TaxTMI 
TaxTMI 
2003 (12) TMI 87
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....f export. To cater to the domestic market, the Joint Venture company proposes to enter into a job work arrangement with Metropolitan Trading Company., Worli Mumbai. It is a partnership firm registered under the Partnership Act,1932, having its principal place of business in Mumbai and factory at Koramangla in Bangalore . All goods produced and belonging to the Joint Venture company will have "Zodiac" and other brand names. "Zodiac" brand name now belongs to Metropolitan Trading Company. 2. 2. As per the draft job work agreement filed along with the application, as and when the joint venture is set up, domestic clearances for the Joint Venture company will be largely got manufactured in the factory premises of Metropolitan Trading Company on job work basis. The draft job work agreement between the Joint Venture company and Metropolitan Trading Company envisages that the latter will undertake manufacture of readymade garments and clothing accessories on a job work basis, including washing, ironing etc., at the rates and other terms to be mutually agreed upon between them. The Joint Venture company will supply the raw materials for such manufacture. The services rendered under the p....
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....ple, to enter into an MOU with Zodiac Clothing Company Ltd. Has also been filed. This is a reply to a letter, dated 2.11.02 from Zodiac Clothing Company Ltd. Enclosing a copy of the said draft MOU. 5. The applicant has submitted that a Joint Venture is a contractual arrangement whereby two or more parties undertake an economic activity which is subject to joint control and that the expression "set up" occurring in the definition of the expression "applicant" under section 23A © of thee Central Excise Act,1944 means "ready to commence". The expression "set up" should be the stage which is anterior to the stage of commencement of business; in the present case, anterior to the stage of establishment of a Joint Venture. It has been argued that any party engaged in the negotiation for entering into a Joint Venture can be said to be involved in the process of "setting up" the Joint Venture. Accordingly, they should be eligible to be an applicant to seek an Advance Ruling for the proposed Joint Venture. In support, they have referred to a decision of the Hon'ble Gujarat High Court in the case of Prem Conductors Pvt. Ltd. Vs. CIT {(1977)(108)ITR 0654)}:- "It was only when the machiner....
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....he law exactly what tests should be applied to decide at what stage it can be held that a Joint Venture is being "set up". It is the considered opinion of the Authority that so long there is adequate evidence that there is an active proposal to set up a Joint Venture between a non-resident and a resident and certain negotiations to that end have taken place, it can be said reasonably that the applicant, in this case, Zodiac Clothing Company Ltd. (a resident company) is serious about setting up a Joint Venture with M/s. Asia Tangible Investments Pvt. Ltd. ( a non-resident company ). While coming to this conclusion the Authority has kept in view the fact that the scheme of issuing Advance Rulings is a facilitation measure as mentioned above. 9. The Authority also does not consider there is any infirmity in the application with reference to the first proviso to section 23D(2). However, the Authority considers that whereas there is no difficulty in giving rulings ons the first three issues posed by the applicant, being matters relating to applicability of an exemption notification No.8/2002-CE, dated 1.3.2002 issued under section 5A(1) of the Central Excise Act, the fourth issue is p....
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....nder Board's Circular No.212/46/96-CX-dated 20.5.96. Rule 4 of the Central Excise Rules, 2002 makes an exception in respect of goods falling under Chapter 62 of CET with regard to the question who is the "manufacturer". The proviso to Rule 4(1), Rule 4(3) and the proposed agreement jointly would mean that due to the special provision under Rule 4 etc. the Joint Venture company would be the manufacturer of goods through a legal fiction. They can authorize Metropolitan Trading Company to discharge duty liabilities and follow the procedural rules relating to removal and payment of duty. The Joint Venture company proposes to act under the proviso to Rule 4(3) and as per paragraph 7 of the draft job work agreement Metropolitan Trading Company would pay the duty. Therefore, the Joint Venture Venture company though being liable to pay the duty will not pay the same and Metropolitan Trading Company though not liable to pay the duty would actually do so. Further, the goods manufactured by the Joint Venture company in their units which will be exported will not be included in the value of clearance for determining eligibility for the SSI exemption in terms of the provisions of Clause.2 (....
