TaxTMI 
TaxTMI 
2024 (9) TMI 1863
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.... No. 20464 of 2016, Central Excise Appeal No. 21787 of 2017, Central Excise Appeal No. 26315 of 2013, Central Excise Appeal No. 26317 of 2013, Central Excise Appeal No. 28432 of 2013, Central Excise Appeal No. 28433 of 2013, Central Excise Appeal No. 20766 of 2014, Central Excise Appeal No. 20767 of 2014, Central Excise Appeal No. 20473 of 2015, Central Excise Appeal No. 20457 of 2016, Central Excise Appeal No. 21783 of 2017, Central Excise Appeal No. 21788 of 2017, Central Excise Appeal No. 20463 of 2016, Central Excise Appeal No. 21789 of 2017, Central Excise Appeal No. 21790 of 2017, Central Excise Appeal No. 20315 of 2019, Central Excise Appeal No. 20673 of 2022, Central Excise Appeal No. 21784 of 2017, Central Excise Appeal No. 20458 of 2016, Central Excise Appeal No. 21785 of 2017, Central Excise Appeal No. 21786 of 2017, Central Excise Appeal No. 20255 of 2019, Central Excise Appeal No. 20730 of 2022. APPEARANCE: For the Appellants: Mr. Ravi Raghavan, Advocate with Mr. Md. Ibrahim and Mr. Tushar Sharma, Advocates. For the Respondent: Mr. PRV Ramanan, Special Counsel (AR). ORDER PER : DR. D.M. MISRA These appeals are filed challenging the respective impugned....
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....11.2013 - Rs. 5,00,000/- 15 E/20767/2014 Shri. Chandy C Thambi E/20767/2014 - Rs. 5,00,000/- 16 E/20473/2015 International Flavours and Fragrances Ltd. E/20473/2015 May 2013 to March 2014 OIO No. 23/2014 dated 05.12.2014 - Rs. 5,00,000/- 17 E/20457/2016 International Flavours and Fragrances Ltd. E/20457/2016 April 2014 to March 2015 OIO No. 23/2015 dated 30.12.2015 - Rs. 5,00,000/- 18 E/21783/2017 International Flavours and Fragrances Ltd. E/21783/2017 April 2015 to September 2015 OIA No. 281 - 288/2017 CT dated 03.10.2017 - Rs. 3,59,370/- 19 E/21788/2017 Mallya Fine Chem Pvt Ltd-Unit-II E/21788/2017 September 2013 to February, 2014 and March, 2014 to September, 2014 OIA No. 281 - 288/2017 CT dated 03.10.2017 Rs. 49,66,172/- and Rs. 23,61,262/- Total Rs. 73,27,434/- Rs. 49,66,172/- and Rs. 10,00,000/- Rs. 59,66,172/- 20 E/20463/2016 Mallya Fine Chem Pvt Ltd-Unit-II E/20463/2016 October 2014 to March 2015 OIO No. 24/2015 dated 30.12.2015 Rs. 60,00,573/- Rs. 15,00,000/- 21 E/21789/2017 Mallya Fine Chem Pvt Ltd-Unit-II E/2178....
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....dated 07.01.2004 entered between IFFL and MFCPL. The assessable value of the goods were determined applying cost construction method by taking into account the cost of raw materials and packing materials supplied free of cost by IFFL and adding job working charges / conversion charges in terms of Rule 11 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 (CEVR, 2000, for short) following the principles laid down by the Hon'ble Supreme Court in the case of Ujagar Prints Vs. UOI [1989(39) ELT 493 (SC)]. The said method of assessment was followed upto the period 31.03.2007. On introduction of Rule 10A into CEVR, 2000 w.e.f. 01.04.2007, the assessable value was computed by MFCPL on the basis of sale price of FCPs by IFFL to its customers for clearances effected during 01.04.2007 to 25.05.2007. W.e.f. 26.05.2007, MFCPL has changed the methodology of arriving at the assessable value claiming that the transaction between them and IFFL on termination of agreement dated 07.01.2004 and entering into a new agreement on 18.05.2007, is on principal-to-principal basis as MFCPL had purchased the raw materials and packing materials on their own account to manufactu....
