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TMI Blog2014 (3) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... etting work from M/s ITC as he is getting more financial gains from M/s ITC but it is not coming out anywhere in the case records as to have M/s ITC has financially gained from the appellant in the transactions. There is a clause in the agreement that M/s ITC at any time can get the work entrusted to the appellant, done from others. Therefore, the provisions of Rule 9 cannot be pressed into service in the present proceeding. The valuation of goods is required to be decided by the adjudication authority under the provisions of Rule 11 of the Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 applicable at the relevant time. - matter remanded back to decide accordingly. - Appeal No. : E/1696-1697 of 2010 - ORDER No. A/10002-10003/2014 - Dated:- 1-1-2014 - Mr. M.V. Ravindran and Mr. H.K. Thakur, JJ. For the Appellant : Shri B.V. Kumar, Advocate For the Respondent : Shri S.K .Mall, AR JUDGEMENT Per : Mr. H.K. Thakur; These appeals have been filed by the appellants against OIO number 26/Commr/HKJ/Ahd-II/2010 dated 10.08.2010, under which a demand of Rs. 3,70,31,551/- has been confirmed against the main appellant M/s. Leamak Hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC Limited for manufacturing and packing of the product. (d) M/s. ITC Limited has his own people to supervise the manufacturing activities at the factory premises of M/s. Leamak by deploying professionally qualified employees right from the receipt of the raw material stage till the despatch of the goods from the factory premises of M/s. Leamak. (e) M/s. ITC Limited has provided machinery worth Rs. 1.78 Crores to M/s. Leamak for manufacturing of confectionery. M/s. ITC Limited has incurred all the expenses with respect to cost of such machinery, its installation, freight and other expenses and depreciation of such machinery were claimed by M/s. ITC Limited. (f) As per agreement between M/s. Leamak and ITC Limited, a nominal rent of Rs. 12,000/- per annum was being paid by M/s. Leamak with respect to the machinery worth Rs. 7.38 Crores provided by M/s. ITC Limited. This machinery supplied by M/s. ITC Limited could be used for the manufacturing of confectionery belonging to M/s. ITC Limited only and not for any other client. (g) M/s. ITC Limited has provided interest free loan to M/s. Leamak of Rs. 25,86,257/- and Rs. 49 Lakhs in the years 2002-03 and 2005-06 respectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of M/s. Leamak because, as per the contract entered into between both of them, M/s. ITC Limited is at liberty to get the same goods manufactured on job work basis from other job workers also. Learned advocate appearing on behalf of the appellants relied upon the following case laws:- (a) Tungbhadra Industries Limited vs. Collector of Central Excise, Hyderabad- [1995 (75) ELT 95 (Tri.)] (b) Auto motive Axles vs. CCE, Hyderabad - [2002 (42) ELT 706 (Tri.)] (c) Motor Industries Company Limited vs. CCE, Bang. [1999 (111) ELT 163 (Tri.)] (d) Makson Healthcare Pvt. Limited vs. CCE Bhopal [2007 (218) ELT 286 (Tri.)] (d) Anantha Poly Products Pvt. Limited vs. CCE, Madurai [2008 (227) ELT 574 (Tri.)] (e) Gillette Diversified Operations Limited vs. CCE, Chennai -[2007 (217) ELT 551 (Tri.)] (f) TTK Healthcare Limited vs. CCE Guntur [2007 (207) ELT 453) (Tri.)] (g) Advance Surfactants India Limited vs. CCE, Mangalore [2011 (274) ELT 261 (Tri. Bang.)] (h) Kaveri Pet and Polyforms Pvt. Limited - [2009 (248) ELT 803 (Tri. Bang.)] (i) Kwality Fun Food Restaurants Pvt. Limited vs. CCE Coimbatore 2012 (283) ELT 261 (Tri. Chennai)] (j) Ujjagar Print ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have interest, directly or indirectly, in the business of each other. 8. Adjudicating Authority has held that both M/s Leamak and M/s ITC Limited are related persons as both of them has interest in the business of each other on account of the reasoning given in Para 3 above. 9. Appellants have, inter-alia, relied upon the judgment of CESTAT in the case of M/s Automotive Axles (Ltd) vs. CCE, Bangalore (Supra) and M/s Motor Industries Company Ltd., vs. CCE., Bangalore (Supra) to drive home the point that mutuality of interest has been held to be only financial flow back to both the principal manufacturer and the job worker. It was argued by the appellant that since there is no money flow back to M/s ITC Limited, therefore, it is legally not correct to hold both the appellant and M/s ITC Limited to be related persons for the purpose of valuation. Paras 20 and 21 of CESTAT s judgment, in the case of M/s Motor Industries Company Ltd vs. CCE., Bangalore (supra), are reproduced below: 20. With due respect, we are unable to agree with? this conclusion of ld. Commissioner. This is not a new concept which the Commissioner or the department has tried to bring out in the order. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated person cannot be rejected so long as the price is a mutually arrived at one and not fixed by any consideration and that there is no flow back in any form. When the price of related persons is the same as that of other dealers and in such circumstances also the price is required to be accepted. In the present case, the department is not proceeding on the basis of ancillary units being related persons but as Commissioner has analysed, they have proceeded on the basis that the goods are manufactured under the management, direction and control of MICO. All units being ancillaries manufacture goods according to design and specifications, therefore, MICO getting such goods manufactured as per their specification does not make MICO as the manufacturers in terms of Section 2(f) of Central Excises and Salt Act. This has been further analysed by the Honble Supreme Court in the case of C.C.E. v. M.M. Khambhatwala as reported in 1996 (84) E.L.T. 161 (S.C.) where goods produced by household ladies in their own premises out of the raw material supplied by the respondents who paid wages on the basis of number of pieces manufactured and there was no supervision over the manufacturing of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the buyers standard, they are either reprocessed to bring them up to the requisite quality, or if that is not possible, the goods are sold to the buyer for a different purpose if they are compatible with the specifications of some other product and provided that the buyer has a need for that product, or the goods are sold to others in the market as sub-standard goods at a lower price or the goods are destroyed. It is significant to note that the buyer is not obliged to purchase the goods manufactured by the seller regardless of their quality and that in the event of rejection by the buyer the alternatives present before the seller extend to the sale of the manufactured goods to others or even to the very destruction of the goods. It is apparent that the seller cannot be said to manufacture the goods on behalf of the buyer. Further the Supreme Court observed in Para 7 that the appellant relies on the circumstances that under the agreements the seller is required to affix the trade-marks of the buyer on the manufactured goods and, it is said, that indicates that the goods belong to the buyer. The Supreme Court observed that it seems to them clear from the record t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the adjudicating authority that the judgment of Hon ble Supreme Court in the case of M/s Ujagar Prints (Supra) cannot be made applicable to the present proceedings because the present case is clearly distinguishable from the facts and the principles laid down by Apex Court for valuation of the goods in case of manufacture of goods on job work basis. In the case of M/s. Ujagar prints only one of the several materials i.e. grey fabrics was supplied to the job worker, whereas in the present case all the raw materials and packing materials were supplied by ITC. Various gift articles were also supplied by ITC for packaging, the machinery worth more than Rs. 7 Crores required for manufacturing of confectionary was supplied by ITC on rent of Rs. 12,000/- per annum in the present proceedings whereas the machinery belonged to M/s Ujagar Prints in the case before Apex Court. In the case of M/s Ujagar Prints the job worker was at liberty to manufacture goods for any client on job work and was not restricted to a particular client as is the case in the present proceedings. As already held Revenue is not able to establish that there is mutuality of interest in view of the monetary gain and fl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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