated 9-6-1987, held that products in question which were supplied by Dugar to Peico, were liable to be assessed to Central Excise duty, on the basis of the prices at which the products were sold in the wholesale market, by Peico. After giving abatement on account of Central Excise duty and sales tax, the duty demanded was worked out at Rs. 30,45,490.02. It was observed that although Peico had claimed abatement on account of additional sales tax, turnover tax, equalised freight etc., they did not furnish the quantum of the above deductions, and did not file supporting documents. Hence, the adjudicating Collector of Central Excise did not consider these deductions. A penalty of Rs. 5 lakhs on Peico, and Rs. 1 lakh on Dugar was imposed under Rule 173Q of the Central Excise Rules, 1944 (hereinafter referred to as the `Rules ). 5. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturer; and that the manufacture of goods with customer s raw materials, and according to the customers specifications and design, does not render the actual manufacturer as a `dummy . Such a customer could not be treated as a `manufacturer of such goods. 7.4 A number of decisions were also cited in support of the contentions that no duty could be demanded and no penalty could be imposed on Peico, in the circumstances of the case. 7.5 An alternate plea was made for giving the benefit of various permissible deductions. 8.1 On 11-11-1993, Shri A.N. Haksar, the learned Sr. Advocate advanced arguments on behalf of Dugar. He submitted that the order of the Collector proceeds on the assumption that Peico exercised complete control over Dugar. In this connection, he stated that for the goods produced by Dugar, Dugar were the manufacturer, and Peico were the customer. In the circumstances of the case, Peico could not be considered as the manufacturer of the goods produced by Dugar. He referred that except for 4 to 5% of the components/parts, no mould was required, and that mere supply of raw materials, will not make the supplier, a `manufacturer , and that in this case Dugar a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilips only from 1984. 11. We have carefully gone through the facts and circumstances of the case, and have given our due thought and consideration to the submissions made on behalf of the appellants, and on behalf of the respondent. 12. In both these appeals, the main issue for our consideration relate to the `valuation . In para 2.8 of the show cause notice, conclusion was reached as under :- All the above facts lead to reasonable belief that the `said company and the `said firm wilfully suppressed the above facts of production of the `said goods and removed the same by mis-representing and by not disclosing to the proper Central Excise officer the above facts which were absolutely vital in deciding the `normal price claimed by the `said firm in the price lists submitted during the period from August 1983 to September, 1985 under Section 4 of the said Act. 13. M/s. Dugar were engaged in the manufacture of tape recorders, falling under Item No. 37AA of the erstwhile Schedule to the Central Excises and Salt Act, 1944 (the old Tariff). Their factory registration was dated 1-11-1983. Their Central Excise licence was dated 19-8-1983. In addition to the production of tape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal); (2) Peico supplied these moulds to the parties (selected by them after surveying the market), who manufactured these components by using such moulds, (such moulds having been supplied to them by Peico, without any charge), and as per size, design and appearance specified by Peico (para 6 and grounds `K and `S of the appeal); (3) The components manufactured by using these moulds were supplied by the above parties, to Dugar. They were supplying these components to Peico also. (Para 6 and ground `K of the Appeal). (4) Common suppliers were supplying printed circuit boards both the Peico and Dugar. The cost of dies were paid by Peico. (Peico s letter dated 1-2-1985; para 6 and ground `K of the Appeal). (5) The amounts to be paid by Dugar to such suppliers of (1) top cabinet; (2) under-case; (3) cassette door, all produced out of the moulds belonging to Peico; and (4) Printed circuit boards were negotiated by Peico (Para 7 and ground `K of the Appeal). 15.2 It is also observed that :- (1) While working out the unit price of (a) top cabinet; (b) under-case and (c) cassette door, only the cost of fabrication, without the cost attributable to moulds, has been taken i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for arriving at the assessable value (refer paras 13, 21, 33, 40 and 49 of the Hon ble Supreme Court decision). 21. In the case of Texmaco Limited v. C.C.E., 1992 AIR SCW 2020, the Hon ble Supreme Court have observed that the value of the article was the full intrinsic value of the article, inclusive of the cost of the materials and components supplied free by the customer, and irrespective of the fact that no expenditure was incurred by the manufacturer on such components. They added that the assessable value would take into account the full commercial value. 