1999 (1) TMI 149 - AT - Central Excise

Tribunal upholds respondents' status as not subordinate manufacturers of RCI, rejects Revenue's appeal

The Tribunal dismissed the Revenue's appeal, upholding the order that the respondents were not subordinate manufacturers of RCI. The Tribunal found that ... Valuation Issues:1. Whether the respondents are considered the actual manufacturers within the meaning of Section 2(f).2. Whether the price at which RCI sells the goods should form the assessable value under Section 4 of the Central Excise Act.Issue 1:The case involved a dispute where the respondents were alleged to be subordinate manufacturers of RCI, with RCI being considered the actual manufacturer under Section 2(f). The Revenue contended that various provisions in the Manufacturing and Marketing Agreement indicated RCI's authority over the manufacturing process, use of know-how information, trademarks, and exclusive sale agreements. The Revenue argued that the goods should be treated as manufactured by RCI due to the control and involvement outlined in the agreement. Additionally, the Revenue emphasized the abnormal price difference between what the respondents declared and the wholesale price at which RCI sold the goods, suggesting a lack of independence in the transactions.Issue 2:Regarding the assessable value of the goods, the Revenue sought to include additional costs such as know-how, supervision, and data provided by RCI to the respondents in the valuation. The Revenue relied on previous decisions where such costs were added to the assessable value. They argued that the contractual price did not reflect these additional elements and should be adjusted accordingly. The Revenue further contended that the price at which RCI sold the goods in the wholesale market should be the basis for the assessable value, citing cases to support their position.Analysis:The Tribunal carefully considered the arguments presented by both parties. It noted that previous show cause notices against the respondents had been dropped by the department for prior and subsequent periods, indicating consistency in the department's approach. The Tribunal reviewed the terms of the agreement between the respondents and RCI and concluded that RCI could not be considered the manufacturer based on the agreement's terms. The Tribunal found no evidence to suggest that RCI received extra payments for providing technical know-how, distinguishing the case from precedents where consultancy charges were separately collected and added to the assessable value.The Tribunal also acknowledged the Collector of Central Excise's decisions to drop subsequent show cause notices, supporting the respondents' position. Ultimately, the Tribunal dismissed the Revenue's appeal, stating that there was no merit in the arguments presented. The Tribunal upheld the impugned order's conclusion that the respondents were not subordinate manufacturers of RCI and that the assessable value calculation did not require adjustments based on the Revenue's contentions.This detailed analysis highlights the Tribunal's thorough consideration of the legal issues raised in the case and its reasoned decision based on the specific facts and legal principles involved.