TaxTMI 
TaxTMI 
2012 (10) TMI 268
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....eferred as Valuation Rules). After investigation and completion of proceedings culminated in the impugned order wherein the adjudicating authority came to the conclusion that clearances effected by the above five units to Symphony cannot be considered as clearances effected on principal to principal basis but as job workers to principal basis. Accordingly, duty on differential value has been demanded with interest from the five job workers named above with interest. Duty demand includes duty for the period beyond one year prior to show cause notice. Penalties have been imposed on all the job workers and Symphony as detailed below : - Name of the Party and Stay application No. Total duty demanded Total amount of Penalty & Fine imposed M/s. Ravi Kiran Plastics Pvt. Limited [E/S/993 of 2011] Rs.51,71,338/- Rs. 51,71,338/- + Rs. 10,00,000/- M/s. Symphony Comforts Systems Limited [E/S/1060/11] Rs. Nil Rs. 10,00,000/- + Rs. 4,50,000/- Fine M/s. Shaily Engg . Plastics Limited [E/S/1058 of 2011] Rs. 52,26,503/- Rs. 52,26,503/-Rs. 10,00,000/- M/s. Polyset Plastics Pvt. Limited [E/S/1134 of 2011] Rs. 3,09,39,616/- Rs. 3,09,39,616/- + Rs. 65,00,000/- M/s. Prince Containers Pvt....
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....bring out, there was no need to allow cross examination. Even before us or in the synopsis submitted by one of the learned advocates, there is no indication to say how exactly their defence has suffered because of denial of cross-examination and in what way it has affected their defence . They have also not indicated what did they want to bring out in cross examination. 5.1. The case of the appellants is that transaction between the five firms and Symphony is on principal to principal basis and the nature of transaction between Symphony and other appellants was sale. The appellants have contended that sales tax was paid on purchase of raw materials and sales of finished products and transaction between raw material suppliers, appellant firms and Symphony has all been in the ordinary course of trade or business and in line with provisions of Sale of Goods Act which has not been considered by the adjudicating authority. It was also denied that the appellants are actually manufacturing air coolers on behalf of Symphony and vendors for raw materials/components were authorised vendors and were supplying inputs to the appellant firm for and on behalf of Symphony. It was argued on behalf....
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....e price/compensation can be decided in any manner mutually acceptable to the contracting parties. As such, method of material cost + additional specific profit does not render a transaction to be that of job worker and principal, but the same remains on principal to principal basis. (b) Specifying vendors for raw materials considering the nature and usage of the final product produced is not abnormal. (c) Making payments for raw materials in advance or installing equipments given by the buyer is a normal business transaction and does not render the manufacturer to be a job worker. Despite the arrangements as objected to by the department, the transactions were held to be in normal course of sale and purchase, on principal to principal basis. 5.5. Further, the appellants also relied upon the decision of the Tribunal in the case of Innocorp Ltd. and Dart Manufacturing India Pvt. Ltd. (Supra) and submitted that the facts involved in that case are also similar and the Tribunal held that relationship was of principal to principal basis and the transaction was one of purchase and sale. It was submitted that the following were the common circumsta....
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....eat detail. He has taken note of the fact that purchase agreement proceeds with a clear recording that "now it is agreed by us and parties as follows - ( i ) M/s. Symphony Comfort Systems Limited (Symphony for short) has planned to get different types of Air Cooler Kits manufactured through PCL (Plan 3(2)) with a trade name to be decided separately". The Commissioner has also taken note of the fact that agreement does not start with the words that Symphony intends to purchase air cooler/air cooler kits from the appellant firms but intends to get them manufactured. He has also taken note of the fact that day to day communication between Symphony, OEMs (the five appellant firms) and Vendors (suppliers of raw materials/components) were done through emails and copy of every communication between OEMs and Vendors were marked to Symphony. Further, the payments by Symphony were made invoice by invoice basis for components purchased by OEMs from the Vendors identified by Symphony and at the price negotiated by Symphony and also to ensure that OEMs paid the amount due to the Vendors within a stipulated time. Further, costing and allocation sheets were prepared and approved by Symphony. On g....
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.... sale. We are not going into lot of other details which bring out further differences between two cases cited by the appellants and the present one since in our opinion, this is sufficient to conclude that reliance of the appellants on these two cases is not sufficient to show prima facie case in their favour . 5.10. At this stage, it would be appropriate to consider some of the decisions which were cited by the learned A.R. The decision of the Hon'ble High Court of Bombay in the case of Jabil Circuit India Pvt. Limited in our opinion, is very relevant and would strengthen the case of the Revenue. In this case, in Para-9, the Hon'ble High Court took note of the facts, as under:- "9. On the basis of the material on record, the adjudicating authority has arrived at a conclusion that the manufacture and sale of settop boxes by the assessee to Thomson india is based on the terms and conditions contained in the Memorandum of Understanding arrived at between the parent company of the assessee and the parent company of Thomson India. The adjudicating authority has recorded a finding that the above Memorandum of Understanding was a manufacturing agreement for manufactu....
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....ion was of pre-deposit in the case of Jabil Circuit India Pvt. Limited . 5.11. Learned A.R. also relied upon the decision of the Hon'ble Supreme Court in the case of Alnoori Tobacco Products - 2004 (170) ELT 135 (SC) to submit that mere reliance on the decisions is not enough since, if facts of the decision are not considered, one additional or different facts may make world of difference between the conclusions in two cases. Apex Court observed further that 'Disposal of cases by blindly placing reliance on a decision is not proper ." 5.12. In fact the defence for payment to OEMs and Vendors without referring to the sale or clearances of air coolers was that the amount paid to OEMs was disbursement of advance to the seller and therefore, it cannot be taken out of the purview of sale and purchase. If the advance payment is made, it will not be with reference to each invoice raised by the vendor and it will not be matching the amount. Further, if the OEM is independent, the purchaser will not monitor whether the OEM has paid the suppliers of raw materials/components. Further, the payment made on the basis of production would also not be directly related to the quantum of production....
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.... only 14 days credit period was available but at the same time Symphony has given the credit time of 30 to 60 days for payment of air coolers because of which OEMs had to pay out from their own pocket to suppliers of the raw materials for the period of 16 days which in other words may be the OEMs have to bear interest on such amount due to the time lag, arising out of difference in credit limits. In order to reimburse OEMs for burden of interest Symphony paid them interest at the bank rates for 16 days. This would show the amount of effort made by Symphony to workout the exact cost of the product and to ensure that OEM should not get a single paisa more than what they intended to pay as processing charges and the kind of control they exercised. This is possible only when the relationship is not principal to principal basis. 8. Above discussion would show that the OEMs are nothing but job workers of Symphony and therefore, prima-facie application of rule 10A is appropriate. 9. Another submission by the appellants was that the appellants had always paid duty on same basis and this was not an agreement which was entered into after Rule 10A came in the statute book but much before. T....