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TMI Blog1996 (9) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,94,616/- and 1539.20 sq. mtrs. of fabrics seized from M/s. Jamnagar Woollen Textile Mills Pvt. Ltd. (J.W.T.M., for short) valued at Rs. 72,800/- are liable to confiscation under Rule 173Q of the Rules. (3) Directing those concerns to produce the goods released provisionally from each of them in terms of the conditions of the B11 bonds executed by them and on their failure to produce the goods, directing them to pay Rs. 18,358/-, Rs. 49,066/-, Rs. 73,654/- and Rs. 20,000/- respectively to discharge their obligation under the Bonds. (4) Directing appropriation of security amounts in the form of Bank guarantees and N.S. Certificates deposited by them against the said Bonds. (5) Imposing penalties of Rs. 4000/- on each of them under Rule 9(2) of the Rules read with Rule 173Q of the Rules. The appeals have been filed by the above-named concerns and another as indicated hereinbelow :- Appeal E/734/88 - N.P.T.M. Appeal E/735/88 - JWTM Appeal E/736/88 - SMTM Appeal E/737/88 - SSM Appeal E/738/88 - The New Vinod Silk Mills (Pvt.) Ltd. (for short, NVS) 2. NVS, a proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the purpose, that the real prices were much higher, namely, the prices at which the cut and packed fabrics were sold by JWTM to their buyers and the transactions between the three suppliers and JWTM were not at arms length. On these allegations it was indicated that the assessable value of finished fabrics on which the processor is required to pay excise duty should be based not at the suppliers prices to JWTM but on JWTM s prices to their buyers. The notice contained demand of differential duty and proposed confiscation and imposition of penalty. 4. The processor, suppliers and JWTM submitted replies raising contentions, which can be summarised as follows :- The processor has no ownership on the finished fabrics and the suppliers are the owners. The suppliers filed declarations under Notification No. 305/77 about the structure of the fabrics and the prices at which they sell the goods. The processor filed classification lists, price lists and RT 12 Returns relying on such declarations and maintained statutory records and paid duty. Processor all along acted bonafide and did not contravene the Act or the Rules and assessments also have been made. There was no collusion betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted person as defined in Section 4(4)(c) of the Act cannot be invoked in the case of the three suppliers and JWTM since the former are partnership firms and the latter is a Company with a purely juristic personality. The price at which the goods are ordinarily sold to the buyers in the course of wholesale market for delivery at the time and place of removal is the basis for valuation under Section 4(1)(a) provided the buyer is not a related person and the price is the sole consideration for the sale. Related persons means a person so associated with the assessee (in this case, the suppliers) that they have interest directly or indirectly in the business of each other. The particulars of the three supplying firms are the following :- NPTM SMTM SSM 1. Pravinchand Sehgal 1. Pravinchand Sehgal 1. Pravinchand Sehgal No. 1. 2. N.N. Sehgal, Father of No. 1. 2. N.N. Sehgal, Father of No. 1. 2. N.N. Sehgal, Father of Wife of No. 1 3. Smt. Veena Sehgal, Mother of No. 1 3. Asha Rani Sehgal, 4. Ravikumar Mehra It is seen that father and son are the partners of NPTM, father, son and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look at the reality behind the facade. See para 7 of the decision in Juggilal Kamlapat v. CIT, AIR 1969 SC 932. The identity of interest between these concerns, the relationship and control are such that the concerns cannot be said to be at arms length or independent parties. Consequently the prices at which the finished goods are sold by the suppliers to the company cannot be taken to be the prices of the supplier. The prices of JWTM to the wholesalers have to be taken to be the suppliers real prices. See para 5 of the decision in Mohanlal Maganlal Bhavsar Others v. Union of India and Others, 1986 (23) E.L.T. 3 (SC). Point answered against the appellants. 9. Point (b) and (c) : The appellants, relying on the judgment and clarificatory order in Ujagar Prints case reported in 1988 (38) E.L.T. 535 (SC) and 1989 (39) E.L.T., contended that the assessable value of the finished fabrics removed by the processor must be based not on the suppliers price but on the sum total of the cost of grey fabrics, the cost of processing and the processors profit. In cases where the raw material belongs to the supplier and the processed goods are returned by the processor to the supplier, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed goods in the market, would include only the price or deemed price at which the processed fabric would leave the processors factory plus his profit. Rule 174............enjoins.........The price at which he is selling the goods must be the value of the grey cloth or fabric plus the value of the job done plus the manufacturing profit and manufacturing expenses but not any other subsequent profit or expenses. It is necessary to include the processors expenses, costs and charges plus profit, but it is not necessary to include the traders profit who gets the fabrics processed, because that would be post-manufacturing profits (emphasis supplied) In CCE, Hyderabad v. Pharmasia Ltd., 1996 (63) ECR 380 (Tribunal) the Tribunal considered the decisions of the Supreme Court and held, on similar facts that the assessable value would not be the value at which.....(the suppliers) sell the product in the wholesale market, but would be the sum total of the value of the raw materials, the value of the job work, the manufacturing profit and expenses for processing of the processor. 10. On the basis of the Ujagar Prints clarificatory order, we hold that as long as the transactions between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale and the nature of the discount is known to the parties concerned prior to the actual removal of the goods, deduction should be given irrespective of whether each customer availed of the said discount. Deduction is to be given if the conditions aforesaid are satisfied. Incentive Bonus : It is contended that JWTM offers to all buyers incentive Bonus subject to minimum purchases made in the year. The Collector has not considered the plea. It has to be allowed if this is as per trade pattern of JWTM and if the facility is offered to all Buyers. Expenses of JWTM : It is contended that JWTM prices reflect also expenses incurred by them for cutting, packing, etcetera and these are post-manufacturing expenses vis-a-vis the processed goods removed by the processor and hence must be deducted from JWTM price, if that price is basis for assessment. In our opinion, the Collector was in error in rejecting this claim for deduction. These expenses are post-manufacturing expenses and this expenditure has atleast partly contributed to the higher price of JWTM. The expenses have to be allowed if JWTM prices are to be adopted to arrive at the assessable value of processed goods. Loss c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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