H.K. Thakur, J.
Following appeals have been filed by the appellants with respect to Orders-in-Original passed by Commissioner of Central Excise and Customs, Vadodara II:-
| S. No | Appeal No. | Appellant | Order-in-Original Nos. |
| (i). | E/860/2011 | M/s. Ravi Kiran Plastics Pvt. Limited | 1-VDR-II-OA-MP-RAVIKIRAN-DEAG-ADJ- COMMR-2011-12 |
| (ii). | E/910, 911,944, 945,947 of 2011 | M/s. Symphony Comforts Systems Limited | 1-VDR-II-OA-MP-RAVIKIRAN-DEAG-ADJ-COMMR-2011-12, 2-VDR-II-OA-MP-SHAILY-DIVADI-ADJ- COMMR-2011-12, 3-VDR-II-OA-MP-KISANMOULDING-ADJ-COMMR-2011-12, 4-VDR-II-OA-MP-POLYSETPPL-ADJ-COMMR-2011-12 and 6-VDR-II-OA-MP-PRINCE-ADJ-COMMR-2011-1 |
| (iii). | E/907 of 2011 | M/s. Shaily Engineering Plastics | 2-VDR-II-OA-MP-SHAILY-DIVADI-ADJ-COMMR-2011-12 |
| (iv). | E/1013 of 2011 | M/s. Kisan Moulding Pvt. Limited | 3-VDR-II-OA-MP-KISANMOULDING-ADJ-COMMR-2011-12 |
| (v). | E/970 of 2011 | M/s. Polyset Plastics Pvt. Limited | 4-VDR-II-OA-MP-POLYSETPPL-ADJ-COMMR-2011-12 |
| (vi). | E/1009 of 2011 | M/s. Prince Containers Pvt. Limited | 6-VDR-II-OA-MP-PRINCE-ADJ-COMMR-2011-12 |
3. Shri Ramesh Nair, Shri S.R. Dixit and Shri Uday Joshi (Advocates) appeared on behalf of the appellants. Shri S.R. Dixit argued that Revenues stand is that Symphony brand coolers manufactured by OEMs for M/s. Symphony is not in ordinary course of trade or business and the transactions between the OEMs for M/s. Symphony can not be considered as sale as the entire supply of raw materials, moulds, assembly lines etc. used in the manufacturing activities, are supplied directly and minutely controlled/ supervised by M/s. Symphony. It was his case that OEMs have purchased various inputs etc. independently on their own account and used the same in the manufacture of Symphony brand Coolers. That final product was sold by OEMs under proper sales documents by observing proper Sales Tax procedures. That all these transactions are on principal to principal basis and there is nothing specified in Section 4(1)(a) of the Central Excise Act, 1944 as to what is a sale not in ordinary course of trade. That there is nothing wrong in the negotiations being undertaken by M/s. Symphony with the raw material suppliers regarding specific quality of raw materials or getting the final product price reduced from OEMs by getting raw materials at economic and competitive price. That specifying a pool of identified suppliers and suggestive rates has been considered to be a normal commercial transaction as per CESTAT judgment in the case of Corromondal Paints Limited [2010 (260) ELT 440 (Tri. Bang.)], CCE Hyderabad vs. Innocorp Limited [2013 (289) ELT 172 (Tri. Bang.)] and Abhishri Packaging Pvt. Limited and Others vs. CCE, Vapi [2013-TIOL-772-CESTAT-AHM]. It was also his argument that definition of Job Worker given in explanation to Rule 10A gives a clear indication that for goods manufactured under Job work should mean that a manufacture is on behalf of the raw material supplier (principal manufacturer) who should supply the raw materials to the job worker free of cost out of which the finished goods are manufactured. That if the raw materials are supplied by anyone on behalf of the principal manufacturer, then also the supply of material should be free of cost. That the amortised value of moulds and assembly lines (tables) provided by M/s. Symphony has admittedly been added for arriving at the assessable value as per Rule 6 of the Central Excise Valuation Rules, 2000. That even before 31.03.2007 also, when Rule 10A was not existed, the goods were being sold on the same pattern as being done after 31.03.2007 and that nature of sale being not proper trade sale, was never questioned by the Revenue. That this fact itself shows that appellants did not wilfully suppress or misstated any fact with intention to evade duty and has also not devised a new modus operandi for getting the raw materials. It was also his case that in any contract of this nature, there is always a price variation Clause depending upon the variation in prices of raw materials used in the manufacture of goods sold. In the present case it gets reflected in the prices fixed by the OEMs with respect to supplies made from time to time in order to get exact amount of advance/ payment dues from M/s. Symphony. It was argued that the practice following is totally commercial, convincing and nothing abnormal can be seen into these sale transactions.