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....nd IFFL were related persons, then there was no requirement of invoking the provisions of rule 11 of CEVR, 2000. In such a situation, the department could have directly invoked the provisions of Rule 9 of CEVR, 2000. The fact that the show cause notices did not directly invoke Rule 9 also clearly supports the contention of the Appellant that the demand has been made beyond the case made out in the show cause notices. Therefore, the impugned orders confirming the demand on the basis of the finding that the Appellant and IFFL are related persons invoking Rule 9 is ex-facie perverse and clearly shows that the impugned orders have travelled beyond the allegations in the show cause notices. Reliance placed on the following decisions of Hon'ble Supreme Court : (i) CCE, Mumbai vs. Toyo Engineering India Pvt. Ltd., - 2006 (201) E.L.T. 513 (S.C.); (ii) Hindustan Polymers Co. Ltd. v. Collector of C. Ex., Guntur - 1999 (106) ELT 12 (SC) 3.2 It is submitted that there should certainty in taxation. That in the present case, the Department has cited several provisions of valuation in the Show Cause Notices and has ultimately invoked Rule 11 of the CEVR, 2000, without indicat....
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....o the Appellant. It is further submitted that merely because the price is not the sole consideration cannot be a ground to hold the seller and the buyer as related persons and consequently Rule 9 of CEVR, 2000 is not applicable. 3.7. The impugned orders have confirmed the demands mainly on the ground that the Appellants have an intricate business relationship with IFFL and both of them have an interest in the business of each other and one influences the other. Hence, the impugned order holds that Appellants and IFFL are to be treated as related persons in terms of Section 4(3)(b)(iv) of the CEA. The Appellants submit that M/s IFFL is a private limited company and the Appellants are a private limited Company and none of the Directors of Appellants' company is a Director in IFFL, nor has any Director in IFFL have any interest in the firm of the Appellants. There is also no common share holding between the companies or any of the individuals. Consequently, the extent of interest as far as the transaction relating to manufacture and sale by the Appellants to IFFL is purely commercial and this does not ipso facto render the Appellants interested in the business of IFFL. Reliance is ....
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....ation is completely different in the above said decisions. In the case of Nutri Foods (supra), the Hon'ble Tribunal after noting the facts that the manufacturer therein was not allowed to fix the price of the goods cleared by them until there has been joint determination of the price and even for that purpose, they were liable to provide all the information pertaining to the product, as may be required, for determining the price and that the supply/cost of packing material was not considered at the time of fixing the price held that the prices stipulated in the agreement and the manner of the determination cannot be considered to be normal as there was extra commercial considerations have entered in the determination of the price. Similarly in the case of Brindavan Alloys Ltd and Killic Slotted Angles Limited (supra), there was an additional consideration accruing to the appellants in the form of free publicity and sales promotion of their goods for which the sole selling agents had to foot the bill and the price was not the sole consideration for sale of goods. Whereas in the present case, the price of the goods cleared by the Appellants is mutually agreed upon (i.e., after taking....
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....FL or at prices agreed upon between MFCPL and IFFL in terms of the 2007 Agreement. A comparison of the assessable values adopted by MFCPL for some of the FCPs, for different periods with the selling prices of IFFL and at prices agreed upon between MFCPL and IFFL in terms of the 2007 Agreement was 187% to 274%. 4.1. Rebutting the argument of the Appellant that the impugned Order has travelled beyond the SCN, it is submitted: (a) Para 14(i)(b) of the SCN makes it abundantly clear that the assessable values of the subject goods were sought to be determined in terms of Rule 11 of CEVR,2000 based on general principles of valuation enunciated in the rules foregoing to Rule 11 ibid and section 4(1) of CEA,1944; In para 13 (vi) also it is stated clearly that assessable values were sought to be worked out in terms of Rule 11 (c) The fact that the re-determined assessable values are based on the sale prices of IFFL is also evident from the worksheet appended to the SCN. Significantly enough, in terms of the principle underlying the determination of assessable values, both under Rule 9 and Rule 10A, is the adoption of the sale prices when the goods enter the stream of trade for th....