22. The designs in respect of their application to the tape recorders produced by Dugar under the brand name `Philips , were registered in the name of Peico, under the provisions of the Design Act, 1911 and the Design Rules, 1933. The three major plastic moulded components which go into the making of the outer body of the tape recorders are top cabinet, under-case and the cassette door. The moulds for these components were got prepared by Peico at their cost and supplied free to the parties producing plastic moulded components. The General Manager of M/s. Supreme Industries had stated, While working out of our overall p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted persons. In that case investment on the gas compressing plant installed in the assessee s factory had been made by the buyer. 27. In para 2.1 of the show cause notice, dated 10-3-1986, it has been alleged that Peico received tape recorders from Dugar at a very low price, than the price at which Peico sold them to their dealers, that is market value of such goods as capable of being sold with their trade mark as `Philips . 28. As we have seen above, the prices paid by Dugar for the plastic moulded components did not include the element of the cost relatable to the moulds. The cost of the moulds had been paid by Peico. To that extent, the cost relatable to the moulds, which should have formed part of the price of the components, got excluded from the price at which the goods were supplied by Dugar to Peico, and therefore, the price collected was not the sole consideration, (being influenced by the consideration that a part of the manufacturing cost has been met by the customer), and the price charged could not form the basis for determining the assessable value under Section 4 of the Act, read with Central Excise (Valuation) Rules, 1975. 29. Peico themselves were the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of the comparable sale namely the price at which the BIL were selling in the wholesale market. 31.1 The Collector, Central Excise, Calcutta-II in his Order-in-Original has come to the conclusion that the products are liable to be cleared on payment of proper Central Excise duty on the basis of enhanced proper value under Section 4 of the said Act. While on the basis of the facts on record we have observed above that the charges collected by Dugar from Peico for the `Philips tape recorders supplied by them, did not satisfy the criteria of Section 4 value, we find that the adjudicating authority had not discussed all the elements of the enhanced proper value under Section 4" on whose basis he has sought to charge differential Central Excise duty from the appellants. Obviously, from the list price at which the `Philips authorised dealer sells the goods to the customer, not only the Central Excise duty, sales tax and the other taxes actually paid have to be deducted, but other permissible deductions as per law, also have to be taken note of to arrive at the assessable value. We find that the adjudicating authority had not discussed the basis at which and as to how the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n added that the Collector, Central Excise, erred in holding that Peico were the manufacturer in terms of Section 2(f) of the Act. In ground `U of their appeal, Peico have also reiterated the same. A number of decisions were cited to substantiate the plea of both the appellants that supply of raw materials by the buyer, marking the brand name of the buyer on the goods produced, supply of drawings and specifications, and producing the goods as per design and requirements of the customer, do not make the customer the `manufac- turer of such goods, and do not render the actual manufacturer as a `dummy . 34. To our mind, the evidence on record is not adequate to establish that Dugar was floated by Peico, or that Dugar was a dummy unit. Although, we find that the charges recovered by Dugar from Peico did not constitute the price for determining the assessable value under Section 4, we are of the view that the reasoning adopted by the adjudicating authority that Peico were the manufacturer of the tape recorders obtained by them from Dugar, is difficult to sustain. It will, however, not make difference for the conclusion reached by the lower authorities that the charges at which the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stream of trade when they are sold to the `Philips wholesale dealers with `Philips warranty. 38. As regards the penalty imposed on Dugar, keeping in view the amount of Central Excise duty evaded after re-calculation in the above manner, the quantum needs to be reviewed and re-fixed by the proper adjudicating authority. 39. As a result, the appeal filed by Peico is allowed. For re-calculation of the amount of differential Central Excise duty evaded and recoverable from Dugar, and for the quantum of penalty imposed on Dugar, the matter is remanded back to the competent adjudicating authority. 40. Within a month of the receipt of this order, Dugar will submit necessary details with supporting documents of the deductions which they consider permissible as per law, and as pleaded in Ground `AA of their appeal before us, to the jurisdictional adjudicating authority, and thereafter the adjudicating authority will proceed to re-determine the differential Central Excise duty payable by Dugar including penalty, if any, to be imposed, and pass an appealable speaking order after observing the principles of natural justice. 41.The appeals and the Cross Objections are disposed of in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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