2018 (8) TMI 162 - AT - Central Excise

Tribunal rules in favor of appellant on wall putty valuation dispute, penalties overturned

The Tribunal ruled in favor of the appellant regarding the valuation of wall putty, finding they were not a job worker for Asian Paints Ltd. The extended ... Method of Valuation - job-work - it appeared to Revenue that the transaction is not at arms length and accordingly, instead of valuation under Section 4(1)(a) of the Act, the valuation is to be done under Section 4(1)(b) of the Act read with Rule 10 A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Whether the valuation of wall putty manufactured and cleared by the appellant, M/s. Miraj Drymix Pvt. Ltd., has been rightly done for the purpose of levy of duty? - whether the extended period of limitation has been rightly invoked? - Penalty u/r 26 of CER. Held that:- Under the provisions of Rule 10A with Explanation, the condition precedent, i.e supply of raw material by the principal to the other manufacturer, job worker is not satisfied in the facts of the present case - the show cause notice is misconceived and the provisions of Rule 10 A of the Valuation Rules 2000 do not attract in the facts and circumstances of the present case. The facts herein are squarely covered by the Precedential rulings of this Tribunal in the case of CCE vs Innocorp Ltd. [2013 (9) TMI 382 - CESTAT BANGALORE], where it was held that the respondents in these appeals were not manufacturing the subject goods as job workers “on behalf of” TUPPERWARE. Needless to say, therefore, that Rule 10A was not applicable to the assessment of the subject goods Demand set aside - penalties also not warranted - appeal allowed - decided in favor of appellant. Issues Involved:1. Valuation of wall putty for the purpose of levy of duty.2. Invocation of the extended period of limitation.3. Imposition of penalties under Rule 26 of Central Excise Rules, 2002.Detailed Analysis:Valuation of Wall Putty:The primary issue was whether the valuation of wall putty manufactured by the appellant was correctly done for excise duty purposes. The appellant argued that they were independent manufacturers selling to Asian Paints Ltd. on a principal-to-principal basis, whereas the Revenue contended that the appellant acted as a job worker for Asian Paints Ltd. due to the extensive control exercised by Asian Paints over the manufacturing process, including approval of raw materials, quality control, and exclusive sale under Asian Paints' brand name. The Revenue's position was that the valuation should be done under Section 4(1)(b) of the Central Excise Act read with Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.Extended Period of Limitation:The Revenue invoked the extended period of limitation, arguing that the appellant failed to correctly determine the value of the excisable goods, resulting in short payment of duty. The appellant countered that there was no intention to evade duty and that all relevant facts were disclosed during audits conducted by the Department.Imposition of Penalties:Penalties were imposed on the appellant and its officers under Rule 26 of the Central Excise Rules, 2002. The appellant argued that the penalties were unwarranted as there was no willful misstatement or suppression of facts.Findings:Valuation of Wall Putty:The Tribunal found that the appellant was not a job worker for Asian Paints Ltd. The key points considered were:- The appellant procured raw materials independently, albeit from suppliers approved by Asian Paints.- The manufacturing process was controlled by the appellant, and they bore the responsibility for the quality of the final product.- The agreement between the appellant and Asian Paints was on a principal-to-principal basis, with the appellant selling the finished product to Asian Paints at mutually agreed prices.The Tribunal concluded that the provisions of Rule 10A of the Valuation Rules, 2000, were not applicable as the appellant did not receive raw materials from Asian Paints, and the manufacturing was not done 'on behalf of' Asian Paints but 'for' Asian Paints.Extended Period of Limitation:The Tribunal held that the extended period of limitation was not invocable as there was no suppression or willful misstatement by the appellant. The audits conducted by the Department had access to all relevant documents, and the appellant's transactions were transparent.Imposition of Penalties:The Tribunal set aside the penalties imposed on the appellant and its officers, concluding that the demand itself was not sustainable. The Tribunal emphasized that the issue was one of interpretation of law, and there was no evidence of any intent to evade duty.Conclusion:The Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant. The Tribunal also set aside the penalties imposed on the appellant's officers under Rule 26 of the Central Excise Rules, 2002.Separate Judgments:No separate judgments were delivered by the judges; the decision was unanimous.