9911796707
TMI Blog2018 (8) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ause notice is misconceived and the provisions of Rule 10 A of the Valuation Rules 2000 do not attract in the facts and circumstances of the present case. The facts herein are squarely covered by the Precedential rulings of this Tribunal in the case of CCE vs Innocorp Ltd. [2013 (9) TMI 382 - CESTAT BANGALORE], where it was held that the respondents in these appeals were not manufacturing the subject goods as job workers on behalf of TUPPERWARE. Needless to say, therefore, that Rule 10A was not applicable to the assessment of the subject goods Demand set aside - penalties also not warranted - appeal allowed - decided in favor of appellant. X X X X Extracts X X X X X X X X Extracts X X X X ..... s.1.01 3 40 Kgs. Rs.1095 /- NA Rs.344.55 Rs.42.59 Rs.1.06 5. Thereafter, further investigation was taken up and statements of one Raj Kumar Yadav, the authorised signatory, Shri Sanjay Mahagaonkar AVP (Technical) were recorded on three different dates being 22nd May, 2014; 26th February, 2015; and 06th December, 2016. On 12.2.015, the officers of Anti-Evasion wing of Central Excise, Alwar visited the factory premises of the appellant for investigation. During the course of investigation, statement of Shri Raj Kumar Yadav was recorded, who inter-alia stated that he was holding the post of Factory-incharge and looks after the work related to purchase of raw material, production and clearance of finished goods. The company is engaged in the manufacture of wall putty only for Asian Paints Ltd. under their brand name ( Asian Wall Putty ) as per the specification and formulation. The goods were cleared in various packings including the packing up to 25 Kgs assessed under MRP based assessment. The wall putty of packaging of more than 25 Kgs were cleared on transaction value. Their unit was frequently audited by the authorized signatory of Asian Paints. The main raw material i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department was given the details of the sale value of the goods procured from the appellant through email on 27/12/2016. 11. It appeared to Revenue that the appellant have not taken permission under Rule 7 of Central Excise Rules, 2002 for provisional assessment. Further, in terms of Rule 10A(ii) of the Valuation Rules, where the excisable goods are produced or manufactured by a job worker on behalf of the appellant (hereinafter referred to as 'principal manufacturer'), then in a case where the goods are not sold by the principal manufacturer at the time of removal of goods from the factory of the job worker, but are transferred to some other place from where the goods are to be sold after their clearance from the factory of job worker and where the principal manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the normal transaction value of such goods sold from such other place at or about the same time and where such goods are not sold at or about the same time, at the time nearest to the time of removal of said goods from the factory of job worker. Further, in terms of explanation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y encouraged to ensure that the manufacturing processes are in statistical control. Seller shall share all related information of the Product to the purchaser at any point of time. Regardless, the Seller is responsible for each part confirming to specifications. Clause 10(e) of the agreement dated 15.2.2011 It has the necessary skills, knowledge, experience, expertise, equipments, required capital and net worth to perform its obligation in accordance with the terms of this Agreement. Clause 4(a) & Clause 4(d) of the Agreement dated 15.2.2011 provides that the appellants are required to ensure the quality of the raw material in order to maintain the quality of wall putty, which is extracted hereunder: Clause 4(a) The Seller agrees to carry out rigorous quality control of the Products to be manufactured by him, which shall meet the specification requirements indicated by the Purchaser at all times. The Seller warranties that the Products supplied by him shall be of the highest commercial quality. Clause 4(d) The Purchaser's decision, on the quality of the Products shall be final and binding upon the Seller. The Purchaser shall be entitled to reject the said products pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory to the depots of Asian Paints, therefore, the goods were not sold by the principal manufacturer at the time of removal of the goods from the factory of the job worker - appellant, but were transferred to some other place from where the said goods were sold after their clearance from the factory of the job worker. The price of the finished goods, so cleared, was determined as per agreement/purchase order and thus appellant was not aware of the price at which Asian Paints Ltd. further sold from the depots. In other words, the product under the brand name 'Asian wall putty', was cleared to the principal manufacturer depots without taking into account the depot price of the principal manufacturer which is in violation of Rule 10 A (ii) of the Valuation Rules, 2000. It further appeared that the appellant failed to determine the correct value of the excisable goods for payment and/or calculation of excise duty and accordingly, the same resulted in short payment of duty which was determined as under: - S.No. Year Value of goods cleared to various depots of M/s. Asian Paints Ltd. Mumbai on which duty was paid. Differential value of goods as per Rule 10A of Valuation Rules, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re or production of goods on behalf of the principal manufacturer, from any inputs or goods supplied by the principal manufacturer or by any other person authorised by him." From the definition of 'job worker' as contained in the definition quoted herein above, the law purposes satisfaction of the two conditions before manufacturing activity can be called as job work; firstly, the raw material is to be supplied by the manufacturer, and secondly, the manufacture must be done on behalf of the principal manufacturer. 17. It is apparently clear from the factual matrix of the present case that there was no supply of raw material at all by Asian Paints Ltd. to the appellant for the manufacture of final product. Thus, the appellant have correctly discharged the duty on the transaction value in terms of Section 4(1)(a) of the Central Excise Act. 18. The learned Commissioner has observed in the impugned order that, the Appellant received the formulation of the pre-mix from APL, which was the major input used in the manufacture of the final product. Thus, it appears that the Commissioner has treated the supply of such formulations as supply of inputs by APL in the capacity of princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and held that the transaction was not in the nature of job-work". 