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2012 (10) TMI 268

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..... as exercised total control over every aspect of the transaction with the OEMs and the transaction of the OEMs with the Vendors. Under these circumstances, it would be appropriate to require Symphony also to deposit a portion of the penalty since they are the main party and main beneficiary of the whole arrangements and the transactions. Moreover when the law was amended Symphony had the responsibility to change the system of Valuation being the driving force behind the whole operation. It would be totally unfair and unjust to require only job workers to make pre-deposit of duty and allow Symphony to go scot free without requiring any deposit in spite of the fact that maximum profit accrued to Symphony and not the job workers in this case. Thus the OEMs are required to deposit 10% of the duty demanded within eight weeks from today & M/s. Symphony Comfort Systems is required to deposit an amount of equal to 20% of the penalties imposed on them in various orders within eight weeks from today. Subject to such pre-deposit of the amounts detailed above, the requirement of pre-deposit of balance dues from all the appellants, is waived and stay against recovery of the same is granted durin .....

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..... stems Limited [E/S/1106/11] Rs. Nil Rs. 2,50,000/- + Rs. 3,00,000/- Fine M/s. Symphony Comforts Systems Limited [E/S/1107/11] Rs. Nil Rs. 2,40,000/-Rs. 90,00,000/-Fine M/s. Symphony Comforts Systems Limited [E/S/1104/11] Rs. Nil Rs. 65,00,000/- + Rs. 10,00,000/- Fine 2. All the parties were heard in considerable detail. However, after going through the records and considering the submissions made by all the parties concerned, it became quite clear that the investigation and adjudication involved consideration of several records recovered, statements of several persons and analysis of facts and statutory provisions relating to the transactions. 3. For convenience sake, the issues raised, the points canvassed by the defence are considered point wise and conclusion indicated therein itself. Even though there are several adjudication orders passed by two different Commissioners, issues involved are same and the adjudication process has arisen as a result of a common investigation and orders also have treated the issue in the same manner and the basis for conclusions are also same and arguments were also made on this premise. Therefore, a common order is being passed. There c .....

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..... materials/inputs. Under similar circumstances in the case of Corromondal Paints - 2010 (260) ELT 440 (Tri, Bang.) and in the case of Innocorp Limited and Dart Manufacturing India Pvt. Limited vide its order No.209 & 291/2012 dt.63.2012/ 8.5.201 2 of Bangalore Bench of the Tribunal. 5.2. This point was argued very vehemently and in great detail and the issue raised is most important one in the case. This is because for applying Rule 10A of Valuation Rules, the department has to show that five firms are job workers and according to Rule 10A, the job worker has been defined as - "for the purpose of this Rule, the job worker means, a person engaged in the manufacture or production of goods on behalf of the principal manufacturer from any inputs or goods supplied by the said principal manufacturer or by any other person authorised by him." It can be seen that to be called as Job Worker, manufacture is required to be done on behalf of the principal manufacturer and out of the inputs or goods supplied by the principal manufacturer or persons authorised by him. 5.3. The appellants relied upon the decision in the case of Corromondal Paints to submit that the circumstances were identical .....

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..... (v) Certain equipments/moulds were supplied free of cost by buyer to the manufacturer. 5.6 The conclusion of the Tribunal was submitted as under:- a. The features of the contract clearly indicated that the transaction was on principal-to-principal basis. As such, the goods are not to be taken as manufactured "on behalf of" Tupperware. b. Stringent quality control required production process inspection as well as specifying the supplier pool. c. Tupperware had liberty to reject goods on quality grounds. All these show that the transaction was undertaken in the normal course of business on principal to principal basis. d. The manufacturer cannot be said to be under extensive control of buyer due to above features. e. Affixing buyer's brand name is also immaterial. f. Suppliers for raw materials being specified by buyer due to quality reasons does not mean the suppliers are "authorized by principal" within the meaning of Rule 10A of Valuation Rules, 2000. g. Free supply mould value was amortized in the assessable value of goods and in any case moulds were to be returned after use. h. The issue already stands covered in favour of assesses vide the decision in the ca .....

