1998 (6) TMI 226 - AT - Central Excise

CEGAT Tribunal Overturns Duty & Penalty Orders, Recognizes Principal-to-Principal Relationship

SRI RAGHAVENDRA FOOD INDUSTRIES Versus COMMR. OF C. EX., BANGALORE

SRI RAGHAVENDRA FOOD INDUSTRIES Versus COMMR. OF C. EX., BANGALORE - 1999 (105) E.L.T. 726 (Tribunal) Issues:- Confirmation of duty amount under Section 11A of C.E. Act, 1944- Imposition of penalty under Rule 173Q(1) and 209A of C.E. Rules, 1944- Allegations of manufacturing goods on behalf of another entity- Dispute regarding valuation of goods and assessment based on price lists- Interpretation of the relationship between the parties in the manufacturing processConfirmation of Duty Amount and Penalty Imposition:The appeals arose from an Order-in-Original confirming a duty amount and imposing penalties under relevant rules. The Collector of Central Excise alleged that the appellants were manufacturing biscuits for another entity, M/s. Auro Food Ltd., based on agreements and operational practices. The Collector held that there was suppression of facts, leading to the demand confirmation and penalty imposition.Dispute on Valuation and Assessment:The appellants contended that they were independently manufacturing goods on a job work basis for M/s. Auro Food Ltd. They argued that the price list declared by them should be accepted for assessment purposes, contrary to the Collector's decision to accept the value of M/s. Auro Food Ltd. The appellants cited various judgments supporting their position, emphasizing that the taxable event is the manufacture of goods and the assessable value should consider raw material costs, job work charges, and manufacturing expenses.Interpretation of Relationship in Manufacturing Process:The appellants maintained that the manufacturing arrangement was on a principal-to-principal basis, with M/s. RFI acting as the manufacturer. They argued that the supplier of raw materials, M/s. AFL, did not have ownership rights over the manufactured goods. The Tribunal, after considering the submissions and legal precedents, concluded that M/s. RFI was the manufacturer on their account, not related to M/s. AFL. Therefore, the value of the goods manufactured by M/s. RFI should be accepted based on the principles established in relevant judgments, leading to the setting aside of the impugned orders and allowing the appeals with consequential relief.This detailed analysis of the judgment from the Appellate Tribunal CEGAT, MADRAS highlights the key issues, arguments presented, and the ultimate decision based on legal interpretations and precedents.