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TMI Blog2012 (2) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Succinctly put, the material facts giving rise to the present appeals are as under: Respondent No.1-M/s Food and Healthcare Specialities (for short "the Assessee") was engaged in the blending and packing of Rs.Glucon D' for M/s Heinz India Pvt. Ltd. (for short "Heinz"), respondent No.2 in these appeals, pursuant to an agreement commencing from 1st March 2000. Under the agreement, Heinz was to supply raw material, packing material and the technical know-how to the Assessee for the blending and packing of the said product. From March 2000 to September 2000, the Assessee paid excise duty on the basis of wholesale price of the product at the depots of Heinz. However, for the period commencing from October 2000, they filed price declarations seeking to modify the assessable value of the product as the aggregate of cost of raw material, packing material and their job work charges and started paying duty on the same. During the course of investigations undertaken by the revenue, it was found that the said product was also being processed at the Aligarh factory of Heinz and the duty on those clearances was being paid at the assessable value/depot sale price of Heinz. Consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e condition that the said manufacturer authorised the person, who actually manufactured or fabricated the said goods, to comply with all the procedural formalities under the Act and the rules made thereunder, in respect of the goods manufactured on behalf of the said manufacturer. Relying heavily on the decision of this Court in Commissioner of Central Excise, Indore vs. S. Kumars Ltd. and Ors.1, wherein dealing with the question of assessable value of the processed goods in relation to the processor the earlier decisions of this Court in M/s Ujagar Prints and Ors. (II) vs. Union of India and Ors.2 (for short "Ujagar Prints (II)"), M/s Ujagar Prints and Ors. (III) vs. Union of India and Ors.3 (for short "Ujagar Prints (III)"), Empire Industries Limited and Ors. vs. Union of India and Ors.4 and Pawan Biscuits Co. Pvt. Ltd. vs. Collector of Central Excise, Patna5, were discussed. Learned counsel argued that the formula laid down in the Ujagar Prints (II) or (III) would not apply to the fact-situation. It was stressed that having failed to examine the relationship between the Assessee and Heinz, the Tribunal's order deserved to be set aside and the matter was fit to be remitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of excisable goods for the purpose of charging excise duty are contained in Section 4 of the Act (as amended with effect from 1st July 2000), which, insofar as it is relevant, reads as follows: "4. Valuation of excisable goods for purposes of charging of duty of excise.-(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall- (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. (2) .................................................................... (3) For the purposes of this section,- (a) ............................................................ (b) persons shall be deemed to be "related" if- (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act read with the 2000 Rules. We may, however, note that conceptually there is no significant change in the definition of "related person" in the new and repealed Section 4 of the Act. 6. Thus, the pivotal question on which learned counsel for both the parties addressed us, is whether the Assessee was merely a processor of Rs.Glucon-D', independent of Heinz or it was related to Heinz. In other words, whether the relationship between the Assessee and Heinz was one of principal to principal or that of an agent and principal. As aforesaid, the stand of the revenue is that the Assessee, as the processor, is not independent of Heinz and therefore, ratio of Ujagar Prints (III) would not apply. It is evident from the order of the Tribunal that it has not addressed this aspect of the matter in detail, and has not considered whether the Assessee and Heinz were related persons. Nevertheless, since the rival contentions urged before us mainly related to the question as to whether the formula laid down in Ujagar Prints (III) and reiterated in Pawan Biscuits, would apply or the principle enunciated in S. Kumar will govern the present case, it will be useful to notice the principle enu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing on job work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market, that would be taken by the excise authorities as the assessable value of the processed fabric and excise duty would be charged to the processor on that basis provided that the declaration as to the price at which he would be selling the processed goods in the market, would include only the price or deemed price at which the processed fabric would leave the processor's factory plus his profit..." 9. The decision in Ujagar Prints (III) was subsequently followed by this Court in Pawan Biscuits. In that case, the Tribunal had held that the assessee was, in reality, an agent of Britannia Industries Ltd. and, therefore, the price at which Britannia was selling the manufactured goods in the wholesale market was to be taken as the assessable value. The decision of the Tribunal was reversed by this Court. It was found that the agreement between Pawan Biscuits and Britannia indicated that their relationship was one of principal to principal and not that of principal and agent and also that the assessee (Pawan Biscuits) could m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersons and thus disputed the basis on which claim for additional excise duty was made. The stand of the assessee was that by virtue of the decision of this Court in Ujagar Prints (III), they were liable to treat the notional sale by the assessee to the merchant manufacturers as the relevant point for determining the assessable value. Examining the provisions of Section 4 of the Act, as it existed at the relevant time, with reference to the Central Excise Valuation Rules, 1975 and the decisions of this Court in Ujagar Prints (II) and Ujagar Prints (III) and Pawan Biscuits, the Court held as follows: "We, therefore, do not agree that Ujagar Prints (III) would apply even to a processor who is not independent and, as is alleged in this case, the merchant manufacturers and the purchasing traders are merely extensions of the processor. In the latter case, the processor is not a mere processor but also a merchant manufacturer who purchases/manufactures the raw material, processes it and sells it himself in the wholesale market. In such a situation, the profit is not of a processor but of a merchant manufacturer and a trader. If the transaction is between related persons, the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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