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TMI Blog2005 (8) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and Pawan Biscuits Co. (Pvt.) Ltd. v. Commissioner of Central Excise, reported in 2000 (120) E.L.T. 24 (S.C.) as well as circular bearing no. 619/10/2002-CX., dated 19-2-2002 reported in 2002 (140) E.L.T. 28-30. 1.3 In the appeals (E/2053/2004 to E/2055/2004 & E/2052/2004 to 2058/2004). Revenue has sought to value the goods, in terms of Rule 7 of the Central Excise Valuation Rules, 2000, i.e. the price at which such goods are sold by Rallis, on account of FMC, from their depots as consignment stockists of FMC under the consignment Agency Agreement (in short CAA) dated 8-12-2000. 1.4 In the appeals E/724/2005 & E/725/2005 for the same goods, for the same period, a divergent stand has been taken by the Revenue, wherein Revenue after having taken cognizance of the fact that Rallis was manufacturing the impugned goods, under job work arrangement of FMC has accepted the valuation on the basis of cost of material + job charges as laid down by the Apex Court in the Ujagar Prints & Pawan Biscuits (supra) however, the only dispute-that has been raised is that the commission received by Rallis under the CAA should be included in the said assessable value of the goods for the purpose of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 001 591622 500000 2 No. V (38) 3-35/2002/D/ 5371 dated 29-11-2002 Nov. 2001 to July, 2002 1520771 1500000 3. No. V(38) 3-20/2003/D/ 4299-4300 dated 19-6-2003 Aug., 2002 to Feb., 2003 1395735 1350000 3508128 3350000 2.1After hearing both sides & considering the material, it is found - (a) (i) Commissioner's (in short CCE) finding no. l - Rallis & FMC were working in a joint venture till 25-9-2001. In the impugned order at the CCE held that both Rallis & FMC were working in a joint venture till 25-9-2001 is on that Rallis & FMC were working in a joint venture till 25-9-2001 is a factually incorrect statement inasmuch as the joint venture ended on 8-3-2001 and only the final approval for change of name was received from the Registrar of Companies on 25-9-2001. (ii) The sequence of events which form a part of the relied upon documents in the SCN clearly indicate that the joint venture actually ended on 8-3-2001 with the finalization of all share transfer procedures. The approval for change of name was received from the Registrar of Companies on 25-9-2001. Thus the basis of the CCE, that the joint venture was in existence till 25-9-2001 cannot be held to be factually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it as well covers other products also. Further in terms of the CAA Rallis has no right, title, interest on the products consigned to its depots and the sale proceeds of FMC products. Such proceeds would have to be remitted to FMC within specified time. The relevant clauses of the CAA clearly indicate that the CAA has been entered into on a principal to principal basis and at arms length on pure commercial terms & conditions. In respect of the CAA also, the CE in the impugned order has not referred to or disputed any clauses to allege otherwise. (ii) The Appellants have submitted, the comparative scenario before and after MAA & CAA as under : Rallis - Akola factory manufacturing on own account & the goods sold from various depots of Rallis on own account (before the impugned show cause notice period) Rallis-Akola factory manufacturing on job work basis on account of FMC & the said FMC goods sold from various depots of Rallis as consignment agents of FMC (during the impugned show case notice period) Import of technicals (principal raw material) by Rallis from FMC Corporation USA as well as procurement of other raw materials & packing materials by Rallis on own account for its Ako ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period. (c) The CCE has also not appreciated - (i) that during the show cause notice (impugned) period, the job work was conducted on account of FMC by the Akola factory of Rallis in consideration for processing charges and the said factory being an assessee under central excise, applicable excise duty was being paid by it as is applicable in the hands of a job worker in terms of the principles laid down by the Apex Court in the case of Ujagar Prints & Pawan Biscuits (supra), and (ii) that the sale of such FMC products was done through the country wide dealer network by Rallis in an entirely different capacity i.e. as a consignment agent in consideration for commission on which even service tax was being discharged by Rallis. (iii) the CCE has further failed to appreciate that the MPA and the CAA entered into between Rallis & FMC were based on sound & rational commercial considerations and the reduction in assessable value for the purpose of central excise was only incidental in terms of the law of the land. The CCE failed to realize that neither the valuation provisions contained in Central Excise nor any other law requires a manufacturer (assessee) to always keep