TaxTMI 
TaxTMI 
1996 (4) TMI 319
X X X X Extracts X X X X
X X X X Extracts X X X X
....he facts and circumstances of the case the relationship between Indal and LME can be taken to be on principal to principal basis and whether LME cannot be taken to be an independent manufacturer for excise purposes. 3. The learned Counsel for the appellants explained the relationship between the two appellants and stated that Indal supplied Aluminium rods to LME for manufacture of extrusions of various specifications on job work basis. He pleaded that rods were supplied by Indal. On a query from the Bench he clarified that the material supplied by Indal was not related to any specific order for the manufacture of extrusions but taking into consideration the average quantity of material that was required for manufacture of extrusions Indal supplied about 40 MTs. per month. This material was transferred to the unit of LME on the basis of continuous flow of raw material supplied on stock account. He pleaded that apart from charging Rs. 6 per kg. by LME, for conversion of Aluminium rods into extrusions, Indal paid packing charges @ Re. 1 or Rs. 2/- per kg. depending on whether packing was done in gunny bags or wooden crates in respect of the goods. The goods which are manufactu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ionship with the type of the extrusions and LME in addition to fixing the charge for conversion was being paid Re. 1/- or Rs. 2/ as packing charges. In this connection he was asked as to how the relationship can be considered as principal to principal basis. It was also pointed out that there was no specific mention in the memorandum of understanding about any liability on LME in regard to damage to the material supplied and charges for normal wastages during the course of manufacture. There was also no stipulation as to what is to be the percentage of the return out of the raw materials by way of production of extrusions after the job work was done. He in this connection referred us to Para 7(c) of the MOU and mentioned that it has been stipulated that scrap and rejections shall be kept to the minimum as mutually agreed upon and this stipulation was sufficient to hold that LME was acting as an independent entity. He in this connection cited the following judgments in support of his plea that LME was an independent entity. (1) 1991 (55) E.L.T. 203, (2) 1987 (30) E.L.T. 745, (3) 1994 (71) E.L.T. 156, (4) 1996 (81) E.L.T. 284, (5) 1996 (82) E.L....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... goods were despatched to various customers of Indal under invoice of Indal which were prepared by LME. It was further found that the godown of LME in which goods were shown to have been transferred did not exist at all at LME premises even though sales have been shown from the godown at LME address. Blank challans signed by the officers of Indal were also recovered and so also blank pre-signed invoices and blank and unsigned delivery challans of Indal. There was also no storage facility for storage of goods for Indal. Shri Unni, Senior Manager of LME stated that Officers from Indal, Bangalore visited the LME premises and supervised the despatch operations in case of large consignments while for small consignments, Indal used to send blank invoices and vouchers through some persons and they were filling the particulars in the blank invoices which were sent to them and the goods were being despatched by LME. Fortnightly statements of stock position was also given by them to Indal whose officers also visited LME to verify the stock and that raw materials were received by them on a stock transfer basis from the Alupuram Unit of Indal based on which duty being paid was arrived at the n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....goods were to be despatched, the Officers from M/s. Indal, Bangalore, visited their unit to supervise the shipping operations, but when small quantities of the goods were to be despatched; the vouchers/documents were sent from Bangalore to them through some person; that the blank invoices were being sent to them because the exact weight of the goods to be despatched was not known before hand; that even though M/s. Indal, Belgaum, had registered their godown at the factory premises of M/s. LME, actually there was no complete/finished godown; that the goods were directly despatched to the customers of M/s. Indal, Bangalore on the latter's Instructions that fortnightly statement of stock of materials were given by them to M/s. Indal, Bangalore whose Officials also visited M/s. LME, to verify the stocks at frequent intervals; that the existence of the godown of M/s. Indal, Belgaum, in their premises was not communicated to the department since no materials were stored therein; that from 29-10-1991 onwards the raw materials were received by them on a stock transfer basis from the Alupuram Unit of M/s. Indal; that in respect of the finished goods even though they raised the Invoice and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was charged for the same. It is observed that there is no built in clause for price variation about the job work charges which is rather unusual. It is further seen that after the manufacture of the goods despatch operations were carried out at the behest of Indal including the price charged in the invoice. Further Indal was supervising the despatches in case of large quantity of extrusions while in case of smaller quantities, LME were performing secretarial function for Indal for despatch and documentation. It is seen from the MOU that the cost of conversion to be charged is in respect of the following two items : "(a) cost of unloading and receiving the raw materials, storage, loading and related manufacturing/conversion job. (b) cost of cutting the materials to the final length required and/or winding it up." But for the secretarial functions there are no additional charges recovered by LME. Conversion charges it is seen were not to include the following as per clause of the MOU : (1) Cost of bobbins. (2) Cost of labelling & packing, including packing materials. (3) Transportation costs of raw material, finished goods, packing mat....