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TMI Blog2023 (10) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... not the seller but does deliver to the buyer even though consideration for the goods is received by the seller. Essential to such framework arrangement is that inputs should be supplied by the seller. It is the imperative of a want in the transaction value of the assessee that is contemplated, by the rules intended by section 4(1)(b) of Central Excise Act, 1944, to stand in as alternative in the design of each of the methods of valuation in Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Thus, in the absence of sale , rule 4 is applicable, rule 5 when sale occurs beyond place of removal, rule 6 when the excisable goods are sold at a price that is not the sole consideration, rule 7 when sale takes place beyond both time and place of removal, rule 8 when goods are captively consumed by the assessee and rule 9 and 10 when clearance is not to independent person. A common characteristic of all of these, except where there is no sale, is sale by assessee - It would, thus, appear that the several rules, as originally included, were intended to make up for deficiencies in sale by assessee. Rule 10A of Central Excise Valuation (Determination of Price of Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been. 2. It was alleged that M/s Patel Profiles Pvt Ltd had effected clearances to the project site by discharging duty liability of ₹ 11,70,248 on assessable value of ₹ 81,15,466 on which M/s Morgan Construction Co India Pvt Ltd had raised invoices of ₹ 92,15,555 on M/s Jindal Steel Works Ltd resulting in short-payment of ₹ 1,58,635. Recovery of the said amount under section 11A of Central Excise Act, 1944, along with applicable interest under section 11AB of Central Excise Act, 1944, besides imposition of penalty of like amount under section 11AC of Central Excise Act, 1944 in addition to fine of ₹ 10,000 under rule 25 of Central Excise Rules, 2002 in lieu of confiscation and penalty of ₹ 1,58,635 on M/s Morgan Construction Co India Pvt Ltd as well as ₹ 5,000 each on individuals, Shri Sunil Chelan and Shri Vipul Patel, under rule 26 of Central Excise Rules, 2002 came to be challenged before the first appellate authority without success and order [order-in-appeal no. BC/256/MUM-III/2012-13 dated 24th September 2012] of the Commissioner of Central Excise (Appeals), Mumbai-III is in appeal here by M/s M/s Patel Profiles Pvt Ltd as are order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several years after the rules for valuation was notified. It would appear, therefore, that, save for certain specific purpose, such as determination of 'duty liability' or entitlement to 'exemption', 'job-worker' has no legal existence in central excise law other than as a manufacturer. Moreover, the lack of definition of the other expression - 'principal manufacturer' - in the Explanation supra or in the statute would make it appear that 'job-worker' is nothing but an ancillary manufacturer. Hence, doubt arises as to the intended coverage of rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and determination of its applicability. 5. The historical aspect of the dilemma was, as pointed out by Learned Counsel for the appellant and though in a different context, dealt by the Tribunal in Jabil Circuit India Pvt Ltd and another v. Commissioner of Central Excise, Pune -III [2019 (12) TMI 636 - CESTAT MUMBAI] thus, '6. The issue of valuation of goods in the hands of 'job-worker' is one which is vexed the Tribunal and central excise authorities for long. It is obvious that in situations of the manufacture having been contracted out to special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son (hereinafter referred to as principal manufacturer), then, - in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the 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 transaction value of the said goods sold by the principal manufacturer; (iii) in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever applicable, shall mutatis mutandis apply for determination of the value of the excisable goods : Provided that the cost of transportation, if any, from the premises, wherefrom 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.' It contains an option of delivery from the premises of 'job-worker', upon sale by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UPPERWARE 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 assessees from suppliers named by TUPPERWARE. The cost of these materials were expressly recognized as expense of the assessees. That the suppliers were chosen by the assessees from a panel furnished by TUPPERWARE does not mean that the actual suppliers were authorized by TUPPERWARE to supply the materials to the assessees. Insofar as the moulds are concerned, undisputedly, they were returned by the assessees to TUPPERWARE after use (without availing Cenvat credit) and the amortised value thereof was included in the assessable value of the finished goods. On these facts, it has to be held that the third condition also remains unfulfilled in this case. In the result, 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.' and, likewise, in Coromandel P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the findings by the lower authorities that the said clause is only for the limited purposes of defining the remuneration/margin of profit for discharge of applicable taxes. It can be seen from the above reproduced clause, entire tenor of the agreement was for manufacture and supply of paints, is totally on principal to principal basis and the indication in the said clause specifically indicates that all the taxes have to be paid on such sale prices at the time of supply of paints by the appellant. It is also seen that the agreement between both the parties is indicating that the prices which are charged by M/s. Coromandel should be treated as sale to SIPL and on the full value they have to discharge the duty liability