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TMI Blog2010 (9) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 and 915/2009 - 1165-1166/2010 - Dated:- 8-9-2010 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. REPRESENTED BY : Shri G.P. Sastry, Advocate, for the Appellant. Shri M. Vivekanadan, SDR, for the Respondent. [Order per : M.V. Ravindran, Member (J)]. These two appeals are filed against the Orders-in-Appeal No. 74/2009(V-I)C.E. dt.27-4-2009; No. 110/2009(V-I) C.E., dt.31-8-2009. 2. The relevant facts that arise for consideration are that the appellants are the manufacturers of Paints varnishes, thinners falling under chapter 32 and 38 of the schedule to the Central Excise Tariff Act, 1985. The appellants have entered into an agreement with M/s. Sigmakalon India Pvt. Ltd., Mumbai (for brevity sake hereinafter referred to as SIPL ) for manufacture and supply of paints. The paints manufactured by the assessee for SIPL are for industrial and institutional use. So, as per Rule 2A of Standard Weights Measures Act, 1976, the provisions of Section 4A of Central Excise Act, 1944 are not applicable. Hence, Central Excise duty was paid by the appellants on the value arrived basing on the landing cost of the raw materials and the production overheads which is mut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s additional consideration received or the transaction value is incorrect. It is his submission that the appellant herein is manufacturer of different paints and is not manufacturer of any special application paints like marine paints. It is his submission that the appellant had enough spare capacity for manufacturing the paints. He would submit that SIPL approached the appellant for utilization of such additional capacity and entered into an agreement with the appellant for manufacture and supply of paints. He would draw our attention to the various clauses of the agreement and more specifically to the Clauses, wherein the consideration to be paid is enumerated and tried to impress that the value which has been arrived at is a commercial one based upon the cost of the material etc. and a marginal profit. He would also draw our attention to the Clause 11 of the said agreement. He would submit that the appellant has procured the raw materials from the specified vendors only for the reason that the manufacture of paint for SIPL were for specific application and quality needs to be maintained; there was no compulsion on the part of the SIPL or for the price for the raw materials, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion that first three batch productions were supervised by SIPL and their employees. 5. We have considered the submissions made at length by both sides and perused the records. 6. The issue involved in this case is whether the appellant herein can be considered as job worker under the provisions of Rule 10A of the said Rules. Before we take up these appeals and consider the statutory provisions of job worker as enshrined at Rule 10A of Central Excise Rules, 2002, it is required that a factual matrix be brought on record. 7. It is undisputed that the appellant is manufacturer of paints and had spare capacity. It is also undisputed that appellant wanted to encash the spare capacity by manufacturing paints for SIPL. It is also undisputed that these paints which were to be manufactured by the appellants, were under specific agreement which is termed as Agreement for Manufacture and supply of paints entered between the appellant and SIPL. It is also undisputed that the clauses of the agreement indicated that both the parties have understood the arrangement as principal to principal basis. It is seen that clause No. 1 and 2 of the said agreement indicate the actual position when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of the impugned order and I am in agreement with the findings of the Adjudicating Authority that the activity undertaken by the appellant is controlled by Sigmakalon from the stage of procurement of raw materials; that the equipment I supplied free of charge for the manufacture of the products, the installation of which will be done by Sigmakalon at the appellant s premises while retaining the ownership and also the repair maintenance for the same will be taken up by Sigmakalon; control over the inventory of inputs and process of manufacture and there is a finding in the impugned order to the extent that the raw material/packing material was to be obtained from the persons identified by Sigmakalon. Further, the whole process as to how the advances were paid and the suppliers of raw material/packing material were appointed by Sigmakalon to circumvent the actual transaction of supply of raw material; as to how the price shown in the invoices is not the sole consideration and there are various other considerations as per the terms of the agreement was explained in the impugned order. I do not find any infirmity in the impugned order to cause any disturbance of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee/appellant and SIPL is of very commercial nature and hence, any items which are procured for specific manufacturing of paints, SIPL can definitely indicate the specific use. It is to be seen that there is no clause in the agreement which would indicate that the appellant herein has to return the said raw material/packing material without any charge i.e. to say they are bound to return without any consideration. We find that clause No. 11 was relied upon by the ld. SDR to say that the compensation which was given was based upon the material cost + additional specific profit. In our considered view, this in itself cannot be said that the relationship between the appellant and SIPL is that of a job worker and principal manufacturer and the compensation received by a person or a company, can be decided in any manner mutually acceptable to the contracting parties. The specific clause No. 11 of the agreement in no way suggests anyone to take a view that the appellant was a job worker of SIPL. Further, we find that clause No. 15D of the said agreement which we are reproducing herein under would indicate the relationship between the appellant and SIPL. 15D. This agreement is devis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order. 3. In the present case, it is the case of M/s. GDOL that their relationship with M/s. REPL was on principal-to-principal basis and that they had only purchased the goods from M/s. REPL in terms of the sale and supply agreement entered between them. The transaction was a normal commercial transaction and was not in the nature of job work insofar as M/s. REPL were concerned. We have found a valid point for M/s. GDOL. They did not supply any raw material or capital goods to M/s. REPL for the manufacture of the subject goods, nor did they provide work force for the purpose. Deputation of supervisors by them to the factory of M/s. REPL did not make any dent in the commercial nature of the transaction between the companies. M/s. GDOL had nothing to do with the lease arrangement between M/s. REPL and M/s. BIPL in respect of the capital goods. It was lawful for M/s. REPL to hire capital goods and use it for manufacturing excisable goods. That was precisely what they did in this case. Advancing of amounts, interest-free, by M/s. GDOL to M/s. REPL has also been satisfactorily explained by the appellants. The sale consideration payable by M/s. GDOL to M/s. REPL for the goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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