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.... manufactured article at the stage when the article enters into the stream of trade and such price in respect of a transaction must necessarily be at arm's length. Further, inclusions and additions that enrich the value of the article till its clearance are permissible additions to the price that can be taken into account to determine 'value'. 4.4. Further referring to judgment of the Hon'ble SC in the case of CCE, Indore vs. S.Kumar's Ltd. [2005 (190) ELT 145 (SC)] it is submitted that the implication of the observations is that, the assessable value of a manufactured article, as per the erstwhile Section 4(1)(a)- held to be not different from "transaction value' as per new section 4(1)(a)- would be, the wholesale price charged for a manufactured article at the stage when the article is sold in the open, wholesale market i.e., when it enters into the stream of trade for the first time and such price in respect of a transaction must necessarily be at arm's length. Further, it was held that the assessable value should be the intrinsic value of the goods, when the same are sold for the first time in the wholesale market. 4.5. The learned AR for the Revenue further submitted ....
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.... own products, i.e. other than FCPs, the aforesaid value additions are reflected in the prices of MFCPL as the products enter the stream of trade at their own hands. Hence, the sale prices charged by MFCPL to IFFL are not the same as the normal price or the transaction value of the impugned FCPs. • In sum, the prices of FCPs charged by MFCPL to IFFL cannot be taken as the transaction values of such products going by the rationale of the Hon'ble SC in the cases of Grasim Industries Ltd.(supra) and that of Ujagar prints (II) as explained in the judgment rendered in the case of S. Kumars Ltd, (supra). • The judgments of the Hon'ble SC in the cases of Kwality Ice Cream Co., Good Year South Asia Tyres "P' Ltd., Eastern Bakeries Pvt. Ltd. and TTK Health Care Ltd cited by the Advocate for appellant is not applicable as Clause 7 of the 2007 Agreement discussed above clearly makes the facts distinguishable from the aforesaid cases. Further, the said judgments were rendered prior to the judgment in the case of Grasim Industries Ltd.(supra). • MCF purchases the raw materials etc., from independent vendors on payment of VAT/CST and sells at FCPs to IFFL a....
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....he 2007 Agreement states that the specifications and quality would be prescribed by IFFL and MFCPL had to purchase the materials in accordance with the same. The sourcing of materials, however, remained the same pre and post 26/5/2007. Given these facts, the claim that the transaction between MFCPL and IFFL was on 'principal to principal' basis because of the provision that MFCPL would acquire the materials on their own-instead of free supplies by IFFL- has no legs to stand. The transactions between MFCPL and IFFL cannot, therefore, be regarded as on 'principal to principal' basis. In true terms, IFFL is the principal and MFCPL has manufactured the FCPs on behalf of IFFL. • As per Clause 5.1 of both the Agreements, MFCPL could not sell or otherwise deal in trademarks, copyrights and designs similar to that of IFFL. This means MFCPL has to obtain the approval/clearance of IFFL of even the design on the product, and the packing material for their own brands and products. They are also not permitted to deal in or even trade in products bearing marks or designs similar to that of IFFL and IFFL would decide the issue of similarity. • The aforesaid facts and the....
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....extended period of limitation is relevant only in respect of the first SCN dated 20/4/2012 and it is held that the clarification issued by the department to their associate M/s Global Food would not come to the help of MFCPL and IFFL in explaining the deliberate default on the part of MFCPL to gain undue duty advantage. Clearly, MFCPL had not presented the true and full facts before the Department. These findings in the impugned orders are reiterated. • Considering the deliberate default on the part of MFCPL and IFFL, invoking of extended period of limitation and imposition of penalties on the two companies and the captioned individual appellants are fully justified. 5. Heard both sides at length and perused the records. 6. The issues for determination are whether: (i) the assessable value of FCP manufactured by MFCPL and cleared to IFFL during the period 26.05.2007 to 30.06.2017 be determined on the Transaction value at which MFCPL sold the FCP to IFFL under agreement dated 18.5.2007 or the assessable value be determined based on the sale price in the hands of IFFL in terms of Rule 11 of the Central Excise (Determination of price of excisable goods) Rul....
