TaxTMI 
TaxTMI 
1994 (1) TMI 155
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....mal price of the tape recorders manufactured by Dugar on behalf of Peico, and supplied to Peico, at suppressed prices, without taking into consideration the various factors, that build up the cost of production, and whose cost was borne by Peico. Central Excise duty amounting to Rs. 40,56,907.12 was demanded in the show cause notice. 4. The Collector, Central Excise, Calcutta-II, in his Order-in-Original dated 9-6-1987, held that products in question which were supplied by Dugar to Peico, were liable to be assessed to Central Excise duty, on the basis of the prices at which the products were sold in the wholesale market, by Peico. After giving abatement on account of Central Excise duty and sales tax, the duty demanded was worked out at Rs. 30,45,490.02. It was observed that although Peico had claimed abatement on account of additional sales tax, turnover tax, equalised freight etc., they did not furnish the quantum of the above deductions, and did not file supporting documents. Hence, the adjudicating Collector of Central Excise did not consider these deductions. A penalty of Rs. 5 lakhs on Peico, and Rs. 1 lakh on Dugar was imposed under Rule 173Q of the Central Excise Ru....
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....ials to another, for manufacture of the goods in accordance with his drawings and specifications, is not a manufacturer; and that the manufacture of goods with customer's raw materials, and according to the customers' specifications and design, does not render the actual manufacturer as a `dummy'. Such a customer could not be treated as a `manufacturer' of such goods. 7.4 A number of decisions were also cited in support of the contentions that no duty could be demanded and no penalty could be imposed on Peico, in the circumstances of the case. 7.5 An alternate plea was made for giving the benefit of various permissible deductions. 8.1 On 11-11-1993, Shri A.N. Haksar, the learned Sr. Advocate advanced arguments on behalf of Dugar. He submitted that the order of the Collector proceeds on the assumption that Peico exercised complete control over Dugar. In this connection, he stated that for the goods produced by Dugar, Dugar were the manufacturer, and Peico were the customer. In the circumstances of the case, Peico could not be considered as the manufacturer of the goods produced by Dugar. He referred that except for 4 to 5% of the components/parts, no mould was req....
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....ability on both Dugar and Peico. He stated that the firm Dugar was not floated by Peico and that it was an old firm, and started working for Philips only from 1984. 11. We have carefully gone through the facts and circumstances of the case, and have given our due thought and consideration to the submissions made on behalf of the appellants, and on behalf of the respondent. 12. In both these appeals, the main issue for our consideration relate to the `valuation'. In para 2.8 of the show cause notice, conclusion was reached as under :- "All the above facts lead to reasonable belief that the `said company' and the `said firm' wilfully suppressed the above facts of production of the `said goods' and removed the same by mis-representing and by not disclosing to the proper Central Excise officer the above facts which were absolutely vital in deciding the `normal price' claimed by the `said firm' in the price lists submitted during the period from August 1983 to September, 1985 under Section 4 of the said Act." 13. M/s. Dugar were engaged in the manufacture of tape recorders, falling under Item No. 37AA of the erstwhile Schedule to the Central Excises and Salt A....
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....) under-case; and (3) cassette door. The three components of the tape recorders were developed by Peico at its own cost, and belonged to them (para 6 and ground `S' of the appeal); (2) Peico supplied these moulds to the parties (selected by them after surveying the market), who manufactured these components by using such moulds, (such moulds having been supplied to them by Peico, without any charge), and as per size, design and appearance specified by Peico (para 6 and grounds `K' and `S' of the appeal); (3) The components manufactured by using these moulds were supplied by the above parties, to Dugar. They were supplying these components to Peico also. (Para 6 and ground `K' of the Appeal). (4) Common suppliers were supplying printed circuit boards both the Peico and Dugar. The cost of dies were paid by Peico. (Peico's letter dated 1-2-1985; para 6 and ground `K' of the Appeal). (5) The amounts to be paid by Dugar to such suppliers of (1) top cabinet; (2) under-case; (3) cassette door, all produced out of the moulds belonging to Peico; and (4) Printed circuit boards were negotiated by Peico (Para 7 and ground `K' of the Appeal). 15.2 It is also o....