4. Shri Ramesh Nair (Advocate) appearing on behalf of his appellant argued that their appeals are covered by the judgment of this Bench in the case of M/s. Abhishri Packaging Pvt. Limited and Ors vs. CCE, Vapi (supra). That the orders passed by the Adjudicating authority does not indicate anywhere as to why this is not a case of sale and purchase and as to why price is not the sole consideration. It was his case that when any moulds/ assembly lines are provided by M/s. Symphony then amortised cost of such supplies can be added to the assessable value as per Rule 6 of the Central Excise Valuation Rules, 2000 and appellant will not have any grievance against such additions. It was his case that even if there is certain influence by M/s. Symphony regarding negotiations of prices of raw materials and identification of vendors then also it does not make M/s. Symphony as the suppliers of raw materials. That such an intervention/ influence is only to reduce the price cost of their final product and to maintain quality. Regarding receipt of certain cash discounts from the vendors by M/s. Symphony, it was argued that this fact has nothing to do with the valuation of the goods because actual cost of raw materials paid is required to be included while arriving at the assessable value and it is not the case of the Revenue that M/s. Symphony is either a related person or actual manufacturer of the finished coolers, considering the OEMs as dummy manufacturers. That OEMs are manufacturing plastic moulded goods for other parties also and were not specifically created to cater to the needs of M/s. Symphony.
5. Shri Uday Joshi (Advocate) argued on behalf of his appellants that no show cause notice was given to M/s. Symphony who were the real owners of the goods. It was thus his case that confiscation of seized goods was wrong in view of the Hon'ble High Court of Gujarat judgment in the case of M/s. Unisilk vs. CC, Kandla [2001 (134) ELT 40 (Guj.)]. It was also his argument that by giving redemption fine option to the OEMs, it is accepted by the Revenue that Symphony brand coolers belonged to OEMs which were being sold to M/s. Symphony and hence there was no contravention with respect to seized goods and confiscation and penalties were not attracted in this case on his clients.
6. Shri S.K. Mall (AR), Shri K. Shivakumar (AR) and Shri Manoj Kutty (A.R.) appeared on behalf of the Revenue and made, inter-alia, the following arguments:-
(a). That agreements between the OEMs and M/s. Symphony are not on principal to principal basis as the latter is controlling the activities of all the OEMs and negotiating price and supply of all raw materials from the vendors, including the consignment-wise routing of the payments to vendors.
(b).That certain e-mails and registers recovered during the search of the factory premises of M/s. Symphony indicate that proper records of supply and purchase of motors and other raw materials is kept by M/s. Symphony, therefore, all the raw materials has to be considered to have been supplied by M/s. Symphony through its authorised vendors and only payments were routed through OEMs.
(c).That cash discount if any given by the vendors is retained by M/s. Symphony and only balance amounts of the bill in such cases is released to OEMs.
(d).That copies of invoices raised by vendors is received by M/s. Symphony for release of payments to vendors through OEMs.
(e).That costing-cum-allocation sheets are prepared by M/s. Symphony for each order given to OEMs showing that the payment to vendors are made by OEMs but only by M/s. Symphony.
(e).That as per the statements of some responsible persons of M/s. Symphony, it has been admitted that supply of all materials and price negotiations are done by M/s. Symphony and only payments are made to the vendors through OEMs.
(f).That as per the evidences recovered from the vendors supplying inputs, the meetings of price negotiations of raw materials and their supply are held between M/s. Symphony and the vendors without the presence of OEMs. That as per the contracts in case of non supply of raw materials in time to OEMs also any penalty payable by vendors, is required to be paid to M/s. Symphony and not to the OEMs.
(g).That evidences recovered from the OEMs, along with the statements of employees of OEMs, also suggest that raw material cost were being reimbursed to OEMs by M/s. Symphony and that OEMs status was that of job-worker mentioned in Rule 10A of the Valuation Rules.
(h).That moulds and certain assembly lines were given to OEMs free of cost by M/s. Symphony and certain employees of M/s. Symphony were always posted to the factory premises of the OEMs to look after the production, inspection and quality control of the Symphony brand coolers.
