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Tungabhadra Industries Ltd. Vs. Commr. of C. Ex. - Court Judgment

SooperKanoon Citation

Court

Customs Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu

Decided On

Reported in

(1998)(102)ELT441Tri(Chennai)

Appellant

Tungabhadra Industries Ltd.

Respondent

Commr. of C. Ex.

Excerpt:


.....as claimed have been allowed by madras collectorate while hyderabad collectorate has not allowed the abatement.4. we observe that in the present case the appellants are operating within the parameters of notification 305/77. this notification covers the event where a manufacturer gets his goods manufactured on his own account from any other person. this notification was issued at a time when the question of as to who will be considered as the manufacturer when goods were manufactured on job work basis was still not settled and it was to facilitate the person to get the goods manufactured on his account to get the operations relating to excise levy done by the job worker on his payment of duty etc. it is in this background that the assessable sale price of m/s. hll has been adopted as the basis.normally in terms of section 4 it is the price available at the factory gate or ex-depot where the sales are from the depots is required to form the basis for assessment and in the case of job workers the hon'ble supreme court in the case of ujagar prints v. uoi reported in 1988 (38) e.l.t. 535 held that the value of the goods will be arrived at is on the basis of the cost of the raw.....

Judgment:


1. The issue in the appeal relates to abatement to be allowed from the sale price of the principal (M/s. Hindustan Lever Ltd.) who had got the goods manufactured on job work basis from the appellants. The appellants were manufacturing the goods within the parameters of Notification 305/77 which notification for convenience of reference is reproduced below: [3]. Loan licence, In exercise of the powers conferred by rule 174A of the Central Excise Rules, 1944, the Central Government, being satisfied that it is necessary and expedient in the public interest so to do, hereby exempts from the operation of rule 174 of the said rules every manufacturer who gets his goods manufactured on his account from any other person, subject to the conditions that the said manufacturer authorises the person, who actually manufactures or fabricates the said goods to comply with all procedural formalities under the Central Excises and Salt Act, 1944 (1 of 1944) and the rules made thereunder, in respect of the goods manufactured on behalf of the said manufacturer and, in order to enable the determination of value of the said goods under section 4 of the said Act, to furnish information relating to the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all liabilities under the said Act and the rules made thereunder.

[Authority, M.F. (D.R.) Notification No. 305/77-C.E., dated 5-11-1977} 2. The learned Advocate for the appellants has pleaded that the appellants in terms of this notification got the goods assessed based on the sale price of M/s. HLL who had supplied the raw materials to the appellants for the manufacture of the soap Lifebuoy. He has pleaded while the appellants have no objection to the duty being assessed on the basis of the sale price of M/s. HLL, his grievance is that the abatements which are available in terms of Section 4(4)(d)(ii) had not been allowed to the appellants in respect of the following 3 elements: He has pleaded a number of other abatements were also sought before the authorities below but he is giving up his claim in respect of the elements other than the above three enumerated above. He has pleaded the position in regard to the abatements as above is now well settled by the judgment of the Hon'ble Supreme Court in the case of Bombay Tyre International reported in 1983 (14) E.L.T. 1896 and that of the Hon'ble Supreme Court in the case of MRF Ltd. reported in 1996 (77) E.L.T. 433.

He has pleaded that the learned lower authority did not have the benefit of MRF judgment under which the abatement of interest on receivables and turnover tax has been specifically allowed. So far as the equalised freight is concerned the Hon'ble Supreme Court in the case of Bombay Tyre International has clearly held that the abatement is allowable. He has pleaded that the learned lower authority has held since the appellants are the manufacturers and value has to be in terms of Section 4(2) of the Valuation Rules. He has pleaded that since M/s.

HLL has been held to be the manufacturers for the purpose of payment of duty in terms of Notification 305/77 the benefit as would be available to the manufacturer should be allowed in respect of the goods.

3. In this connection the matter had come up earlier and we had asked the Department to verify the practice in regard to the manufacturers similarly placed in different Collectorates. The learned JDR informed that the abatement as claimed have been allowed by Madras Collectorate while Hyderabad Collectorate has not allowed the abatement.

4. We observe that in the present case the appellants are operating within the parameters of Notification 305/77. This notification covers the event where a manufacturer gets his goods manufactured on his own account from any other person. This notification was issued at a time when the question of as to who will be considered as the manufacturer when goods were manufactured on job work basis was still not settled and it was to facilitate the person to get the goods manufactured on his account to get the operations relating to excise levy done by the job worker on his payment of duty etc. It is in this background that the assessable sale price of M/s. HLL has been adopted as the basis.

Normally in terms of Section 4 it is the price available at the factory gate or ex-depot where the sales are from the depots is required to form the basis for assessment and in the case of job workers the Hon'ble Supreme Court in the case of Ujagar Prints v. UOI reported in 1988 (38) E.L.T. 535 held that the value of the goods will be arrived at is on the basis of the cost of the raw materials and the job charges and the sale price of the supplier of the raw materials is not to be taken as the basis when the job work done is on principal to principal basis. In the present case these aspects have not been gone into. Both the assessee and the Revenue in terms of this notification have treated the goods as having been manufactured for M/s. HLL and have adopted the sale price of M/s. HLL for this purpose. We would like to observe that unless in terms of the settled decision in law M/s. HLL and the appellant can be treated as related persons the question of taking the sale price of M/s. HLL for assessment purpose will not arise. In the present case the price of M/s. HLL is the basis is not contested before us. We have therefore to proceed on the basis of that the price as adopted is relevant for arriving at the assessable value in terms of Section 4 and what falls for consideration before us is as to the abatement which is to be allowed. The position that emerges from the above is that M/s. HLL has been held as the manufacturer for payment of excise duty purposes. If that be so the natural corollary to that would be that necessary abatements that would have been otherwise be available in case M/s. HLL is held to be the manufacturer should be allowed. The abatements sought are in respect of the interest on receivables, turnover tax and equalised freight. As we have mentioned above in terms of the judgment of the Hon'ble Supreme Court referred to supra all these abatements are available subject to the satisfaction in regard to the facts in regard to that. The appellants had been denied in principle without verification of the facts the benefit of abatements on the interpretation placed by the learned lower authority on Section 4 in the facts and circumstances of this case. The plea taken before us is that the goods manufactured were removed ultimately to the depots of M/s. HLL and they were sold from the depots. This plea as seen from the record was taken before the learned lower appellate authority in paras 3 and 4 of the appeal form. We therefore hold in view of the above that the appellants would be entitled to the abatements as claimed in respect of the 3 elements subject to the satisfaction of the authorities that there was interest accrual on account of receivables and the appellant had paid turnover tax and also that the sales actually took place from the depots of M/s. HLL and not form the factory of the assessee. With these observations the matter is therefore remanded to the learned original authority for determination of the value in the light of the above. The appeal is therefore allowed by remand.


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