TaxTMI 
TaxTMI 
2014 (3) TMI 44
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....ed at their factory premises as a job worker. It is the case of the Revenue that for the purpose of valuation and payment of duty, the goods manufactured by M/s. Leamak should have been worked out as per the provisions contained in Section 4(3) (b) of the Central Excise Act, 1944 and not in accordance with the principles laid down by the Hon'ble Supreme Court in the case of Ujjagar Prints [1989 (39) ELT 493 (SC)] and in the case of Pawan Biscuit Company Pvt. Limited [1991 (53) ELT 595 (Tri.)]. As per the investigation conducted by the Revenue, both M/s. Leamak and M/s. ITC Limited are proposed to be related persons as per the definition contained in provisions of Section 4(3) (b) of the Central Excise Act, 1944, which has been upheld by the adjudicating authority as per OIO dated 10.08.2010. 3. The adjudicating authority, while deciding the issue against the appellants recorded following findings:- (a) M/s. ITC Limited and M/s. Leamak have entered into agreements dated 04.1.2003 and 01.09.2005 for the manufacture of confectionery items at the factory premises of M/s. Leamak with respect to Minto fresh, Candyman, Candyman Iclair in various flavours for which the raw materials ....
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....ctured by M/s. Learmark to M/s. ITC Limited because the entire goods manufactured in the factory were handed over to representative of M/s. ITC Limited at the factory gate and M/s. ITC Limited prepared invoices of the manufactured goods as stock transfer for further despatching to M/s. ITC Limited hubs. (j) that as per clause 4.30 of the agreement dated 01.09.2005, M/s. Leamak were restricted by M/s. ITC Limited to manufacture confectionery products for supply to any other party. (j) that M/s. ITC Limited was also supplying items to M/s. Leamak for packing along with finished confectionery which were to be supplied free as an incentive/ gift for sale promotion of confectionery products. 4. Shri B.V. Kumar (advocate) appearing on behalf of the appellants argued that both M/s. Leamak and M/s. ITC Limited are not related persons because mutuality of interest between both the parties is to be seen in the light of financial gains. It was his case that deputing specially trained persons to the factory premises of M/s. Leamak was only with an intention to maintain the quality of the products got manufactured by M/s. ITC Limited on job work basis. That supply of machinery worth Rs....
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....em are not on principle to principle basis. He relied upon the following case laws:- (a) Bee Pee Coating Limited vs. Collector of Central Excise, Vadodara [2000 (115) ELT 765 (Tri.)] (b) Pawan Biscuit Company Pvt. Limited vs. Collector of Central Excise [1991 (53) ELT 595 (Tri.)] (c) CCE Hyderabad vs. Ultrapack [2010 (251) ELT 413 (Tri. Bang.)] 6. Heard both sides and perused the case records. The issue involved in the present proceedings is whether valuation of the goods manufactured by the appellant for M/s ITC is required to be made under Rule 9 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000 read with the provision of Sec. 4(3)(b)(iv) of the Central Excise Act 1944 by treating the appellant and M/s ITC as related persons. 7. Provisions contained in Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and Sec 4(3)(b) of the Central Excise Act, 1944 are reproduced below: Rule 9. When the assessee so arranges that the excisable goods are not sold by an assessee except to or through a person who is related in the manner specified in either of sub-clauses (ii), (iii) or (iv) of....
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...., the same is also negotiated and re-fixation of price is arrived at. In any contract of this type there is always a price and that price is a negotiated price with offer and acceptance and that there is free will in determining the price. In this case the Commissioner has not demonstrated and shown that there is no free determination of price by negotiation. The data relied by Commissioner itself disclose that there is negotiation and the price is arrived at thereafter. The ancillary units are making profit and it is not as though no profit is made by them. The MICO is determining the market and it is they who are marketing the goods and as the market player, it has to keep its price in terms of the market fluctuations. Therefore, being aware of the market situations, it negotiates the price to maintain the business. Such fixation of price by MICO with its ancillary units cannot be said to be a control as to make the ancillary units a hired labour, which is different concept; wherein a hired labour has no role to play except to receive his wages and the contract is that of employer and employee and the hired labour services can be terminated and that he can seek reinstatement or s....
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....L.T. 535 (S.C.) and that of Empire Industries v. Union of India as reported in 1985 (20) E.L.T. 179 (S.C.). In the case of Santha Industrials v. C.C.E. as reported in 1995 (78) E.L.T. 556 (Tribunal), the Tribunal held that owner of the brand name getting the goods manufactured, the ancillary is certainly concerned about its make, quality, standard and market reputation. The Tribunal held that there is no bar in the notification that the brand name holder to get his products manufactured through other independent units on principal to principal basis, on supply of raw materials and by quality control. The Tribunal held that this will not make the other units dummy. 21. This citation refers to large number of judgments of the Tribunal. In the case of Cheryl Laboratories v. C.C.E. as reported in 1993 (65) E.L.T. 596 (Tribunal) in a similar circumstances the 3-Member Bench held that a buyer cannot be considered as a manufacturer and two persons cannot be held to be manufacturers of the same product. The Bench cited the Supreme Court judgment in the case of Union of India v. Cibatul Ltd. as reported in 1985 (22) E.L.T. 302 (S.C.). Hon'ble Supreme Court in Para 6 and 7 answered the qu....
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....e buyer. The seller owns the plant and machinery, the raw material and the labour and manufactures the goods and under the agreements, affixes the trade-marks on the goods. The goods are manufactured by the seller on its own account and the seller sells the goods with the trade-marks affixed on them to the buyer. This ruling of the Hon'ble Supreme Court is clearly applicable to the facts of this case and answers the points raised by the ld. Commissioner in his order. 10. In view of the above law laid down by various Courts the mutuality of interest between M/s. Leamak and M/s. ITC Limited in the business of each other is not established and both cannot be held to be related persons within the parameters of Section 4(3)(b) (iv) of the Central Excise Act, 1944. However, it is also observed from the case records that the entire plant and machinery required for the manufacture of the goods does not belong to the appellant. Appellant, at no stage has the ownership of the goods and the transaction between the appellant and M/s ITC Limited is not one of the sales. Supply of the raw materials and the machinery used for manufacturing activity mainly belong to M/s ITC Limited for which an....