(i). That in the present appeals the tone of the agreements do not contain any Clause for sale of the finished coolers. As the contracts are not of sale, therefore, the value of the goods in the present appeals can not be determined under Section 4(1) (a) of the Central Excise Act and has to be done only under Rule 10A of the Central Excise Valuation Rules, 2000.
(j).That as per certain Clauses of these contracts OEMs can not manufacture air coolers for any other brand for other brand owners during the currency of existing contracts or till the end of two years from the closure of the contracts. That, such contracts make OEMs at the mercy of M/s. Symphony and hence the sales can not be considered to be on principal to principal basis and has to be accepted as cases of master/ servant relationships.
(k).That in the absence of the above restricting manufacturing Clauses and no whisper of sale of Air Coolers in the contracts make these appeals factually different than the case decided by CESTAT Ahmedabad in the case of M/s. Abhishri Packaging vs. CCE, Vapi [2013-TIOL-772-CESTAT-AHM] and that ratio can not be applied to the facts and circumstances of the present appeals.
(l). That as per Apex Courts reasoning in the case of CCE, Mumbai vs. Fiat India Pvt. Limited [2012 (283) ELT 161 (SC)], (Para 60) the present case is not of a sale of Section 4(1)(a) of the Central Excise Act, 1944. ARs also relied upon the judgment of Jabil Circuit India Pvt. Limited vs. CCE, Pune-III [2013 (295) ELT 29 (Bom.)].
(m). That argument of the appellants regarding Central Excise Valuation Rules, 2000 should be followed sequentially and that money value of any additional consideration could be added as per Rule 6 of these rules, is not correct as per Supreme Courts judgment in the case of Fiat India Pvt. Limited vs. CCE, Mumbai (supra) and valuation in the present proceedings was correctly done by the Revenue under Rule 10A of the Central Excise Valuation Rules, 2000. Learned AR Shri S.K. Mall, also relied upon the following case laws:-
(i). Hyva (India) Pvt. Limited vs. CCE, Belapur [2013 (292) ELT 59 (Tri. Mumbai)]
(ii). Audi Automobiles vs. Commissioner [2010 (249) ELT 124 (Tri.)]
(n).Learned AR made the bench go though the clauses of the contracts involved in the present proceedings and the one before this Bench in the case of Abhishri Packaging vs. CCE, Vapi (supra) and thus argued that facts of both the contracts were different and the earlier judgment in the case of Abhishri Packaging vs. CCE Vapi (supra) can not be made applicable to the present appeals in view of the following case laws:-
(i). CCE, Calcutta vs. Alnoori Tobacco Products [2004 (170) ELT 135 (SC)
(ii). CCE, Bangalore vs. Srikumar Agencies [2008 (232) ELT 577 (SC)]
(o).That in view of the above manipulations done by the appellants, penalties and confiscation of goods have been correctly made by the Adjudicating authority.
7. Heard both sides and perused the case records and the written submissions made by either sides in these appeals. The issue involved in the present appeals is whether valuation of the goods manufactured by the appellants needs to be made under Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 or under Section 4(1)(a) of the Central Excise Act, 1944 read with Rule 6 of these Rules. It is the case of the appellants that the present assessment of the OEMs is a case of Sale of goods manufactured by the OEMs under the brand name Symphony and are sold to the brand owner M/s. Symphony where price is the sole consideration and the buyer and seller are not the related person. On the other hand Revenue has argued that M/s. Symphony has got full control over the valuation/ negotiations with respect to supply of all the raw materials sent to the OEMs and M/s. Symphony also exercises all the supervisory controls over the manufacturing activities of OEMs. It was thus Revenues case that price is not the sole consideration and Rule 10A of the Valuation Rules is required to be applied for payment of Central Excise duty.
8. Section 4(1) of the Central Excise Act, 1944, Rule 6 and 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are reproduced below:-
Section [4. Valuation of excisable goods for purposes of charging of duty of excise. (1). Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall
(a).in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, sale, be the transaction value;
(b).in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
Rule 6. - Where the excisable goods are sold in the circumstances specified in clause (a) of sub Section (1) of Section 4 of the Act except the circumstances where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee.
[Explanation 1] For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely:-
(i). value of materials, components, parts and similar items relatable to such goods;
(ii).value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods,
(iii).value of material consumed, including packaging material, in the production of such goods;
(iv). value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods.
RULE 10A. - Where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer), then, -
(i). 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;
(ii). 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 said 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;
(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.
