9911796707
TMI Blog2004 (2) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... ut gets goods manufactured through an independent contractor hired by him, that is to say that he was not manufacturer for he had not brought into existence an article or a product in question either himself or through his servant. To cover such a class of person, the legislature provided the implicit part of definition which would include a person who does not himself employ labour, but engages himself in the production or manufacture of goods through an independent contractor. In the present case, M/s. SDP has erected the plant and machinery by arranging their own finance and on their own land for manufacture of ENO fruit salt. For erection of plant and machinery and the manufacturing unit, they can take help of any technical authority whether it is M/s. SBCH or M/s. SBAL. As far as M/s. SDP are owners of the plant and they are responsible for the profit and loss of the plant, they are independent manufacturer. They have manufactured ENO fruit salt from the raw material supplied by M/s. SBAL. They are not under the supervision and control of M/s. SBAL for their day to day work. Therefore, the conclusion arrived at by the Commissioner that M/s. SDP is hired labour of M/s. SBAL is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules declaring the assessable value based on the cost of the raw material plus conversion charges and manufacturing profit in accordance with the principles laid down by the Supreme Court in the Ujagar Prints case. In their declaration, for marketing pattern it was mentioned that the ENO fruit salt, which attracts CED on clearance from the factory is transferred to the godown of M/s. SBCH, Rajahmundry in terms of MOU. The Central Excise officers of Rajahmundry investigated the valuation adopted by SDP for payment of duty and in the course of investigation, they came to the conclusion that M/s. SBAL, the principal and M/s. SDP the so called job worker and M/s. Smithkline Beecham Consumer Healthcare Ltd. (hereinafter referred to as 'SBCH'), the so called consignment agent are related persons as per Sec. 4 of Central Excise Act. The assessable value arrived at by M/s. SDP under Rule 6(b)(ii) of Central Excise Valuation Rules, 1975 does not reflect the value of cost of designing, drawing and other engineering charges provided in establishing the plant, cost of training the personnel for the plant, cost of supervision, control and testing, cost of manufacturing technology, insurance, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Milan Chakravarthi, General Manager, M/s. SBCH and R. Seshadri, Manager (Accounts), M/s. SBCH under Rule 209A. 3.Shri G. Shivadass, Advocate appeared for the appellants and Smt. Radha Arun, ld. SDR appeared for the Revenue. 4.Shri Shivadass, the ld. Advocate for the appellants stated that M/s. SDP is a partnership firm with Shri K. Raghavendra Rao and Shri B. Laxman Prasad as the main partners. This firm was earlier in the name of M/s. Southern Packaging who were undertaking job work of repacking ENO fruit salt manufactured and supplied by M/s. SBCH into small sachets of 5 gms. Around July 1998, M/s. SBAL was on the look out for a contract manufacturer on job work basis who could manufacture ENO fruit salt. M/s. SDP offered to set up a factory for the said purpose and entered into an agreement in September 1998 for manufacture of ENO fruit salt in the manufacturing facility to be set up by SDP. Thereafter, M/s. SDP entered into MOU dtd. 18-3-99 with M/s. SBAL for manufacture of ENO fruit salt. M/s. SBAL were providing all raw materials and packing materials for manufacture of ENO salt to SDP and in accordance with the formula and technical data provided by M/s. SBAL. The MOU cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re created pursuant to the MoU." 7.He pleaded that in the MoU between SDP and SBAL, the terms, rights & duties of the respective parties are set out. In the contract for manufacture, technical knowhow is invariably provided by the supplier of raw material. In the contract for manufacturing facility there would be tailormade manufacture of the particular product only. The entire funds were obtained by SDP for purchase of land, plant and machinery and interest on such finances is being given by SDP only. No financial guarantee or security was offered by M/s. SBAL. The entire land where the facility has come up belongs to the partner of SDP and machinery has been purchased in the name of SDP out of finance obtained by them. The profit from entire activity is of SDP alone and there is no flowback to SBAL. SBAL only reimbursed the conversion charges and do not provide any other financial charges. The Apex Court in the case of CCE, Baroda v. M.M. Khambhatwala reported in 1996 (84) E.L.T. 161 (S.C.) and the Tribunal in the case of Motor Industries Company Ltd. v. CCE, Bangalore reported in 1999 (111) E.L.T. 163 [this decision affirmed by the Supreme Court as reported in 1999 (111) E.L.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating clearances and payment of duty on such clearances. The Assistant Commissioner has also passed an order dtd. 20-8-2003 finalising the assessments of the clearances made by SDP and no show cause notice was issued to SBAL. On the same facts arising out of same MoU, Department cannot take two different stands at two different point of time. It cannot be that SDP would not be considered as manufacturer for the period from March 2000 to February 2001 and would be considered a manufacturer for the period from March 2001 to June 2003. M/s. SDP cannot be considered as hired labour of SBAL but ought to be considered a real manufacturer and valuation of the goods manufactured by SDP has to be done in terms of principles laid down by Apex Court in the case of Ujagar Prints v. Union of India [1989 (39) E.L.T. 493 (S.C.)] and Pawan Biscuits Co. Pvt. Ltd. v. CCE, Patna [2000 (120) E.L.T. 24 (S.C.)]. 9.Smt. Radha Arun, the ld. SDR reiterated the reasons given by the Commissioner in the impugned order. 10.We have carefully considered the submissions made by both sides. We find that the Commissioner has come to the conclusion that M/s. SBAL were the real manufacturer and M/s. SDP were hir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their goods manufactured on their account from other person or persons"... The aforesaid procedure clearly postulates that for the purpose of the Excise Act and the rules, there can be a manufacturer who get his goods manufactured of his own account from other person or persons, meaning thereby, utilizing infrastructures of others. It is, therefore, obvious that such loan licensees who are entitled to manufacture PP medicines and who are having relevant licences under the Drugs and Cosmetics Act read with relevant rules, can utilize factory premises of other persons where they can get their goods manufactured under their own control and supervision and if they manufacture excisable goods, they would be treated as manufacturers within the meaning of the Excise Act and the Rules. The learned Advocates for the petitioners in this connection invited our attention to a Division Bench judgment of this court in the case of Jamnadas v. C.L. Nangia, AIR 1965, Gujarat 215. Interpreting the term 'manufacture' as laid down by Section 2(f) of the Act. The Division Bench consisting of J.M. Shelat, C.J. and A.R. Bakshi, J. was concerned with the question whether the petitioners before them who w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be manufacturer who gets his goods manufactured on his own account from other person or persons thereby utilizing infrastructure of others. It is therefore, obvious that such loan licencees who are entitled to manufacture PP medicines and who are having relevant licences under the Drugs and Cosmetics Act read with relevant rules, can utilize factory premises of other persons where they can get their goods manufactured under their own control and supervision and if they manufacture excisable goods, they would be treated as manufacturers within the meaning of the Excise Act and the rules. It is also possible for a person who himself does net employ labour but gets goods manufactured through an independent contractor hired by him, that is to say that he was not manufacturer for he had not brought into existence an article or a product in question either himself or through his servant. To cover such a class of person, the legislature provided the implicit part of definition which would include a person who does not himself employ labour, but engages himself in the production or manufacture of goods through an independent contractor. In the present case, the Commissioner has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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