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...., and that the various items of expense composing the value of the article, several components (including those which have enriched its value and given to the article its marketability in the trade), which have poured into that value, are includible for arriving at the assessable value (refer paras 13, 21, 33, 40 and 49 of the Hon'ble Supreme Court decision). 21. In the case of Texmaco Limited v. C.C.E., 1992 AIR SCW 2020, the Hon'ble Supreme Court have observed that the value of the article was the full intrinsic value of the article, inclusive of the cost of the materials and components supplied free by the customer, and irrespective of the fact that no expenditure was incurred by the manufacturer on such components. They added that the assessable value would take into account the full commercial value. 22. The designs in respect of their application to the tape recorders produced by Dugar under the brand name `Philips', were registered in the name of Peico, under the provisions of the Design Act, 1911 and the Design Rules, 1933. The three major plastic moulded components which go into the making of the outer body of the tape recorders are top cabinet, under-case ....
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....declared prices were rightly rejected. 26. As observed by the Tribunal in the case of Rasoi Ltd. v. C.C.E., 1987 (30) E.L.T. 490 (Tribunal), the selling price of manufacturer was rejectable if such price was not the sole consideration even if buyer and seller are not related persons. In that case investment on the gas compressing plant installed in the assessee's factory had been made by the buyer. 27. In para 2.1 of the show cause notice, dated 10-3-1986, it has been alleged that Peico received tape recorders from Dugar at a very low price, than the price at which Peico sold them to their dealers, that is "market value of such goods as capable of being sold with their trade mark as `Philips'." 28. As we have seen above, the prices paid by Dugar for the plastic moulded components did not include the element of the cost relatable to the moulds. The cost of the moulds had been paid by Peico. To that extent, the cost relatable to the moulds, which should have formed part of the price of the components, got excluded from the price at which the goods were supplied by Dugar to Peico, and therefore, the price collected was not the sole consideration, (being influen....
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....purchased or manufactured by the assessee, or any other assessee. In that case the price at which BIL was selling in the wholesale market, (as in this case the price at which Peico were selling in the wholesale market), was available. The Tribunal held that the assessable value shall be determined on the basis of the comparable sale namely the price at which the BIL were selling in the wholesale market. 31.1 The Collector, Central Excise, Calcutta-II in his Order-in-Original has come to the conclusion that "the products are liable to be cleared on payment of proper Central Excise duty on the basis of enhanced proper value under Section 4 of the said Act." While on the basis of the facts on record we have observed above that the charges collected by Dugar from Peico for the `Philips' tape recorders supplied by them, did not satisfy the criteria of Section 4 value, we find that the adjudicating authority had not discussed all the elements of the "enhanced proper value under Section 4" on whose basis he has sought to charge differential Central Excise duty from the appellants. Obviously, from the list price at which the `Philips' authorised dealer sells the goods to the custom....
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....at in the facts and circumstances of the case, they could not be considered as `manufacturer' of the `Philips' brand tape recorders, supplied by Dugar to them. Dugar have also stated in ground `C' of their appeal that the manufacturing activity carried on by them could not be ascribed to or said to be done by Peico, and in ground `S' it has been added that the Collector, Central Excise, erred in holding that Peico were the manufacturer in terms of Section 2(f) of the Act. In ground `U' of their appeal, Peico have also reiterated the same. A number of decisions were cited to substantiate the plea of both the appellants that supply of raw materials by the buyer, marking the brand name of the buyer on the goods produced, supply of drawings and specifications, and producing the goods as per design and requirements of the customer, do not make the customer the `manufac- turer' of such goods, and do not render the actual manufacturer as a `dummy'. 34. To our mind, the evidence on record is not adequate to establish that Dugar was floated by Peico, or that Dugar was a dummy unit. Although, we find that the charges recovered by Dugar from Peico did not constitute the price for dete....