9. The only point of difference between the facts of this case and those involved in the case decided in Abhishri Packaging Pvt. Limited vs. CCE Vapi (supra), tried to be highlighted by the learned AR appearing on behalf of the Revenue, is that the transactions in the present proceedings are not one of sale but a case of deemed supply of inputs and goods by M/s. Symphony and that value is required to be determined under Section 4 (1) (b) of the Central Excise Act, 1944 read with Rule 10A of the Valuation Rules, 2000. It is not the case of the Revenue that brand name owner M/s. Symphony and the OEMs are related persons or that M/s. Symphony is the manufacturer of the goods. The crucial point to be determined in these proceedings, therefore, is whether the transactions between M/s. Symphony and OEMs constitute a sale or not. If the transactions between the two are sale transactions, then only other considerations required to be added to arrive at the assessable value will be as specified in Rule 6 of the Central Excise Valuation Rules, 2000. It is the case of the Revenue that contracts in the present appeals do not convey the price at which the goods will be sold by the OEMs to M/s. Symphony but these contracts only talk about the charges to be paid to the OEMs as per Para 5 of the agreements entered between M/s. Symphony with the OEMs. It is observed that paragraph 6 and 7 of the contracts entered between OEMs and M/s. Symphony read as follows:-
6. The bought-out cost for the parts other than the plastic parts shall be added at actual in final cost. The bought out cost includes that of packaging and any other item that goes in the final product other than the moulded parts (i.e. other than the parts for which SCSL has provided moulding tools to EPPL).
7. RPPL shall give 60 days credit terms for supply of Air Cooler. This would be calculated from the date of dispatch to various godowns/ stock points. SCSL factory. Interest will be charged @ 1.5% per month if payment is not made on due date.
Further, as per paragraph 4.1.2.7(g) of the Order-in-Original dated 19.04.2011, in the case of Ravi Kiran Plastics Pvt. Limited, M/s. Symphony has placed purchase order for Symphony Kaizen JR. Coolers. At the bottom of this purchase order there is a clause for acceptance of the above order placed by M/s. Symphony. In Para 4.1.2.7(h) of the same Order-in-Original dated 19.4.2011 the same model of the Air Cooler has been cleared by appellant M/s. Ravi Kiran Plastics Pvt. Limited on payment of Central Excise duty. Mould amortisation cost has also been added in the selling invoice while discharging Central Excise duty. It has thus been made clear in the agreement entered between M/s. Symphony and OEM M/s. Prince Containers Pvt. Limited that sales tax rate applicable will be at 0%. Clause 19 of this Para reproduced in Para 4.1.2.3 (b) of Order-in-Original dated 19.4.2011 in the case of M/s. Ravi Kiran Plastics, is reproduced below:-
19. PCL shall raise final invoice with excide duty as applicable and being in notified tax-free zone, sales tax will be a zero percent. SCSL or any other company so authorised in writing by SCSL will provide the C Form for the above supplies at the end of the year. The manufacturer has to pay all excise and other overheads and also comply with all the statutory requirements which are required to be complied. SCSL has no role to play in this and SCSL is in no way concerned or responsible for such compliance.
10. Clause-5 of the above agreement only talks about the fixed charges which will be paid by M/s. Symphony to the appellant M/s. Prince Containers with respect to moulding of plastic parts made by OEMs whereas Clause 6 and 7 of agreements talk about adding the cost of other bought out parts also into the actual cost of final product i.e. Air Cooler. There is also a clause in the agreements regarding 60 days credit time available to M/s. Symphony to make payment of dues with respect to air coolers otherwise interest will be required to be paid to the OEMs by M/s. Symphony. No separate charges are agreed to be paid by M/s. Symphony to the OEMs for the activities of assembling of Air Coolers as specified in Clause-1 of the agreements. The above facts read with other clauses of the agreements and the sales documents relied upon by the appellants give a clear indication that the transactions between the OEMs and M/s. Symphony are sale transactions and not a case of Job Work on the raw materials/ goods supplied by M/s. Symphony. There is no doubt a considerable initiation and monitoring on the part of M/s. Symphony to assist the OEMs in getting the timely supply of raw materials at negotiated price and then making prompt payments to vendors with respect to the raw materials purchased by the OEMs. Such initiations, monitoring and supervision of the manufacturing activities is purely a professional and commercial approach on the part of the Brand owner to sustain its business, profitability and also to maintain quality and timely supply of finished goods to the market to fulfil its sales commitments.
