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TMI Blog2007 (10) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... Reddy as promoters. DVL and TDCEL had entered into an agreement on 24-8-94. Following the agreement M/s. DVL manufactured TV Sets, VCRs etc., using the materials supplied by TDCEL on job work basis. They recovered conversion charges from TDCEL. TDCEL and M/s. TEE DEE Electronic Services Company (TDESCO), a partnership firm, had entered into an agreement as per which after sales service within the warranty period of the products of TDCEL would be carried out by TDESCO. 2.1 Investigations conducted by the department revealed that, (a) The branches of DVL were occupied by TDCEL and TDESCO after DVL became job worker. (b) TDCEL supplied all the raw materials, both indigenous and imported required for the manufacture of 'Thomson' brand TVs by DVL and the job charges varied from Rs.500 to Rs.615 for TV whereas the price of TVs varied from Rs.13401/- to Rs.14742/-. (c) Machinery, tools and jigs supplied by TDCEL to DVL were used by staff of TDCEL deployed in the premises of DVL for testing TVs before removal by DVL. (d) TDCEL undertook warranty through TDESCO for the sets sold by them and incurred expenditure on the same. Warranty charges and advertisement charges incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble value of sets manufactured by job worker. (3) There was no proof of financial flow back from DVL to TDCEL. (4) The mutuality of interest between DVL and TDCEL had not been established. (5) It was not the responsibility of the job worker to take responsibility of warranty or repair work and their responsibility was limited to job work and securing job charges. (6) DVL was incorporated much earlier to TDCEL and DVL could not be termed as a dummy unit of TDCEL. (7) The question of notionally working out the rent of the godown or office premises occupied by TDCEL would not arise as the cost was already apportioned to the job charges. (8) The expenses by way of machinery and tools and jigs supplied by TDCEL to DVL were to be included in the assessable value by way of apportionment and that (9) The profit margin of the job worker was to be determined with reference to the job charges alone and not to the wholesale price of the goods that were made up of items supplied free of cost by TDCEL. 3.1 Commissioner restricted the demand of duty to Rs. 4,49,594/- on the value of cost of machinery supplied by TDCEL and labour of TDCEL and expenses incurred by DVL on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture of TV/VCRs. 4.2 Commissioner while confirming duty on the additional consideration in the form of expenses incurred by DVL and on the cost of machinery supplied by TDCEL, ought to have also confirmed duty on the notional interest on the interest-free loan amount of Rs.2,37,61,000/- secured by DVL from AEA whose partners being members of Shri P. Obul Reddy's family and also were shareholders of TDCEL. 5. These arguments in the appeal were countered by the respondents. DVL had theirown factory with plant machinery. They were a joint sector Company with TIDCO holding 26% share capital. There was no evidence to suggest any mutuality of interest or financial flow back from TDCEL to DVL Hence the Assessable Value had to be determined is as per the principles laid down by the Apex Court in the case of Ujagar Prints . Any attempt to revise the Assessable Value taking into account advertising or after-sales-service incurred by TDCEL could not be justified in terms of the Supreme Court's judgment applicable to job workers. The goods cleared by job worker were to be assessed on the value arrived at by including only landed cost of raw materials plus job work charges. The pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioned addition of testing or inspection charges carried out by the trader, before receiving the manufactured goods from the job worker. Hence, the addition of these elements was neither contemplated in the clarificatory judgment of Supreme Court in Ujagar Prints case nor did it form part of the conversion expenses of job worker. It was only a question of interpretation by the Department that such testing equipments cost to be apportioned to the value of job charges and it should not be taken as suppression of fact with intention to evade payment of duty. in this respect, reference was invited to the Supreme Court ruling in the case of Padmini Products [1989 (43) E.L.T.195 (S.C.)]. It was therefore prayed that the demand of Rs. 4,49,594/- confirmed by the ld. Commissioner was erroneous and was required to be set aside, with direction to grant refund of the above amount deposited. The imposition of penalty under Rule 173Q was unwarranted. it was therefore, pleaded that the penalty of Rs.1,00,000/- imposed by the ld. Commissioner in the impugned order was required to be set aside. Moreover, the respondents had every reason to bona fidely believe that these costs did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessable value should include the cost of publicity incurred by TDCEL. Another fallacious argument raised is that the assessable value should be based on the sale price of TDCEL. We find that the decision of the Commissioner computing the assessable value including the cost of materials and services not taken into account by DVL is appropriate. AEA, a financial firm had advanced loans to DVL. It cannot be said that such amounts were an accommodation extended by TDCEL to DVL, DVL being a limited company. And interest thereon cannot be held to have depressed the conversion charges paid to DVL. Besides AEA advanced the loan before the job work arrangement between TDCEL and DVL came into existence. Department has not supported its claim that the job charges collected by DVL was unreasonably low or was depressed by its relationship with TDCEL. Revenue has. Not demonstrated that the job charges received by DVL were lower compared to those charged by any similarly placed manufacturer. In this context, the argument of the assessee that the department had incorrectly worked out the job charges to be 1% of the sale price of TVs as against the actual 11% of the cost incurred by DVL ..... X X X X Extracts X X X X X X X X Extracts X X X X
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