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....is confirmed in the decision relating to AC Patel Vs. Vishwanath (AIR) 1954 Bombay 204):- "Including" is a term of extension. It imports addition. It adds to the subject matter already comprised in the definition". A similar view has been confirmed by the Hon'ble Supreme Court in the case of SGR Tiles Manufacturing Ltd. Vs. State of Gujarat (AIR-1971 SC-90) and Hon'ble Assam High Court in the case of Chandra Mohan Vs. Union of India (AIR-1953 Assam-193). Therefore, for the purpose of the notification, Metropolitan Since the value of clearance of goods got made on job work basis from Metropolitan Trading Company would not be added to clearance of the Joint Venture Company, as a corollary, they should be exempted from requirement of Central Excise registration. Decisions of Hon'ble Supreme Court in M.K. Mohd Kunhi {1969(71)ITR 815-para 8} and CIT Vs. Bansi Dhar & Sons {1986 (1) Sec.523} confirm this view. In view of the inherent powers of the Authority and the provisions of notification no.36/2001-C.E.(NT), dated 26.06.2001 extending exemption from registration where the manufacture is exempt under notification No.8/2002-CE, dated 01-03-2002, a ruling to that effect may be issue....
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....son other than the actual manufacturer of the goods falling under items 61 & 62 CET is an example of the Central Government using this power. 14. It is clear that facts of this case as compared to the facts in Usha Martin Industries Ltd.(supra) are quite different. Going by the facts of the Usha Martin's case one finds that a "fiction" was incorporated in the Import-Export Policy issued under the Imports and Exports(Control) Act, 1947. However, the Tribunal held in the Usha Martin's case (supra) that the fiction created under the Imports and Exports (Control) Act could not be extended to the Central Excise Act. Import Export Policy and Central Excise Act are different pieces of legislation enacted for different purposes. Import Export Policy deals with Import/Export trade and the Central Excise Act deals with levy and collection of central excise duty. In the applicant's case the "deeming fiction" has been introduced under central excise rules treating the Joint Venture company as a manufacturer. The applicant wants that they be treated as a manufacturer only for the limited purpose of payment of duty. 15. The fact that a "deeming fiction" need not have a highly restricted connot....
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.... deem the permitted use of a trade mark, which means the use of the trade mark by a registered user thereof, to be the use by the proprietor of that trade mark. Having regard to the purposes for which the fiction in Section 48(2) was created and the persons between whom it is to be resorted to, namely, the proprietor of the trade mark and the registered user thereof, and giving to such fiction its full effect and carrying it to its logical conclusion, no other interpretation can be placed upon the relevant portions of Section 18(1) and of clause (a) of Section 46(1) than the one which we have given." 17. In view of the above a legal fiction is applicable for the purpose for which it was enacted and for giving full effect to such fiction and also for carrying it to its logical conclusion. In this case, deeming provision has been made under the Central Excise Rules, 2002 with an objective to treat the merchant manufacturer of garments as manufacturer. Hence he will be the manufacture for the purpose of the SSI exemption also as the notification stands. 18. The argument that to allow a non-manufacturer to avail of the small scale exemption, clause 5(I) has been inserted in the not....
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....been specifically provided that for goods falling under Chapter 62 the expression "manufacturer" would include a person who was liable to pay duty leviable on such goods under sub rule (3) of Rule 4 it cannot be said that the meaning and the scope of the expression "manufacturer" is different is paragraph 2(iii),(iv),(v),(vi) and (vii) from the same in clause 5(I). 21 Thus, in the given facts and circumstances of the matter, after looking into the judicial decisions relating to "deeming fiction" and the provisions of central excise law, in particular, and the provisions and the scheme of notification No. 8/2002 - CE, dated 1.3.2002 (including the same relating to the concept of "manufacturer') the applicant cannot claim to be a manufacturer for some purposes and a non-manufacturer for other purposes. The argument of the applicant that the introduction of clause 5(I) in the notification No. 8/2002-CE, dated 1.3.2002 is to overcome the difficulty of following a non-manufacturer to claim the benefit of SSI exemption notification (which benefit such a non-manufacturer would not otherwise be able to claim) is fallacious. The objective of clause 5(I) is only to clarify, beyond doubt, th....