11. In the light of the observations made above, the transactions between the appellants and M/s. Symphony are held to be Sales transactions. Under Section 4(1) of the Central Excise Act, 1944 even if the price is not the sole consideration but still certain additions are required to be made then also Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 6 of the Valuation Rules, 2000 has to be pressed into service when the transactions are one of Sales and parties are not related persons or inter connected undertakings. In all the situations where price is not the sole considerations, it does not mean that invariably valuation has to be done as per Rule 10A of the Central Excise Valuation Rules. The first distinction in the valuation of excisable goods required to be made is whether under Section 4 of the Central Excise Act, 1944, the transaction is one of sale or a case of manufacture of goods from inputs and goods supplied by principal manufacturer. In the latter option, the manufacturer should get only the job charges for converting the inputs/goods but the predominant part of the inputs or goods is required to be supplied free of charge by the principal manufacturer to the Job Worker. Such supply of inputs/ goods free of charge has not been established by the Revenue. Any amount of initiation taken and monitoring done by M/s. Symphony does not make M/s. Symphony as the free supplier of inputs or goods either directly or through any approved person. As per the language of Rule-6 of the Central Excise Valuation Rules, 2000 also the money value of additional considerations flowing directly or indirectly from the buyer and seller is required to be quantified and added to arrive at the assessable value. Explanation 1 to Rule 6, as reproduced in Para 8 above, make it further clear that any such additional money value in the form of materials, components, parts, tools, dies, moulds, drawings, blue prints, technical maps, charts, value of engineering, development, art work, design work, plans and sketches etc; can be added to the assessable value if the transaction is one of Sale. The forms of all these items specified in Rule 6 of the Valuation Rules, are in the nature of inputs or goods which are determinable. If the interpretation given by the Revenue is accepted to be correct then all the situations where buyer is providing all the above inputs/ goods, the assessments will be required to be made under Rule 10A of the Valuation Rules, 2000. This interpretation will thus make Rule 6 of the Central Excise Valuation Rules, 2000 redundant. Harmoniously reading both Rule-6 and Rule 10A together, along with the explanations to these Rules, will mean that when inputs/ goods are predominantly supplied free of charge by a person to the manufacturer of goods then only the Valuation can be made under Rule 10A of the Valuation Rules, 2000. In a case of sale of goods where some inputs/ goods are supplied free of charges, will still be a situation covered under Section 4(1) (b) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation Rules, 2000. That interpretation will only be a harmonious construction for the Valuation of Central Excise goods under Section 4 of the Central Excise Act, 1944, read with Rule 6 or Rule 10A of the Central Excise Valuation Rules, 2000. In the present proceedings Revenue has not able to establish that inputs are predominantly supplied by the brand name owner free of charge. It is not disputed by the appellants that additional value consideration with respect to moulds and assembly lines is not required to be added to the assessable value under Section 4(1)(b) read with Rule 6 of the Valuation Rules, 2000. Under Rule 6 money value of any additional consideration flowing directly or indirectly from the buyer; in the form of materials, components, parts, tools, dies, moulds, drawings, blue prints, technical maps, charts, engineering work, development, art work, design work, plans and sketches etc; is required to be quantified and added to the assessable value. In the present appeals no doubt the effective control exercised by M/s. Symphony could raise suspicion regarding dummy nature of the OEMs but Revenue is not pressing into service the grounds that both OEMs and M/s. Symphony are related persons for valuation as per Rule 9 of the Central Excise Valuation Rules, 2000 or that the OEMs are actually dummy concerns. Further option of redemption fine is given by the adjudicating authority only to the OEMs which means that status of ownership of goods lying with the OEMs and else where has been accepted by the Revenue.
12. Learned AR appearing on behalf of the Revenue strongly relied upon the case of Supreme Court in the case of CCE, Mumbai vs. Fiat India Pvt. Limited (supra) to the effect that when the price is not the sole consideration of sale then valuation has to be done as per Rule 10A of the Central Excise Rules, 2000 which is more specific for valuation of goods in a job work contract. However, reliance placed by learned AR on Fiat India Pvt. Limited is misplaced because the Honble Apex Court in Fiat India Pvt. Limited case (supra) interpreted a situation when an assessee was deliberately keeping the price of goods lower than the cost price to capture the market. Honble Apex Court never said that if price is not the sole consideration then straight away the valuation should be done under Rule 10A of the Valuation Rules, 2000. As discussed above, even if price is not the sole consideration then also as per Rule 6 of Central Excise Valuation Rules, 2000 more money equivalent of any additional consideration can be added to arrive at the assessable value. Any such addition made with respect to certain inputs/ goods supplied free of charge provided by M/s. Symphony will not take the transactions out of the ambit of sale of goods for which the assessment machinery available is Section 4(1) (b) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation Rules, 2000. Further OEMs are not making equipments/ moulded parts only for M/s. Symphony but also for other persons and accordingly it can not be said that all the OEMs are dummy manufacturers or related persons. There is no allegations by the Revenue to that effect or that OEMs were specially created to cater to the needs of M/s. Symphony.