22. Further, reliance is placed on the following decisions of the Tribunals of various judicatures, which for the sake of brevity have been summarized in the table: S. No Case Key contractual obligaton Held 1. Coromandel Paints vs. CCE, 2010(260) ELT 440(T) * Explicit prohibition on use of raw material and packing material for any other purpose than the manufacture on behalf of the Purchaser. * No input or raw material was supplied by the purchaser. * Compensation was given on the basis of actual material cost and additional specific profits. * Advance money paid for procurement of raw material from the specified vendor, can it be held that the activities were carried on job-work basis. * Receiving advance money for payment towards the purchases of raw materials is within normal commercial terms. * The fact that the compensation was based on the material cost along with specific profits cannot be used alone to uphold that there was job work manufacture. * Since no inputs were provided by the principal manufactures therefore, the activity was not job-work. 2. Abhishri Packaging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the standard / quality considerations arising out of the quality of raw materials /inputs and the job-worker would be responsible only for the quality of workmanship. However, in the instant case, the entire responsibility of quality of the final products, viz. arising from the usage of inputs as well as from workmanship, is that of the Appellant. Thus, the present transaction cannot be said to be one of job-work. 24. Furthermore, Rule 4 of Cenvat Credit Rules, 2004 clarifies the Legislature's intent behind the definition of 'job-worker". The Rule prescribes that, a manufacturer shall be entitled to take credit with respect to inputs when the goods are directly sent from the vendor to the job-worker. This can only be in a scenario wherein the principal manufacturer (viz. recipient of job-worked goods) has paid for the goods to the vendor and asked him to deliver the same to the job- worker. Thus, it becomes even more perspicuous from the said provision that the law pre-supposes free of cost supply of raw materials as a mandatory test in case of job work transactions. 25. It is humbly submitted by the learned advocate appearing for the appellant that the impugned order-in-origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - work'. It is to be noted that the definition does not cover within its ambit those manufactures which are undertaken 'for' the principal manufacturer. It is extremely pertinent to note that the Ld. Commissioner in the impugned OIO agreed with the same proposition and observed as under: "44. I also find that the assessee manufactured the finished goods from the raw materials procured from the suppliers who were provided such supplies only as per specification and approval of Asian Paints. From the various clauses of the agreement between M/s Mirajdrymix and Asian Paints, it can be implied that the transactions were not at arms. Some of the terms of agreement implied that Asian Paints had propriety interest in the goods manufactured by the assessee, from the raw material stage itself. The agreement imposed many conditions on the assessee and consequently they had very little liberty in the matters relating to production. Therefore, I hold that that the assessee was manufacturing the goods 'for' Asian Paints and not 'on behalf of' Asian Paints and the scope of manufacturing activities of the assessee was that of 'job-work' as envisaged under Rule 10A of the Valuation Rules, 2000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alties imposed on the aforesaid individuals/ personnel is also not legally sustainable. 34. In view of above, the Appellant humbly prays that the impugned order is liable to be set aside and present appeal be allowed. 35. The learned Counsel for the appellant have also relied on the ruling of this Tribunal in the case of Pawan Biscuit Company (P) Ltd. vs collector of Central Excise [1991 (53) ELT 595 Tribunal) as regards the relationship of principal and agent, and further relied on the rulings in the case of Siddho Sons vs. Union of India and others 1986 (26) ELT 881 (SC). 36. The learned AR for Revenue Mr. R K Mishra has supported the findings in the impugned order. He states that the supply of goods by the principal to the job worker can be both tangible and /or intangible. In the facts of the present case, Asian Paints Ltd. have supplied and/or shared their formula for manufacture of premix compound which is further required for manufacture of the Wall putty by the appellant. Thus, in the facts of the present case, sharing of the formula to manufacture premix renders the appellant as 'job worker' of Asian Paints Ltd. He has further relied on the final order of this Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be included in the selling price of instant product have not been included. It further appeared that elements of cost, like technology, standard and technical know-how have escaped the agreed price between the parties. Accordingly, it is concluded that Hershey India was in fact a job worker of the M/s. Zydus Wellness Ltd. and the M/s. Zydus Wellness Ltd. and Rule 10 A of the Valuation Rules becomes applicable and the goods are required to be valued on the basis of price at which M/s. Zydus Wellness Ltd. sell the product/goods from the deport. 37. Accordingly, the learned AR for the Revenue prays for dismissing the appeal and confirming the impugned order. 38. In rejoinder, Shri V Lakshmikumaran states that this Tribunal should treat the preceding judgment in the case of Hershey India Ltd as per incuriam, firstly because Rule 6, which is applicable Rule, has not been considered. Secondly, in the final order of Hershey India Private Ltd. (supra), it has not considered the precedent judgements of this Tribunal in the case of CCE Hyderabad vs Innocorp Ltd. (supra), Prestige Engineereing (India) Ltd. versus CCE Meerut 1994 (73) ELE 497 (SC) and other judgements as noticed herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orders of TUPPERWARE, (i) that the agreement left the assessee free to manufacture goods not similar to the products for third parties and (j) that TUPPERWARE was free to source the products from other manufacturers. All these features of the contract would clearly indicate that the assessee was manufacturing the goods for TUPPERWARE and selling the goods to them for a price at arms length on principal-to-principal basis. Therefore, the contention of the appellant that the respondents were manufacturing the goods as job workers "on behalf of" TUPPERWARE cannot be accepted. The second requirement noted in para (7.1) was, therefore, not satisfied in this case. 7.4 It is true that stringent quality standards were prescribed by TUPPERWARE to be strictly maintained by the manufacturers at every stage of the manufacture. TUPPERWARE could inspect the process of manufacture to ensure that the specified quality standards for the products were being maintained. They also had the liberty to reject the finished goods which did not conform to the specified standards. These things are part of normal commercial practice in respect of business houses who insist on the quality of their merchandis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
