2024 (3) TMI 1227 - AT - Central Excise

Revenue fails to prove job-work relationship despite financial arrangements; Rule 10A valuation rejected

CESTAT Chandigarh held that the appellants were not job-workers for another company despite financial arrangements where the principal company paid ... Valuation - brake shoes supplied by them to M/s SAL - Job workers of M/s SAL - whether the appellants are job-workers for M/s SAL and whether the valuation of the Brake Shoes manufactured by the appellant needs to be done taking recourse to CEVR,2000? - Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods), Rules 2000 or CEVR, 2000 - HELD THAT:- The appellants submitted the correspondence between them and M/s SAL, which indicates that though M/s SAL are making payments to the suppliers of ingots, the same is but on behalf of, the appellants, by debiting to the account of the appellants. It is seen that this is only a financial arrangement and it in itself does not render the appellants to be the job-workers of M/s SAL. There is no indication either in the orders placed by M/s SAL on the appellants or in the invoices issued by the appellants to M/s SAL, that the whole arrangement is of any job-work - the argument of the appellant that if they were job-workers for M/s SAL, M/s SAL would have availed the benefit of notification no. 214/86 - there is no reason for M/s SAL to pay for the full value of Brake Shoes rather than job charges, if the manufacture by the appellant was only on job-work basis. Revenue has not made out any case for rejection of declared value and fixing it at 110% of the cost of production as it is not established the appellants are job-workers of M/s SAL - the impugned order cannot be legally sustained - Appeal allowed. Issues involved:The issues involved in the judgment are whether the appellants are job-workers for M/s SAL and whether the valuation of the Brake Shoes manufactured by the appellant needs to be done taking recourse to CEVR, 2000.Issue 1 - Job-worker status:The appellant contended that they were not job workers of M/s SAL, as the transactions were on a Principal to Principal Basis and not merely job charges. The ownership of raw material remained with the appellant, and they recovered the full value of the brake shoes supplied. The correspondence between the parties indicated that the payments made by M/s SAL to the suppliers were on behalf of the appellant. The tribunal found that the financial arrangement did not render the appellants as job workers of M/s SAL. The absence of job-work indication in the orders and invoices supported the appellant's argument that they were not job-workers.Issue 2 - Valuation under CEVR, 2000:The Commissioner had invoked CEVR, 2000 for valuation, but the tribunal found that the declared value by the appellants was correct as per Section 4(1)(a) of the Central Excise Act, 1944. The tribunal noted that there was no evidence to prove that the appellants were manufacturing goods on behalf of M/s SAL. The invoices and purchase orders between the parties indicated a sale basis, principal-to-principal basis, and transactions at arm's length. The tribunal concluded that the valuation under Rule 10A of CEVR, 2000 was not applicable in this case. The demand for fixing the value at 110% of the cost of production was rejected as it was not established that the appellants were job-workers of M/s SAL.Conclusion:The tribunal set aside the impugned order and allowed the appeal, stating that the Revenue had not made a case for rejecting the declared value and fixing it at 110% of the cost of production. The judgment was pronounced in the open court on 28/03/2024.