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TMI Blog2014 (2) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... VDR-II-OA-MP-POLYSETPPL-ADJ-COMMR-2011-12 and 6-VDR-II-OA-MP-PRINCE-ADJ-COMMR-2011-1 (iii) E/907 of 2011 M/s. Shaily Engineering Plastics 2-VDR-II-OA-MP-SHAILY-DIVADI-ADJ-COMMR-2011-12 (iv) E/1013 of 2011 M/s. Kisan Moulding Pvt. Limited 3-VDR-II-OA-MP-KISANMOULDING-ADJ-COMMR-2011-12 (v) E/970 of 2011 M/s. Polyset Plastics Pvt. Limited 4-VDR-II-OA-MP-POLYSETPPL-ADJ-COMMR-2011-12 (vi) E/1009 of 2011 M/s. Prince Containers Pvt. Limited 6-VDR-II-OA-MP-PRINCE-ADJ-COMMR-2011-12 2. As the issue involved in all the above appeals is the same, therefore, applications for early hearing of appeal Nos. E/970 and 907 of 2011 are allowed and all the above appeals are being taken up for disposal under this common order. Appellants at Srl. No. (i), (iii) to (vi) above (hereinafter referred to as OEMs) are manufacturers of Coolers of 'Symphony' brand and sell the same to the Brand name owner M/s. Symphony Comforts Systems Limited (hereinafter referred to as the 'M/s. Symphony'. The case of the Revenue is that OEMs are showing purchase of various raw materials from various suppliers (hereinafter referred to as the 'Vendors') approved by M/s. Symphony. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE, Vapi [2013-TIOL-772-CESTAT-AHM]. It was also his argument that definition of Job Worker given in explanation to Rule 10A gives a clear indication that for goods manufactured under 'Job work' should mean that a manufacture is on behalf of the raw material supplier (principal manufacturer) who should supply the raw materials to the job worker free of cost out of which the finished goods are manufactured. That if the raw materials are supplied by anyone on behalf of the principal manufacturer, then also the supply of material should be free of cost. That the amortised value of moulds and assembly lines (tables) provided by M/s. Symphony has admittedly been added for arriving at the assessable value as per Rule 6 of the Central Excise Valuation Rules, 2000. That even before 31.03.2007 also, when Rule 10A was not existed, the goods were being sold on the same pattern as being done after 31.03.2007 and that nature of sale being not proper trade sale, was never questioned by the Revenue. That this fact itself shows that appellants did not wilfully suppress or misstated any fact with intention to evade duty and has also not devised a new modus operandi for getting the raw materials. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Gujarat judgment in the case of M/s. Unisilk vs. CC, Kandla [2001 (134) ELT 40 (Guj.)]. It was also his argument that by giving redemption fine option to the OEMs, it is accepted by the Revenue that Symphony brand coolers belonged to OEMs which were being sold to M/s. Symphony and hence there was no contravention with respect to seized goods and confiscation and penalties were not attracted in this case on his clients. 6. Shri S.K. Mall (AR), Shri K. Shivakumar (AR) and Shri Manoj Kutty (A.R.) appeared on behalf of the Revenue and made, inter-alia, the following arguments:- (a) That agreements between the OEMs and M/s. Symphony are not on principal to principal basis as the latter is controlling the activities of all the OEMs and negotiating price and supply of all raw materials from the vendors, including the consignment-wise routing of the payments to vendors. (b) That certain e-mails and registers recovered during the search of the factory premises of M/s. Symphony indicate that proper records of supply and purchase of motors and other raw materials is kept by M/s. Symphony, therefore, all the raw materials has to be considered to have been supplied by M/s. Symphony throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered to be on principal to principal basis and has to be accepted as cases of master/ servant relationships. (k) That in the absence of the above restricting manufacturing Clauses and no whisper of sale of Air Coolers in the contracts make these appeals factually different than the case decided by CESTAT Ahmedabad in the case of M/s. Abhishri Packaging vs. CCE, Vapi [2013-TIOL-772-CESTAT-AHM] and that ratio cannot be applied to the facts and circumstances of the present appeals. (l) That as per Apex Courts reasoning in the case of CCE, Mumbai vs. Fiat India Pvt. Limited [2012 (283) ELT 161 (SC)], (Para 60) the present case is not of a sale of Section 4(1)(a) of the Central Excise Act, 1944. ARs also relied upon the judgment of Jabil Circuit India Pvt. Limited vs. CCE, Pune-III [2013 (295) ELT 29 (Bom.)]