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....ction 2(h) of the CEA, 1944. It has been observed that the phrase "ordinary course of trade or business" denotes a situation arising in the open market where seller puts up goods for sale to make the goods fetch the best explored price in the market and the buyer successfully offers a best price to possess the goods from the seller. Further, she has observed that the price charged by MFCPL to IFFL for supply of FCP is not based on true transaction value but influenced by factors holding under business with IFFL because of dominating and dictating position of IFFL in the whole arrangement. Consequently, she has held that MFCPL and IFFL have interest in each other's business and one influences the other and consequently MFCPL and IFFL to be treated as related persons in terms of Section 4(3)(b)(iv) of the CEA, 1944. Thus, the transaction value adopted in terms of Section 4(1)(a) is liable to be rejected and the value of the FCP be determined by taking recourse to Section 4(1)(b) read with Rule 11 of CEVR, 2000. Further, she has held that Rule 4 to Rule 10A of CEVR are not directly applicable to the transactions between MFCPL and the IFFL and accordingly Rule 11 of CEVR, 2000 is the a....
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.... cannot make the transaction not at arm's length and the agreed price of sale by MFCPL was not the true transaction value of the goods. The learned advocate for the appellant has submitted that the conditions mentioned under Section 4(1)(a) namely there is sale of excisable goods; the sale is for delivery at the time and place of removal; the assesse and the buyer are not related and the price is the sole consideration for sale have been complied with in the present case; therefore resorting to Section 4(1)(b) of CEA read with Rule 11 of the CEVR is not warranted. It is pleaded that Rule 11 is applicable only when the value of excisable goods cannot be determined by applying Rule 4 to Rule 10; then it should be determined by using reasonable means consistent with principles and general provisions of valuation Rules; Rule 9 of CEVR, 2000 is attracted only when two entities are related within the meaning of sub-clause (ii), (iii) and (iv) of clause (b) of sub-section (3) of Section 4 of the CEA, 1944. In the present case, it is argued that the MFCPL is buying all required inputs on their own and after converting the same into finished goods, sells the same outright basis price to IFF....
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....sold in the wholesale market for the first time only at the hands of IFFL. Further he has submitted that the arrangement under the two agreements clearly point out to the fact that MFCPL has no freedom of action; even specifications and quality requirements of raw materials and packing materials etc. were specified by IFFL. This virtually left MFCPL with no option to purchase materials from vendors other than the ones from whom IFFL purchased; therefore the transaction value between MFCPL and IFFL is not true transaction and is not an ordinary course of business and trade prescribed under Section 2(h) of CEA, 1944. Further he has submitted that when FCPs leave the factory of the MFCPL, they bear the trademark, logo, label and brand name viz. 'BUSH' of IFFL; packing and outer carton bear the identity of IFFL and its brand name, MRP as determined was indicated on the product; but the intrinsic value of FCPs including the brand value of IFFL is realized only when the products put in the wholesale market. All the value additions and inclusions which enrich the value of the FCPs to facilitate such sale in the wholesale market are reflected in the prices of IFFL and not in the price of M....
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....h value shall, subject to the other provisions of this section be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale : Provided that - (i) where in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different price to different classes of buyers (not being related persons) each such price, shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of buyers; (ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force, or at a price, being the maximum fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso the price or the maximum price, as the case may be, so fixed....
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....oods, - (i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. Explanation. - In this sub-clause "packing" means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which or on which the excisable goods are wrapped, contained or wound; (ii) does not include the amount of the duty of excise, sales tax and other taxes, in any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale; (e) "wholesale trade" means sales to dealers, industrial consumers, Government, local authorities and other buyers, who or which purchase their requirements otherwise than in retail." W.e.f. 01.07.2000, Section 4 reads as follows:- '4.(1) Where under this Act, the duty of excise is chargeable on any excisable goods with ref....