and sales tax.' 9. Thus, it would appear that short-listing of vendors cannot be construed as supply on behalf of 'principal manufacturer' because payment was made directly to the supplier of the goods by the appellant. Though in the context of CENVAT credit availability, it has been held in Miraj Drymix (P) Ltd v. Commissioner of CGST, Alwar [2018 (8) TMI 162 -CESTAT NEW DELHI] '24. Furthermore, Rule 4 of Cenvat Credit Rules, 2004 clarifies the Legislature's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SIPL had entered into agreement for manufacture and supply of paints, with all taxes to be paid on sale price by the latter. The agreement indicated that prices charged by the former are treated as sale to SIPL on which value Central Excise duty and sales tax was being discharged. The Tribunal following the ratio already laid down in Gillette Diversified Operations Ltd. Vs Commissioner - 2007 (217) ELT 51 (Tribunal) held that by merely indicating vendors of raw materials or by giving advance for procuring raw material or even installing equipment given by SIPL would not render Coromandal as a job worker.' 10. In view of the above circumstances, we are of the view that the definition of 'job-worker', as incorporated in the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 would not cover the transactions, as well as the activities, that characteristic occur in the present dispute. Resort to rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is, therefore, not legal and proper.' Thus it was that 'job-workers' were brought under the aegis of the Central Excise Act, 1944 in a tax levy scheme prevailing till C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des his agent; (b) persons shall be deemed to be "related" if-- (i) they are inter-connected undertakings; (ii) xxxxxxx Explanation.--In this clause-- (i) "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969); and (ii) "relative" shall have the meaning assigned to it in clause (41) of Section 2 of the Companies Act, 1956 (1 of 1956); (c) "place of removal" means-- xxxxxx from where such goods are removed; (cc) "time of removal", (d) "transaction value" ……………………… actually paid or actually payable on such goods.' in Central Excise Act, 1944 and '3. The value of any excisable goods shall, for the purposes of clause (b) of sub-section (1) of section 4 of the Act, be determined in accordance with these rules.' of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, leaves no room for doubt on the primacy of 'transaction value' of goods which are 'sold' to 'unrelated person' at the 'time of payment of duty' on 'removal from the factory' of 'assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the buyer of the goods. It was also argued that the method of payment adopted by the M/s Jindal Steel Works Ltd did not alter the transactional engagement among the appellant-companies to resort to the valuation scheme in the Rules. Furthermore, it was contended that the manufacturing process was not limited to the 'cost-free' supply effected by M/s Siemens Ltd but required other materials too. Reliance was placed on the decision of the Tribunal in Commissioner of Central Excise, Hyderabad v. Innocorp Ltd [2013 (9) TMI 382 - CESTAT BANGALORE]. According to Learned Counsel, there is no evidence that goods were manufactured by M/s Patel Profiles Pvt Ltd and M/s Excel Tech Engineers Pvt Ltd on behalf of M/s Siemens Ltd which is pre-requisite for rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 to be applicable. Relying on the decision of the Hon'ble High Court of Punjab & Haryana in Commissioner of Central Excise, Delhi-III v. Vee Gee Faucets Pvt Ltd [2015 (329) ELT 76 (P&H)] and in Kampdeep Marketing Pvt Ltd v. Commissioner of Central Excise, Indore [2004 (165) ELT 206 (Tri-Del)], it was also contended that ingredients for invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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.' of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is attracted as the two vendors in the impugned transactions are 'job-workers' within the meaning assigned therein. Indeed, the dispute over the 'princely sum' of ₹ 1,58,635 and ₹ 3,43,033 rests upon this fine point of distinction with the appellants claiming to be independent manufacturers who were merely supplied with some inputs necessary for manufacture and whose 'transaction value' is unimpeachably aligned for assessment to duty. 11. A method of valuation for goods entrusted to be manufactured by 'job-worker' was incorporated only with effect from 1st April 2007 in Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and. quite undubitably, to fill a necessary want in the context of transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Price of Excisable Goods) Rules, 2000 is intended for 'job-work', it does not come into play for all manner of 'job-work' but only when 'inputs' are supplied and sale is effected to the buyer by the principal manufacturer. 13. It is the imperative of a want in the 'transaction value' of the assessee that is contemplated, by the rules intended by section 4(1)(b) of Central Excise Act, 1944, to stand in as alternative in the design of each of the methods of valuation in Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Thus, in the absence of 'sale', rule 4 is applicable, rule 5 when sale occurs beyond place of removal, rule 6 when the excisable goods are sold at a price that is not the sole consideration, rule 7 when sale takes place beyond both time and place of removal, rule 8 when goods are captively consumed by the assessee and rule 9 and 10 when clearance is not to independent person. A common characteristic of all of these, except where there is no sale, is sale by assessee. For the purposes of section 4 of Central Excise Act, 1944, assessee has been circumscribed with no other definition elsewhere in the statute and 'sale' defined in section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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