13. After deciding the nature of transactions between the OEMs and M/s. Symphony as the transactions of sale of goods on principal to principal basis, the remaining arguments raised by the Revenue are squarely answered by the judgment passed by this Bench in the case of M/s. Abhishri Packaging Pvt. Limited and Others vs. CCE Vapi (supra), in Para 13 as follows:-
13. We find that there is no dispute as to the fact that M/s. Symphony had supplied moulds to M/s. Abhishri for manufacturing of Air Coolers. Non-inclusion of the amortized cost of such moulds, in the value of Air Coolers sold by M/s. Abhishri to M/s. Symphony, would, at the most require redetermination of value, read with provisions of Rule 6 of Valuation Rules, which talks about determination of correct value, even for the transaction falling under the ambit of Section 4(1)(a) of Central Excise Act, 1944. When we apply the said rules, we find that the provisions of Rule 6 would apply in this case as the said provisions very clearly indicate that the cost of the free supply of moulds needs to be included in the transaction value, for the discharge of duty liability. The said cost of moulds has to be amortized and included in the value of goods manufactured and cleared by M/s. Abhishri. We find that the application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. We find that by applying such norm, rule 6 of the Valuation Rules should the correct Rule, as it is more specific rule than the Rule 10A, for the purpose of valuation of the goods manufactured and cleared by M/s. Abhishri. This ratio is laid down by the Larger Bench Decision in the case of ISPAT Industries Limited - 2007 (209) ELT 185 - (2007-TIOL-245-CESTAT-MUM-LB). Applying the said ratio, since Rule 6 covers the issue more specifically, invoking the provisions of Rule 10A of the Valuation Rules in this case, does not arise. The conditions which are required for invocation of provisions of Rule 10A are also not satisfied in this case. We are fortified in our views as to the agreement between M/s. Abhishri and M/s. Symphony is on principle to principle basis and interpretation of the provision of Rule 10A is not applicable in this case, by the decision that the coordinate Bench in the case of Innocorp Limited. In the said case of Innocorp Limited (supra), an identical issue was raised by the Revenue holding that M/s. Innocorp Limited being job worker of M/s. Tupperware is covered under the provisions of Rule 10A of the Valuation Rules, 2000. In that case, the first appellate authority had held in favour of the assessee and Revenue had preferred appeal before the Tribunal. The grounds taken in the appeal before the Tribunal in that case reads as under:-
"4. The Grounds of appeal
4.1 The commissioner held that the impugned goods were manufactured from the moulds suppled by TUPPERWARE and that the raw material suppliers were authorized by TUPPERWARE. From these findings o the Commissioner, it is established that the manufacture of goods by INNOCORP/DART for TUPPERWARE amounted to job work in terms of Rule 10 A.
4.2 The facts of these cases are different from those of the cases of Poona Bottling Co. Ltd. and another Vs. UOI and others [1991 (8) ELT 389 (Del.)], UOI vs. Citabul [sic-this is Cibatul] Ltd. [1985 (22) ELT 302(SC)] 2002-TIOL-487-SC-CX-LB and Teggas Industrial Development Ltd. Vs. CCE, Kanpur [1989 (39) ELT 151(Tri.)] relied on by the adjudicating authority.
4.3 From the various clauses of the agreement between INNOCORP/DART and TUPPERWARE, it can be implied that the transactions were not at arms length [Clauses 6.5, 9, 11 and 12 of the INNOCORP-TUPPERWARE agreement and Clauses 6.4, 7.3, 9.2, 11 and 12 of the DART-TUPPERWARE agreement referred to by the appellant in this connection.] Some of the terms of the agreement implied that TUPPERWARE had proprietary interest in the goods manufactured by INNOCORP/DART, from the raw material stage itself. The agreement imposed many conditions on INNOCORP/DART and consequently they had very little liberty in the matters relating to production. Therefore the reliance placed by the Commissioner on the above case law is out of context.