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....anty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods'. 14. Prior to 01.10.1975 the deemed value of the goods was the 'wholesale cash price' of the goods at the time and place of removal of the goods from the factory or at any other place of manufacture or production for delivery less abatement on account of trade discount and the amount of duty payable at the time of removal of goods. The said provision recognized only one wholesale cash price for determination of the deemed value of the goods, which made applicable to quantity of goods manufactured and cleared till the same is revised. 15. To overcome the difficulties of determination of value when the goods sold at more than one wholesale cash price, in normal course of trade, the provision was amended w.e.f. 01.10.1975 with the following objectives and reasons:- "(2) Reasons for revision of the valuation provisions. Valuation under the old section 4 presented certain practical difficulties, some of which got highlighted in the judgment of the Supreme Court in A.K. Roy and Another v. Voltas Limited....
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.... provisos, a departure from the earlier method of determination of one assessable value, applicable to entire quantity of goods manufactured and cleared from the place of manufacture/factory. As mentioned in the objectives and reasons, it is also designed to overcome the situations encountered in A.K. Roy & another Vs. Voltas Ltd. [1977(1) ELT (J177) (S.C)] judgment, where a small percentage of manufactured goods was sold from the factory to the distributors at a price and major portion of the sale was made directly to consumers at a higher price. It is observed as: "18. There can be no doubt that the 'wholesale cash price' has to be ascertained only on the basis of transactions at arms length. If there is a special or favoured buyers to whom a specially low price is charged because of extra commercial considerations, e. g. because he is relative of the manufacturer, the price charged for those salts would not be the 'wholesale cash price' for levying excise under s. 4 (a) of the Act. A sole distributor might or might not be a favoured buyer according as terms of the agreement with him are fair and reasonable and were arrived at on purely commercial basis. Once wholesale d....
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....e few or scanty does not alter the true position". 18. Their Lordships in Bombay Tyre International's case rejected the said line of argument interpreting the scope of Section 3 and Section 4 of the CEA, 1944 and observed as below:- 13. We move on now to a different dimension, to the conceptual consideration of the measure of the tax. Section 3 of the Central Excises and Salt Act provides for the levy of the duty of excise. It creates the charge, and defines the nature of the charge. That it is a levy on excisable goods, produced or manufactured in India, is mentioned in terms in the section itself. Section 4 of the Act provides the measure by reference to which the charge is to be levied. The duty of excise is chargeable with reference to the value of the excisable goods, and the value is defined in express terms by that section. It has long been recognised that the measure employed for assessing a tax must not be confused with the nature of the tax. In Ralla Ram v. The Province of East Punjab - (1948) F.C.R. 207, the Federal Court held that a tax on buildings under Section 3 of the Punjab Urban Immovable Property Tax Act, 1940 measured by a percentage of the annual va....
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....ed by its nature, while the measure of the tax may be assessed by its own standard. It is true that the standard adopted as the measure of the levy may indicate the nature of the tax but it does not necessarily determine it. The relationship was aptly expressed by the Privy Council: In Re. A Reference under the Government of Ireland Act, 1920 and Section 3 of the Finance Act (Northern Ireland), 1934 - L.R. 1936 A.C. 352, when it said:- "........It is the essential characteristic of the particular tax charged that is to be regarded, and the nature of the machinery-often complicated-by which the tax is to be assessed is not of assistance, except in so far as it may throw light on the general character of the tax." The case was referred to by a Constitution Bench of this Court in R.R. Engineering Co. v. Zila Parishad Bareilly & Anr. - (1980) 3 S.C.R. 1, where the relationship was succinetly described thus :- "It may be, and is often so, that the tax on circumstances and property is levied on the basis of income which the assessee receives from his profession, trade, calling or property. That is, however, not conclusive on the nature of the tax. It is only as a matter....
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....ry or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market did not exist for such article at such place, then delivery was envisaged at the nearest place where such market existed. Section 4(b) declared that where such price was not ascertainable, the value would be deemed to be the price at which an article of the like kind and quality was sold or was capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, and if such article was not sold or was not capable of being sold at such place, at any other place nearest thereto. Then there was an Explanation which declared that no abatement or deduction would be allowed except in respect of trade discount and the duty payable at the time of the removal of the article from the factory. The wholesale price was envisaged as a cash price in order to make it a uniform standard, because it was then a price freed from the burden of an increase on account of credit or other advantage allowed to a buyer, a f....