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..... ruary and OEMs were not required to wait till air the coolers were required to be sent in the market in February but were paid as soon as they were manufactured. The above circumstances, in our opinion, would show that prima-facie, the appellants have not been able to show that the transaction as regards air cooler components was not one of pure purchase and sale. Needless to say that further consideration of evidence and records would be required to consider the same in greater details. 5.8. In the case of Corromondal Paints Limited, the agreement proceeds with "1. Sigmakalon India Pvt. Limited is a dealer of Marine and Protective coatings and looking for external extension for its production capacity of a limited range of such products, and does not currently have manufacturing facilities in India. 2. Corromondal Paints Limited has sufficient capacity available at their production facilities at Visakhapatanam and is willing to manufacture and supply paints to Sigmakalon at a price that is mutually beneficial and reasonable. As can be seen, the agreement talks of purchase and sale and the intention is not to get the goods manufactured by another person without mentioning any pric .....

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..... ng authority has arrived at a conclusion that all parts required in the manufacture of settop boxes were required to be purchased by the assessee from the vendors specified in the approved Vendors List received from Thomson India and the assessee had no role to play in the preparation of the inputs supplied by the vendors is the price negotiated by the Thomson India. On the basis of the aforesaid statements, the adjudicating authority concluded that the price of the raw materials purchased by the assessee are controlled by the Thomson India and, therefore, Thomson India indirectly supplied the inputs to the assessee through its sister concerns, set out in the approved Vendors List at the price controlled/approved by the Thomson India." and thereafter, in Para 10 the Hon'ble High Court observed that in the circumstances, the prima facie view of the CESTAT that that adjudicating authority was justified in holding that Thomson India supplied the inputs to the assessee by persons authorised by Thompson India and therefore, the assessee is job worker manufacturing the goods on behalf of the Thompson India. We have already identified the fact that in this case. Symphony identified the V .....

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..... behalf of the Symphony. 7. Another factor that has been taken into account is that the assembly line and moulds were supplied by Symphony. As regards, moulds, it is the contention of the OEMs that cost of moulds has been allocated to the product price. As regards assembly line, it was stated by the learned advocate that they were only simple tables placed in line and it was not any conventional assembly line, as we understand. However, as per the statement recorded, the assembly line was not merely a set of tables placed with each other but a conveyor system. It could be a simple assembly line and it was definitely not a set of tables placed one after other. Shri Bharatbhai Rajgore of Prince Containers Pvt. Limited, in his statement dated 20.03.2009 had stated that the conveyor assembly line was supplied by Symphony. Further Shri Manish Chaddha , Director of Prince Containers Pvt. Limited stated that conveyor line consisted of sub assemblies supplied by Symphony. Shri Paresh Purushottamdas Mehta, Manager of Symphony also admitted that conveyor lines consisting of various sub assemblies were supplied to the OEMs by Symphony. This would show that assembly line was not simply a set o .....

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..... liability. 10. As already seen definition of job worker incorporates the words "on behalf of". In the market no one knows the OEMs. Air Coolers are recognised as of Symphony only. There is no sale to Symphony nor to anyone else. In such a situation, what the OEMs are doing is nothing but manufacturing on behalf of Symphony. 11. However, as already observed earlier, at this stage it would not be possible to consider every aspect of the case. In the facts and circumstance of this case, it cannot be said that appellants have been able to make out a prima facie case for complete waiver. Nevertheless, as for as the job workers are concerned slightly lenient view, in our opinion, is called for. For coming to this conclusion, we have taken note of the fact that in this case Symphony used their clout and capacity to market the products and their reputation to ensure that the-profits made by OEMs was always limited and had nothing to do with the demand for products in the market. While there is a cap for the profit and the earnings of job workers based on Symphony's market, there is no cap for the earning of Symphony, who has exercised total control over every aspect of the transaction w .....

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