. (m) That argument of the appellants regarding Central Excise Valuation Rules, 2000 should be followed sequentially and that money value of any additional consideration could be added as per Rule 6 of these rules, is not correct as per Supreme Court's judgment in the case of Fiat India Pvt. Limited vs. CCE, Mumbai (supra) and valuation in the present proceedings was correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation 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, 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. Rule 6. - Where the excisable goods are sold in the circumstances specified in clause (a) of sub Section (1) of Section 4 of the Act except the circumstances where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. [Explanation 1] - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods are sold, to the place of delivery shall not be included in the value of excisable goods. Explanation - For the purposes of this rule, job-worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorised by him. 9. The only point of difference between the facts of this case and those involved in the case decided in Abhishri Packaging Pvt. Limited vs. CCE Vapi (supra), tried to be highlighted by the learned AR appearing on behalf of the Revenue, is that the transactions in the present proceedings are not one of sale but a case of deemed supply of inputs and goods by M/s. Symphony and that value is required to be determined under Section 4 (1) (b) of the Central Excise Act, 1944 read with Rule 10A of the Valuation Rules, 2000. It is not the case of the Revenue that brand name owner M/s. Symphony and the OEMs are related persons or that M/s. Symphony is the manufacturer of the goods. The crucial point to be determined in these proceedings, therefore, is whether the transactions between M/s. Symphony and OEMs constitute a sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the year. The manufacturer has to pay all excise and other overheads and also comply with all the statutory requirements which are required to be complied. SCSL has no role to play in this and SCSL is in no way concerned or responsible for such compliance. 10. Clause-5 of the above agreement only talks about the fixed charges which will be paid by M/s. Symphony to the appellant M/s. Prince Containers with respect to moulding of plastic parts made by OEMs whereas Clause 6 and 7 of agreements talk about adding the cost of other bought out parts also into the actual cost of final product i.e. Air Cooler. There is also a clause in the agreements regarding 60 days credit time available to M/s. Symphony to make payment of dues with respect to air coolers otherwise interest will be required to be paid to the OEMs by M/s. Symphony. No separate charges are agreed to be paid by M/s. Symphony to the OEMs for the activities of assembling of Air Coolers as specified in Clause-1 of the agreements. The above facts read with other clauses of the agreements and the sales documents relied upon by the appellants give a clear indication that the transactions between the OEMs and M/s. Symphony ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve at the assessable value. Explanation 1 to Rule 6, as reproduced in Para 8 above, make it further clear that any such additional money value in the form of materials, components, parts, tools, dies, moulds, drawings, blue prints, technical maps, charts, value of engineering, development, art work, design work, plans and sketches etc; can be added to the assessable value if the transaction is one of Sale. The forms of all these items specified in Rule 6 of the Valuation Rules, are in the nature of inputs or goods which are determinable. If the interpretation given by the Revenue is accepted to be correct then all the situations where buyer is providing all the above inputs/ goods, the assessments will be required to be made under Rule 10A of the Valuation Rules, 2000. This interpretation will thus make Rule 6 of the Central Excise Valuation Rules, 2000 redundant. Harmoniously reading both Rule-6 and Rule 10A together, along with the explanations to these Rules, will mean that when inputs/ goods are predominantly supplied free of charge by a person to the manufacturer of goods then only the Valuation can be made under Rule 10A of the Valuation Rules, 2000. In a case of sale of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Apex Court never said that if price is not the sole consideration then straight away the valuation should be done under Rule 10A of the Valuation Rules, 2000. As discussed above, even if price is not the sole consideration then also as per Rule 6 of Central Excise Valuation Rules, 2000 more money equivalent of any additional consideration can be added to arrive at the assessable value. Any such addition made with respect to certain inputs/ goods supplied free of charge provided by M/s. Symphony will not take the transactions out of the ambit of sale of goods for which the assessment machinery available is Section 4(1) (b) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation Rules, 2000. Further OEMs are not making equipments/ moulded parts only for M/s. Symphony but also for other persons and accordingly it cannot be said that all the OEMs are dummy manufacturers or related persons. There is no allegations by the Revenue to that effect or that OEMs were specially created to cater to the needs of M/s. Symphony. 