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....to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely after-sales service and marketing and selling organisation expenses including advertisement expenses cannot be deducted. It will be noted that advertisement expenses, marketing and selling organisation expenses and after-sales service promote the marketability of the article and enter into its value in the trade. Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot, on the same grounds, be deducted. But the assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight for tran....
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....of heading 85.24, no excise duty can be levied thereupon indirectly as it was impermissible to levy a tax indirectly. In that view of the matter the decision in PSI Data Systems (supra) must be held to have correctly been rendered." 22. The principle laid down in the said case has been doubted by the Division Bench of the Supreme Court in the case of CCE Vs. Grasim Industries case apparently being in conflict with the ratio laid down in Bombay Tyre International's case. The facts in Grasim Industries' case was that whether collection of certain amounts from customers under different heads viz. packing charges, wear and tear charges, facility charges, service charges, delivery and collection charges, rental charges, repair and testing charges be includable for the purpose of computing the assessable value. Their Lordships referred the matter in that context raising the following questions for determination:- "1. Whether Section 4 of the Central Excise Act, 1944 (as substituted with effect from 1-7-2000) and the definition of "transaction value" in clause (d) of sub-section (3) of Section 4 are subject to Section 3 of the Act? 2. Whether Sections 3 and 4 of the C....
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....tured article prior to its clearance, as permissible additions to be price charged for purpose of the levy. 24. While explaining the observation made in Acer India Ltd.'s case and its limitation in application to the meaning of transaction value in the context of valuation and software when supplied with hardware, their Lordships observed as follows:- "22. This would bring us to a consideration of the decision of this Court in Acer India Ltd. (supra). The details need not detain us. Softwares which were duty free items and could be transacted as softwares came to be combined with the computer hardware which was a dutiable item for purposes of clearance. The Revenue sought to take into account the value of the computer software for the purposes of determination of 'transaction value' with regard to the computer. This Court negatived the stand of the Revenue taking the view that when software as a separate item was not dutiable its inclusion in the hard-disk of the computer cannot alter the duty liability of the software so as to permit the addition of the price/value of the software for the purpose of levy of duty. It is in the above context that the decision of this Cou....
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....to consideration for determination of assessable value of the goods in dispute, for the reason that there is no difference in the concept of Normal price and the transaction value as held in the above judgment. On the contrary, neither the concept of 'Normal Price', nor the scope of 'transaction value' envisaged a price that would be fetched on the sale of goods in a wholesale market be the criterion for determination of assessable value. The said approach of the Revenue was rejected by the Hon'ble Supreme Court wayback in Voltas' case. Their Lordships observed as: "9. Even if it is assumed that the latter part of s. 4(a) proceeds on the assumption that the former part will apply only if there is a wholesale market at the place of manufacture for articles of a like kind and quality, the question is what exactly is the concept of wholesale market in the context. A wholesale market does not always mean that there should be an actual place where articles are sold and bought on a wholesale basis. These words can also mean that potentiality of the articles being sold on a wholesale basis. So, even if there was no market in the physical sense of the term at or near the place of ....
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....ssable value. Negating the said argument in Bombay Tyre International Ltd.'s case as well as by Constitution Bench in Grasim Industries Ltd.'s case, it has been held that all expenses that enrich the value would form part of the assessable value for computation of duty under Section 4(1)(a) under the Normal price era as well as under the 'transaction value regime introduced w.e.f. 01.07.2000. The basis of argument for deduction of such post-manufacturing expenses has always been centered around Section 3 and Section 4 of Central Excise Act,1944 dealing with levy and measure of duty, respectively. In that context, the Hon'ble Supreme Court time and again reiterated the principle that Section 3 and Section 4 operate in different spheres and there has been no material change with the amendments to Section 4 brought into effect in 1975 or in 2000, introducing the concept of transaction value in place of normal price. 29. Also, we find fallacy in the argument of the Revenue that if the expenses that are considered by the Hon'ble Supreme Court in Bombay Tyre International's case for inclusion in the value, if not present, in a transaction value under an agreement, the same should be r....