4.4 The Commissioner held that the assessee was manufacturing the goods 'for' TUPPERWARE and not 'on behalf of' TUPPERWARE, without even attempting to justify such differentiation."
It is can be from the above reading of the grounds of appeal before the Tribunal, the very same findings are recorded by the adjudicating authority in the case in hand. The Bench, after considering the grounds of appeal and submissions made by the Revenue and also analyzing the agreement made by M/s. Innocorp Limited with M/s. Tupperware recorded the following findings.
"7. Our findings.
7.1. We have given careful consideration to the submission of both sides. For the above rule to apply, the subject goods should be shown to have been produced or manufactured by the assesses qua job workers on behalf of TUPPERWARE. According to the appellant, the manufacturing activities carried out by the assesses under the relevant agreements constituted job work for TUPPERWARE who is sought to be presented as principal manufacturer. The appellant considers the assesses as job workers of TUPPEERWARE. As per Explanation to Rule 10 A, 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 authorized by him. According to this definition, any person to enter within its ambit of the definition should satisfy three requirements viz.
(i). he should manufacture or produce goods;
(ii). he should do it on behalf of a principal manufacturer;
(iii). he should do it from any inputs or goods supplied by the principal manufacturer or by any other person authorized by him.
In the present case, INNOCORP and DART satisfied the first condition, which is not in dispute. Whether they satisfied the remaining conditions has to be ascertained from the terms and conditions of the agreements entered into between INNOCORP/DART and TUPPERWARE.
7.2. The terms and conditions of the two agreements are undisputedly similar. The relevant provisions of one of the agreements have been recorded in sub-para (2.1) of para 2 o this order. The parties to this agreement declared that neither of them was an agent of the other, that their relationship was at arms length on a principal-to-principal basis, that neither of them had any interest in the other and that they had a buy-an-sell relationship only vide clause 23 of the agreement. It was also declared that TUPPERWARE was the purchaser of the products manufactured by DART. On a perusal of other clauses of the agreement, we have found these declarations contained in clause 23 to be true.
7.3. It is easily discernible from the agreement (a) that the assessee was appointed by TUPPERWARE, on a principal-to-principal basis, to manufacture the products as per the latter's specifications and to sell the goods to TUPPERWAR, (b) that TUPPERWARE was liable to pay to the assessee the price of the goods invoiced by the latter as per the settled cost quotations for the product, (c) that the raw materials and packing materials required for the manufacture of the goods were to be sourced by the assesse from suppliers named by. TUPPERWARE, (D) that none of the suppliers was authorized by TUPPERWARE to supply the raw materials or packing materials to the assessee, (e) that the moulds supplied by TUPPERWARE to the assessee for manufacture of the goods were returned after use (without availing CENVAT credit), (f) that the brand name of TUPPERWARE WAS affixed on the products by the assessee as required by the buyer, (g) that the assessee indemnified TUPPERWARE against any losses, damages, liabilities etc. which might arise from the former's negligence or willful misconduct in manufacturing, assembling, handling, storing or shipping the products, and TUPPERWARE indemnified the assessed against any claim arising out of consumer's use of the products in accordance with TUPPERWARE's instructions, (h) that the assessee had o use their own equipments, labour and know how to manufacture. Assemble the products, to carry out quality control tests on the products and to pack and sip the products in terms of the Purchase 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 that products from other manufacturers. All these features of the contract would clearly indicate that the assessee was manufacturing the goods or 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 to 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 hoses who insist on the quality of their merchandise. These cannot be considerations to hold that the manufacturing activities of the assesses were under extensive control of TUPPERWARE reducing the status of the manufacturers to job workers. That the brand name of TUPPERWARE was affixed on the finished goods by the assesses is also immaterial. In this context, in our view, the learned Commissioner is justified in having claimed support from the decisions in the cases of Poona Bottling Co. Ltd. etc.
7.5. The third requirement (vide para (7.1) supra) for the assesses to be job workers of TUPPERWARE 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 assesses from suppliers named by TUPPERARE. The cost of these materials were expressly recognized as expense of the assesses. That the suppliers were chosen by the asessees from a panel furnished by TUPPERWARE does not mean that the actual suppliers were authorized by TUPPERWARE to supply the materials to the assesses. In so far as the moulds are concerned, undisputedly, they were returned by the assesses 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 10 A was not applicable to the assessment of the subject goods.
