2018 (1) TMI 917 - AT - Central Excise

Tribunal upholds valuation method for excisable goods, rejects principal-to-principal transaction claim

M/s Hershey India Pvt. Ltd. Versus CCE And ST, Bhopal

The Tribunal dismissed the appeal, affirming that the appellant operated as a job worker for M/s Zydus, applying Rule 10A for valuing the excisable goods ... Valuation - job-work - Rule 10A of the Central Excise Valuation Rules - Department was of the view that the inputs were manufactured by the appellant on job work basis for M/s Zydus and hence the valuation of the goods for purposes of charging excise duty were to be done in terms of Rule 10A of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. Held that: - In terms of the agreement, it is evident that the appellant is required to manufacture the goods exclusively for M/s Zydus, and using their specifications as an agent of M/s Zydus, and using the technical knowhow relating to the product which will be supplied by M/s Zydus - It is evident from the above clause of the agreement that the goods are to be manufactured from inputs supplied by the suppliers identified by M/s Zydus which clearly satisfies as the third condition in the Explanation to Rule 10A. Further on perusal of the various clauses of the agreement read together leads to the conclusion that the goods have been manufactured by the appellant as a job worker on behalf of M/s Zydus. Once we conclude that the appellant has acted as a job worker for M/s Zydus the mischief of Rule 10A of the Valuation Rules becomes applicable and the goods are required to the valued on the basis of the price at which the principal manufacturer, M/s Zydus sells such goods from their depot. Appeal dismissed - decided against appellant. Issues: Valuation of excisable goods under Rule 10A of Central Excise Valuation Rules based on manufacturing agreement terms.Analysis:1. The appellant manufactured ready-to-drink Ice Tea under an agreement with M/s Zydus Wellness Ltd. The dispute arose regarding whether the goods were manufactured as a job worker for M/s Zydus, affecting the valuation for excise duty purposes.2. The appellant argued that the transaction was on a principal-to-principal basis, not as a job worker, citing Section 4(1)(a) of the Central Excise Act, emphasizing the transaction value. They relied on case laws to support their claim, including Shivani Detergent Pvt. Ltd. Vs. CCE, Indore.3. The respondent contended that the conditions of Rule 10A were met, indicating the appellant acted as a job worker for M/s Zydus. They referenced Jabil Circuit India Pvt. Ltd. Vs. CCE, Pune-III to support their stance.4. The Tribunal analyzed Rule 10A, defining a job worker and the conditions for its application. The agreement between the parties indicated the appellant manufactured goods exclusively for M/s Zydus, using their specifications and technical know-how, satisfying the job worker criteria.5. The agreement specified that raw materials were to be procured from suppliers identified by M/s Zydus, meeting the requirement of using inputs supplied by the principal manufacturer. The Tribunal concluded that the appellant acted as a job worker based on the agreement terms.6. As a job worker, the appellant should have valued the goods based on the price at which M/s Zydus sells the goods, as per Rule 10A. Since the agreed price did not include all elements of cost involved in manufacturing, the Tribunal upheld the lower authorities' decision to value the goods based on M/s Zydus' selling price.7. The Tribunal dismissed the appeal, affirming the lower authorities' findings that the appellant operated as a job worker for M/s Zydus, leading to the application of Rule 10A for valuing the excisable goods.This comprehensive analysis highlights the key arguments, legal provisions, and the Tribunal's decision regarding the valuation of excisable goods under Rule 10A based on the terms of the manufacturing agreement.