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.... stipulated that MFCPL shall not sell the products whether packed or otherwise which has been rejected the IFFL, bearing the company's trademark, copyright and / or design. However, MFCPL may sell the products to third party with the prior consent of IFFL. Under Clause 7, it is stipulated that IFFL shall pay MFCPL the prices listed in Appendix 2 for the product duly packed and supplied on outright sale basis and the price is exclusive of excise duty and sales / VAT and other costs, charges, taxes duties etc. Central Excise duty and Sales /VAT as applicable shall be paid by MFCPL and charged to IFFL. It is mentioned at Clause 11 that the agreement will be on principal to principal basis and does not bar parties from entering into similar agreements with any other persons. Under Clause 12, it is further mentioned that either part can terminate the contract without assigning any reason after giving 3 months prior notice in writing to other part. This agreement has been interpreted by the Revenue being an agreement influenced by the purchaser on the seller whereby MFCPL could not sell the products to others and the right to sell the rejected goods also not vested with MFCPL. The Commis....
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....Goods Act, 1930 cannot be applied in the present case. The term 'sale' and 'purchase' under the Central Excise Act, 1944, if construed literally, it would give a wider scope and also include transfer of possession for valuable consideration under the definition of the term" 33. The Ld. Commissioner observed that the price at which MFCPL sells the products to IFFL is ultimately sold by IFFL to wholesale dealers at a price ranging from 1.89 to 2.74 times of their purchase price; the photographs of labels affixed on FCP filled containers demonstrate to the general public that FCP is manufactured and packed by MFCPL for IFFL as all indications or relationship such as brand, logo, trade mark, design etc.; also the customers were notified to contact IFFL for consumer complaints, which clearly showed that the products were made for and on behalf of IFFL by MFCPL. Consequently, she has concluded that the intricate business relationship between IFFL and MFCPL reflects interest in each other's business and one influences the other and hence there is existence of mutuality of business interest between MFCPL and IFFL and accordingly the sale by MFCPL to IFFL is not a true sale. Consequently....
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....07.1.2004 that the transaction between MFPCL and IFFL was influenced by their relationship as defined under Section 4(3)(b)(iv) of CEA,1944, hence the price at which FCP supplied by MFPCL to IFFL to be ignored and the assessment of FCP be made at the price at which IFFL sold the goods in the market be adopted. Therefore, in absence of any additional evidence indicating the transaction between MFPCL and IFFL under the agreement 18.5.2007 fall within the definition of 'related person', rejecting the 'Transaction Value between MFPCL and IFFL is contrary to the settled principles of valuation of goods; hence cannot be sustained. 36. The judgments heavily relied upon by the learned Special Counsel viz. Nutri Foods and S.Kumar's case, are in a different set of facts and circumstances and hence cannot not be made applicable to the facts of the case in hand. 37. In Nutri Food's case there are three parties involved, namely, M/s Anand Food, a partnership firm engaged in manufacturing various food colours, soup powder, etc. M/s Nutri Foods engaged in packing the products manufactured in bulk by Anand foods, M/s All seasons Foods Limited, a public company is the purchaser of the product....
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.... Foods. In these circumstances the Tribunal came to the conclusion that in this arrangement, the freight charges, packing charges etc. being not included in the declared price; therefore rejected the price charged by Nutri Foods to Anand Foods as normal price and directed to reassess the value after making necessary deductions from the price and remanded the matter to the lower authorities. No such circumstances in the present case exist and hence, the said judgment is not applicable. 38. In S. Kumars Ltd.'s case, the merchant manufacturers who had supplied grey fabrics for processing to the respondent No.1, were firms and companies having common management and control under S. Kumars group of companies(also respondents), were selling grey fabrics to the respondent no 1 who after processing the fabrics sold the processed fabrics to other respondents belonging to the same group company which were later sold to independent dealers. In the said circumstances, their Lordships observed that the judgment of Ujagar Prints' case would not apply to Respondent No 1 the processor, who is not an independent entity and as in that case, the merchant manufacturers and the purchasing traders we....