13. After deciding the nature of transactions between the OEMs and M/s. Symphony as the transactions of sale of goods on principal to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Rules, 2000. In that case, the first appellate authority had held in favour of the assessee and Revenue had preferred appeal before the Tribunal. The grounds taken in the appeal before the Tribunal in that case reads as under:- "4. The Grounds of appeal 4.1 The commissioner held that the impugned goods were manufactured from the moulds suppled by TUPPERWARE and that the raw material suppliers were authorized by TUPPERWARE. From these findings of the Commissioner, it is established that the manufacture of goods by INNOCORP/DART for TUPPERWARE amounted to job work in terms of Rule 10 A. 4.2 The facts of these cases are different from those of the cases of Poona Bottling Co. Ltd. & another Vs. UOI & others [1991 (8) ELT 389 (Del.)], UOI vs. Citabul [sic-this is Cibatul] Ltd. [1985 (22) ELT 302(SC)] 2002-TIOL-487-SC-CX-LB and Teggas Industrial Development Ltd. Vs. CCE, Kanpur [1989 (39) ELT 151(Tri.)] relied on by the adjudicating authority. 4.3 From the various clauses of the agreement between INNOCORP/DART and TUPPERWARE, it can be implied that the transactions were not at arms length [Clauses 6.5, 9, 11 and 12 of the INNOCORP-TUPPERWARE agreement and Clauses 6.4, 7.3, 9.2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments entered into between INNOCORP/DART and TUPPERWARE. 7.2 The terms and conditions of the two agreements are undisputedly similar. The relevant provisions of one of the agreements have been recorded in sub-para (2.1) of para 2 o this order. The parties to this agreement declared that neither of them was an agent of the other, that their relationship was at arms length on a principal-to-principal basis, that neither of them had any interest in the other and that they had a buy-an-sell relationship only vide clause 23 of the agreement. It was also declared that TUPPERWARE was the purchaser of the products manufactured by DART. On a perusal of other clauses of the agreement, we have found these declarations contained in clause 23 to be true. 7.3 It is easily discernible from the agreement (a) that the assessee was appointed by TUPPERWARE, on a principal-to-principal basis, to manufacture the products as per the latter's specifications and to sell the goods to TUPPERWAR, (b) that TUPPERWARE was liable to pay to the assessee the price of the goods invoiced by the latter as per the settled cost quotations for the product, (c) that the raw materials and packing materials required for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrol of TUPPERWARE reducing the status of the manufacturers to job workers. That the brand name of TUPPERWARE was affixed on the finished goods by the assesses is also immaterial. In this context, in our view, the learned Commissioner is justified in having claimed support from the decisions in the cases of Poona Bottling Co. Ltd. etc. 7.5 The third requirement (vide para (7.1) supra) for the assesses to be job workers of TUPPERWARE has also not been satisfied in this case inasmuch as the goods were not manufactured from any Inputs supplied by TUPPERWARE or by any other person authorized by them. It is not in dispute that the necessary raw materials and packing materials were procured by the assesses from suppliers named by TUPPERARE. The cost of these materials were expressly recognized as expense of the assesses. That the suppliers were chosen by the asessees from a panel furnished by TUPPERWARE does not mean that the actual suppliers were authorized by TUPPERWARE to supply the materials to the assesses. In so far as the moulds are concerned, undisputedly, they were returned by the assesses to TUPPERWARE after use (without availing CENVAT credit)and the amortised value thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On these facts, this Bench took the view that the relationship between COROMANDEL and SIPL was not that of a principal manufacturer and job worker. In COROMANDEL's case, they were also required to select suppliers named by SIPL because the raw mater4ials from those suppliers were of the special kind required for the manufacture of the paints for which purchase orders were placed by SIPL on COROMANDEL. This fact pleaded by the Department was not accepted as a ground for holding COROMANDEL to be a job worker of SIPL. 7.7 The learned Addl. Commissioner (AR) picked on aspect of COROMANDEL's case to distinguish it from the present case. In that case, this bench had noted that there was no evidence of return of unused materials, scrap etc. to SIPL. In the present case, such materials were to be returned to TUPPERWARE. But, then, the cost of these materials could be billed by the manufacturer to be paid by TUPPERWARE vide clause (11) of TUPPERWARE-DART agreement, which arrangement also reflected a seller-and-buyer relationship between the parties. 7.8 In COROMANDEL's case, this Bench also found that their case. Was supported by the decision of a coordinate Bench in the case of Gillete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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