7.6. We have also perused the text of the order passed by this Bench in the case of Coromandel Paints Ltd. (Supra). The assessee in that case was engaged in the manufacture of paints, varnishes and thinners. They entered into an agreement with M/s. Sigmakalon India Pvt Ltd. (SIPL) for manufacture and supply of paints to SIPL. COROMANDEL accordingly manufactured paints and sold the same to SIPL. They paid duty on the transaction value (the value shown in the invoice raised on SIPL by COROMANDEL) of the goods under Section 4 (1) (a) of the Central Excise Act, 1944. The invoice amounts were adjusted against the advances paid by SIPL. The work undertaken by COROMANDEL appeared, to the Department, to be a job work and therefore show-cause notices were issued to them demanding differential duty on the basis of Rule 10 A o the valuation Rules, 2000. The assessee resisted this demand mainly on the ground that they were not job workers and that the transaction between them and SIPL was on principal-to-principal basis. This contention of the assessee was rejected by the adjudicating authority which held that the assessee was job worker of SIPL and hence liable to pay the differential duty on the basis of Rule 10 A. the orders of the adjudicating authority came to be upheld by the Commissioner (Appeals). Aggrieved, the assessee approached this Tribunal. After examining the various clauses of the "Agreement for Manufacture and supply of Paints", between COROMANDEL and SIPL, this Bench found (a) that both parties had understood the arrangement to be on principal-to-principal basis, (b) that COROMANDEL procured the raw materials and packing materials and manufactured paints as per SIPL's specification and sold the paints to SIPL, (c) that there was nothing on record to indicate that SIPL had supplied raw materials or other goods to COROMANDEL and (d) that certain general equipments such as computers, printers etc. supplied by SIPL were never installed in the factory or used by COROMANDEL. On these facts, this Bench took the view that the relationship between COROMANDEL and SIPL was not that of a principal manufacturer and job worker. In COROMANDEL's case, they were also required to select suppliers named by SIPL because the raw mater4ials from those suppliers were of the special kind required for the manufacture of the paints for which purchase orders were placed by SIPL on COROMANDEL. This fact pleaded by the Department was not accepted as a ground for holding COROMANDEL to be a job worker of SIPL.
7.7. The learned Addl. Commissioner (AR) picked on aspect of COROMANDEL's case to distinguish it from the present case. In that case, this bench had noted that there was no evidence of return of unused materials, scrap etc. to SIPL. In the present case, such materials were to be returned to TUPPERWARE. But, then, the cost of these materials could be billed by the manufacturer to be paid by TUPPERWARE vide clause (11) of TUPPERWARE-DART agreement, which arrangement also reflected a seller-and-buyer relationship between the parties.
7.8. In COROMANDEL's case, this Bench also found that their case. Was supported by the decision of a coordinate Bench in the case of Gillete Diversified Operations Ltd. Vs. CCE, Chennai [2007 (217) ELT 0551 (Tri. Mad.)] 2007-TIOL-2341-CESTAT-MAD."
It can be seen from the above reproduced finding that the issue involved in this case is squarely covered by the decision of the Tribunal in the case of Innocorp Limited (supra). We would hasten to hold that in the case of Innocorp Limited, the agreement clauses as reproduced in paragraph 2.1 of the said order are more stringent than the clauses of agreement in the case in hand, inasmuch as the Tupperware had strict quality control procedure set up, were also controlling and directing M/s. Innocorp Limited for control of the cost of the production, M/s. Innocorp Limited were also required to return the balance goods back to M/s. Tupperware immediately. We find that despite such terms and conditions, Tribunal had held in favour of assessee M/s. Innocorp as per the reasoning reproduced herein above, which would squarely apply in the case in hand. In our considered view, the ratio of the order of the Tribunal is that, if any assessee manufacture final products, independently procuring inputs, paying for the same, utilizing his own manpower and sells the finished products to a purchaser based upon the price agreed between them, the said transaction will be covered by Section 4(1)(a) of the Central Excise Act, 1944. Trying to bring such type of transactions under provisions of Rule 10A of Valuation Rules, is not in consonance with the settled law, even if the finished products are sold at higher price by the buyer.
14. In view of the above, it is held that Valuation of goods has been correctly determined by the appellants. On the other issue of limitations, the Bench is not recording any reasons once on merits the issue is decided in favour of the appellants. Further, there is no point in confiscation of goods or imposition of penalties upon the appellants when issue on merits has been decided in favour of the appellants. Appeals filed by the appellants are allowed by setting aside the orders passed by the Adjudicating authority with consequential relief, if any.