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....nder the Indian Compani Seven Wells Street, St Thomas ponce Ac 1913 having its Registered Office at 1-3 deemed to include its successors in business and assigns) of the One part thereof expression shall unless repugnant to the Mount, Chennai - 600 016. hereinafter called "the AND MALLYA FINE-CHEM PRIVATE LIMITED, a Company incorporated under the Act. 1956 having its Registere Industrial Estate, Banvalore - 360 06 3 C-331 & 332. 2" Stage. pernbe expression shall unless For 360 058, hereinafter called "the Manufacturer: Pwhich ss repugnant to the context or mea its successors in business and sincemeaning thereof be deemed to include For Mallya Fine-Chicos Pvt. Ltd 1 18Hwally Internatip al Flavours & Fragrances ladia Limited WHEREAS the Manufacturer has facilities to manufacture specific products at its Factory and has agreed to manufacture and supply products required by the Company on the terms and conditions stated herein. IT IS HEREBY AGREED BY THE PARTIES AS FOLLOWS : 134 Manufacture and Supply 1.1 The Manufacturer shall manufacture and supply the products listed in Apper quality furnislied by the Company Promoting formulations, specifications an to ....
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....The Manufacturer may however sell the Products to a third party, with the prior consent of the Company, after the same has been reprocessed to-an extent that it cannot be identified as the Company's Products. Trade Marks Before delivering the Products to the Company, the Manufacturer shall affix th trade marks of the Company thereto and also pack the same in containers an as per the design of the Company. It is clearly understood that the Manufacturer shall not use the said labels, containers and cartons for any other purpose. The Manufacturer agrees not to sell or otherwise deal in, directly o indirectly, goods bearing the trade marks, copyrights and designs of the Company or any other trade marks. copyrights and designs similar to that of the Company' ind except for the explicit purpose of fulfilling the Manufacturer's for the explicit purpose of fulfilling the Manufacturer's obligations under this Agreement. 5.2 The Manufacturer hereby recognises that the Company is ne Company is the absolute owner of (a) the registered trade marks - "BBA Logo" Label-(TM No.240757) & "BUSH" Label (TM No. 126580) (b) the said trade marks, copyrights, designs and / or artistic works at....
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....and proceedings by peso ofthe Manufacturer failing to comply with such requirements advised by the Company. 6.3 The Manufacturer shall solely bear and pay all Income-tax. Central Excise Duty · Taxes and Duties and other Taxcs and Duties as imposed by the State, Central and Municipal authorities incidental to the manufacture and supply of the Products, to the Company. 6.4 For the purpose of clarity it is hereby recorded that soy recorded that nothing herein contained in any manner shall be deemed to create any liability on the Company for any default in statutory compliance by the Manufacturer, it being the clear intention of the parties that compliance with manucure being the clicar intention of the hat compliance with Central Excise laws, Sales Tax laws and other statutory enactments in respect of this Agreement shall be the exclusive responsibility of the Manufacturer. Prices The Company shall pay to the Hoe Company Sua er, on commencement of this Agreement, the prices listed in Appendix 2 for the Products duly packed and supplied on an outright sale basis. 7.2 The aforesaid prices are exclusive of Central Excise Duty and Sales / Value x as applicable, ....
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....a Principal-to-Principal basis and does not debar the parties from entering into similar Agreements with any other person. 12. Termination This Agreement may be terminated : ther party without assigning any reason, after giving three month's notice in writing to the other and with (a) she and without any liability to pay any compensation for such termination to the other; or ternalonal Flavours & Fragrances Indie Limited For Mallya Fine-Chem Pvt. Ltd. RIDHAR BALAKRISHNAN Wholefaro Director (b) by either party in the event of a breach of any of the material terms and co day's police in writing (c) by mutual consent conditions of this Agreement, by giving seven day's notice in writing to the other; or . 12.2 Expiry or termination of this Agreement howsoever occasioned shall he. withor prejudice to the rights and obligations incurred prior to the date of such feminin senare gens incur prior to the date of such expiry termination and accounts between the Manufacturer and the Company shall b settled forthwith. 12.3 Upon expiry or termination of this Agreement, the Company shall purchase stocks of unutilised packing materials such as labels, containers an....