the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CAA, their responsibility did not cease after the goods left the factory of Rallis. Based on the aforesaid, he has again held that the valuations would have to be done in terms of Rule 7 of the Valuation Rules. These findings cannot be upheld as - (i) Rule 7 has no application in cases where the assessee is not the owner of the goods, hence CCE's findings that valuation of the product in the instant case should be done in terms of Rule 7 of Valuation Rules not tenable. Valuation under Rule 7 can be taken recourse to only when an assessee who is the owner of the goods manufactured by him on his own account instead of selling the goods from his factory gate, sells the goods from his depots or premises of a consignment agent. The said principle has been held by the Larger Bench in the case of Prafful Industries Ltd. v. Commissioner of Central Excise, Mumbai reported in 2000 (118) E.L.T. 97 (T-LB). Though Rallis manufactured the goods as a job worker, it does not own the goods and hence Rule 7 cannot be made applicable to Rallis. The title & property in the goods always vests with FMC. Application of Rule 7 in the said cases of job work would tantamount to taxing trader's (FMC) profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-company had been set up by the founder company merely for the purpose of evading Central Excise Duty. Further it was also observed as a fact that large part of the appellants total realization through sales was flowing to the founder company. In the instant case, it is not in dispute that Rallis & FMC are separate & independent companies and that the transactions entered into between them are on a principal to principal basis and at arms length. It is also not in dispute that there is no flowback from FMC to Rallis or vice versa and the only consideration received by Rallis from FMC is as per the MPA i.e. processing charges & CAA i.e. commission on sale. It is not also in dispute that the joint venture had ended much before the actual commencement of operations under the MPA & CAA and that reduction in duty under MPA is as per the law of the land. Hence the case of H. Guru (supra) is clearly distinguishable on facts & not applicable in the instant case. (ii) UOI v. Playworld Electronics Pvt. Ltd. - 1989 (41) E.L.T. 368 (S.C.) In the captioned case, the facts were that the respondent company used to sell their entire production to M/s. Bush India Ltd., in the brand name of Bush ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been discharged by Rallis in terms of settled principles laid down by the Apex Court on the goods manufactured by it and hence there is no violation of Rule 4 as well as Rule 6. (i) Penalty be imposed on Rallis cannot be upheld since it had all along acted lawfully with full disclosure to the Department. There is no evidence on record of deliberate violation of the provisions of the statute by Rallis. Reliance placed by the appellant on the decision of the Apex Court in the case of Pratibha Processors v. UOI reported in 1996 (88) E.L.T. 12 (S.C.) is fully justified. (j) Penalty under Section 11AC and interest under Section 11AB of the Central Excise Act, 1944 not imposable on Rallis in the view of findings herein. (i) Penalty under Rule 25 cannot be imposed on Rallis inasmuch as Rallis has not indulged in any of the contraventions mentioned in Rule 25 and has paid duty on the basis of the principle laid down by the Apex Court in the case of Ujagar Prints & Pawan Biscuits (supra) and further confirmed by the Board vide its Circular dated 19-2-2002. (j) Simultaneous penalty under Section 11AC and under Rule 25 is not imposable on Rallis following the decisions - (i) Nationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods should be done on the basis of Ujagar Prints (supra), however commission received under CAA should be added for the purposes of computation of assessable value. In view of what has been held/found hereinbefore, valuation of the subject goods has to be strictly done in terms of the law laid down in the case of Ujagar Prints (supra) & the Boards acceptance of the same. The commission earned by Rallis for its selling efforts under the CAA therefore has no nexus with the manufacture of goods at or by Akola factory of Rallis on job work basis. Hence the same cannot be added for the purposes of computing assessable value. Further the said commission charges are selling expenses in the hands of the trader (i.e. FMC) which cannot form a part of the valuation of goods manufactured on job work basis in terms of the principles laid down by Ujagar Prints (supra) as well as other judicial pronouncements as submitted hereinbefore therefore we find no merits to uphold these appeals. 3.1 In view of the findings the appeals of M/s. Rallis & FMC are allowed & appeals of Revenue are to be rejected. 3.2 Ordered accordingly. 3.3 Appeals disposed in above terms. (Pronounced in Court on 5-8-2005) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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