2019 (12) TMI 636

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....ion of rule 10A of Central Excise Valuation (Determination of Price of Excise Goods) Rules, 2000. While M/s Jabil Circuit India Pvt Ltd is in appeal against demand of duty, as well as imposition of penalty, M/s Tecnicolor India Pvt Ltd, [formerly known as M/s Thomson Holdings (India) Pvt Ltd and for alteration of which a miscellaneous application is also before us], are in appeal against the penalties. The miscellaneous application for change of cause title is allowed. 2. M/s Jabil Circuit India Pvt Ltd is in the business of manufacture of 'set-top-boxes' for M/s Tecnicolor India Pvt Ltd who, in turn, sold these exclusively to M/s Tata Sky Limited. 3. The case of the central excise authorities, as espoused by Learned Authorised Representative, is that the appellant-assessee is a job-worker who had been discharging tax liability on clearance of 'set-top-boxes', to M/s Tecnicolor India Pvt Ltd, by resorting to valuation under rule 6, instead of computing on the basis prescribed in rule 10A, of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000. According to him, the agreement between appellant-assessee and M/s Tecnicolor India Pvt Ltd makes it clea....

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....r for the purpose of the said Rule. Further, the case law of M/s Kailash Soaps Pvt Ltd pertains to the period prior to insertion of the said Rule 10A.' to substantiate the allegation that the manufacture and clearance were as 'job-worker' of M/s Tecnicolor India Pvt Ltd and that no further operation is performed on the goods which are further sold to M/s Tata Sky Limited. Pointing out that '39. An examination of the arrangement between notice and the co-noticee reveals that their parent companies i.e. M/s Jabil Circuit Inc., USA, and M/s Thomson Hongkong Holdings Ltd entered into a contract under memorandum of understanding (MOU) effective as of 06/03/2006. As per this MOU Noticee were to manufacture and sell the STBs to M/s THIPL in accordance with their (M/s THIPL's) specifications and requirements.' it was contended that the pre-arranged scheme of disposal of the consignment clearly demonstrates that there was no free choice with the appellant. Learned Authorised Representative places further reliance on the decision of the Tribunal in Hyva (India) Pvt Ltd v. Commissioner of Central Excise, Belapur [2013 (292) ELT 59 (Tri.-Mumbai)] and the affirmation thereof by t....

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....d subsequently, the assessments, were rendered for the period before the Central Excise Tariff Act, 1985 came into force. The 'job-worker' modal, which was very much in vogue, did not pose a challenge to tax coverage till 1975 as excisable goods were unambiguously enumerated. In 1975, coinciding also with the new Central Excise Valuation (Determination of Price of Excisable Goods) Rules, the residuary, and generic, entry was brought into force as 'tariff item 68', the scope for taxation of such activity as 'manufacture', and thereby excisability, needed interpretation. The exhaustive tariff that has been in place since 1985 expanded the scope of 'manufacturing' as dutiable activity under section 3 of Central Excise Act, 1944. It was in this environment of judicial resolution of dispute pertaining to the period of tariff uncertainty that the modal, was acknowledged, shifting the dutiability from the job-worker, even though construed as manufacturer, to the principal, who did not undertake that manufacturing, was acknowledged, by conditional exemption and, in the absence of any specific rule to govern the valuation for ascertainment of liability when discharged by job-worker, the aut....

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....ipal-manufacturer. The job-worker has been held to be a 'manufacturer' on behalf of 'principal-manufacturer' and the supply of inputs for goods by either the 'principal-manufacturer' or any other person authorized by him, to suffice as 'job-worker'. 8. Quality is the hallmark of modern trade and, in particular, in securing of electronic equipment. In these circumstances, it is but natural for quality control to be ensured by identifying the vendors from whom the raw materials are to be procured by the manufacturer. The question that arises is whether this may be considered as inputs supplied by the 'principal-manufacturer' or its agent. That venders vetted were short-listed by Thomson Holdings India Pvt Ltd as exclusive suppliers is not in doubt. In our view, however, the said raw materials or inputs not being procured from M/s Tecnicolor India Pvt Ltd and from agents render such a proposition to be untenable. As pointed out by Learned Counsel, the fundamental difference lies in the payment effected by the appellants to the supplier of the approved raw materials. In Commissioner of Central Excise, Hyderabad v. Innocorp Ltd [2012-TIOL-956-CESTAT-BANG], it was held that '....

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.... '11. We are of a considered view that the agreement between the assessee/appellant and SIPL is of very commercial nature and hence, any items which are procured for specific manufacturing of paints, SIPL can definitely indicate the specific use. It is to be seen that there is no clause in the agreement which would indicate that the appellant herein has to return the said raw material/packing material without any charge i.e. to say they are bound to return without any consideration. We find that clause No. 11 was relied upon by the ld. SDR to say that the compensation which was given was based upon the material cost + additional specific profit. In our considered view, this in itself cannot be said that the relationship between the appellant and SIPL is that of a job worker and principal manufacturer and the compensation received by a person or a company, can be decided in any manner mutually acceptable to the contracting parties. The specific clause No. 11 of the agreement in no way suggests anyone to take a view that the appellant was a job worker of SIPL. Further, we find that clause No. 15D of the said agreement which we are reproducing herein under would indicate the re....

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....acturer shall be entitled to take credit with respect to inputs when the goods are directly sent from the vendor to the job-worker. This can only be in a scenario wherein the principal E/51653 -51656/2017 manufacturer (viz. recipient of job-worked goods) has paid for the goods to the vendor and asked him to deliver the same to the job- worker. Thus, it becomes even more perspicuous from the said provision that the law pre-supposes free of cost supply of raw materials as a mandatory test in case of job work transactions.' and similar disputes having been considered in Sujhan Instruments v. Commissioner of Central Excise, Chennai-II [2018 (7) TMI 420 - CESTAT-CHENNAI], it was held that '8.5 Thus just because the goods manufactured or produced by Sujhan are purchased by Honeywell on contract that should detract from acceptance of the transaction between Sujhan and Honeywell to be one of principal to principal basis. The arrangement between Sujhan and Honeywell, in our view, is on the lines of 'contract manufacturing' as distinguished from 'job worker'. The contract manufacturers are not supplied with the raw material from principal manufacturers, like 'job workers', but th....