2018 (7) TMI 420 – CESTAT CHENNAI – TMI – Valuation – job-worker or not? – appellant entered into agreement with M/s.Honeywell Electrical Devices and Systems India Ltd. on manufacture on contract basis – Department took the view that Sujhan had simply been acting as job worker for Honeywell; that the entire manufacturing activities were controller by Honeywell as principal manufacturer; that Honeywell fixed ordinary sale price of the impugned goods; Hence value adopted for payment of duty by Sujhan is not the sole consideration for sale as per Section 4 (1) (a) of the Central Excise Act, 1944 – whether the activities of M/s.Sujhan Instruments are to be treated as those of a ‘job worker’ on behalf of M/s.Honeywell i.e. ‘job worker to principal’?
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Held that:- A perusal of the SCN No. 104/2009 dt. 23.10.2009 reveals that department is inclined to treat Sujhan as a job worker of Honeywell primarily on the grounds that supplies of raw materials that required to be approved by the latt
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ing’ as distinguished from ‘job worker’. The contract manufacturers are not supplied with the raw material from principal manufacturers, like ‘job workers’, butthey are required to purchase them from the market, very often from vendors who are approved by the principal manufacturer for quality point of view – there is no reason on account of invoice value between Sujhan and Honeywell should not be treated as the ‘transaction value’ under Section 4 (1) (a) of the Central Excise Act, 1944.
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We draw sustenance from the ratio of the Tribunal’s decision in Coromandal Paints [2010 (9) TMI 315 – CESTAT, BANGALORE], where it was held that by merely indicating vendors of raw materials or by giving advance for procuring raw material or even installing equipment given by SIPL would not render Coromandal as a job worker.
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Appeal allowed. – E/810/2010, E/1/2011, E/40261/2014, E/40964/2013, E/40965/2013 – Final Order No. 41924-41928 / 2018 – Dated:- 21-6-2018 – Hon ble Shri Madhu Mohan Dam
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d) There is a difference of 200 to 400% in the sale price of the goods from M/s.Honeywell when compared to the sale price ofthe assessee to M/s.Honeywell. e) Thebrand name is owned by M/s.Honeywell and the intellectual property rights of the products manufactured by the assessee rest with M/s.Honeywell. f) With the affixing of the brand name, as the ownership of the products rests with M/s.Honeywell, the assessee has no right to sell the goods. g) When there is no right to sell the goods, the amount received by the asessee is only compensation of the expenditure incurred by the assessee and received by him through sale invoices raised. h) the declaration made in the MRP stickers as Specially manufactured for Honeywell Electrical Devices and Systems India Ltd. by M/s.Sujhan Instruments, 54, 4th Street, Kasi Estate, Jafferkhanpet, Chennai 600 083 also confirm that the goods are manufactured for M/s.Honeywell. Department took the view that Sujhan had simply been acting as job worker for
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dated 03.09.10 – 1,77,73,275/ – 1,77,73,275/- E/00001/2011 (Appeal by Honeywell for Penalty) April 2007 – July 2009 – 20/2010 dated 03.09.10 2,00,000/- E/40964/2013 (Appeal by Department) April 2010 – March 2011 12/2011 dated 25.04.11 12/2012 dated 29.02.12 12& 13/2013 dated 30.01.13 13,49,816/- 20,000/- E/40965/2013 (Appeal by Department) April 2011 – January 2012 8/2012 dated 20.04.12 12/2012 dated 08.08.12 12& 13/2013 dated 30.01.13 3,58,663/- 2,000/- E/40261/2014 (Appeal by Sujhan) August 2009 – March 2010 61/2010 dated 12.08.10 58/2011 dated 22.06.11 222/2013 dated 22.11.13 31,17,332/- 25,000/- In adjudication, in respect of appeal E/810/2010 & E/00001/2011, the notices were adjudicated by the Commissioner vide OIO No.20/2010dated 03.09.2010 who confirmed the proposals,hence these appeals by Sujhan and Honeywell. 3. In appeals E/40964 & 40965/2013, the adjudicating authorities were of the level of Additional Commissioner, who confirmed the proposals in the respect
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. job worker to principal or b) whether activities of M/s.Sujhan Instruments are to be treated as manufacture and relationship between M/s.Sujhan and M/s.Honeywell is on a principal to principal basis . ii) Ld. Advocate submits that the issue should have been framed in the other way round and that only after eliminating the applicability of Section 4 (1) (a) of the Act in respect of transactions between Sujhan and Honeywell, should the adjudicating authority have gone further ahead to agitate the applicability of Rule 10 (a) of the Valuation Rules. iii) As per Section 4 (1) (a) of the Act, the transaction is generally required to be adopted as the value of goods for the purpose of charging duty of excise in the cases. Department has not adduced any evidence to prove that the sale of goods between Sujhan and Honeywell have not satisfied any of the ingredients of Section 4 (1) (a) or have not satisfied the definition of transaction value in that section. iv) Rule 10 (a) was introduced in
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(a) cannot be invoked. Ld. Advocate relies upon the Tribunal decision in Coromandel Paints Ltd. Vs Commissioner of C. Ex., Visakhapatnam – 2010 (260) ELT 440 (Tri.) where it was clearly held that no duty demand on this ground can be raised against the assessee. viii) In respect of Appeals E/40964/2013 & E/40965/2013 filed by the department, Ld. Advocate submits that common impugned order No.12 & 13/2012 dt. 30.1.2013 of commissioner (Appeals) has gone into all aspects of matter and arrived at the reasoned finding that the relationship between Sujhan and Honeywell is only on principal to principal and that there is no complete control of the manufacturing process of the former by the latter. Ld. Advocate therefore submits that there is no merit in the departmental appeals and they may therefore be rejected. 6. On the other hand, Ld.A.R Shri K.P.Muralidharan supports the impugned orders. 7. Heard both sides and have gone through the facts of these cases. 8.1 Ld. Advocate has foun
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asis,since the second alternative issue framed in para 11.1 of that impugned order is just very that. 8.3 A perusal of the SCN No.104/2009 dt. 23.10.2009 reveals that department is inclined to treat Sujhan as a job worker of Honeywell primarily on the grounds that supplies of raw materials that required to be approved by the latter, quality control exercised by Honeywell, 99%of the finished goods are sold to the latter and that Honeywell s brand name and MRP stickers are used on the packing. The Rule 10A has been inserted in the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, w.e.f. 1.4.2007. As per this rule, the value at which principal manufacturer sells his goods will be the basis for determining the transaction value for payment of Central Excise duty by the job worker. For the purpose of this rule, the job worker is defined as …. a person engaged in the manufacturer or production of goods on behalf of a principal manufacturer, from any inputs or
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e of Central Excise duty on the assessable value and the value indicated in the invoices from Sujhan to Honeywell. 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 , butthey are required to purchase them from the market, very often from vendors who are approved by the principal manufacturer for quality point of view. The principal then buys finished products from the contract margin and very often sales them to his core customer, sometimes with enhanced margin. Department has also not unearthed or brought out anything on record to suspect that the contract betw
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al following the ratio already laid down in Gillette Diversified Operations Ltd. Vs Commissioner – 2007 (217) ELT 51 (Tribunal) held that by merely indicating vendors of raw materials or by giving advance for procuring raw material or even installing equipment given by SIPL would not render Coromandal as a job worker. 9. In view of the findings and conclusions herein above and following the ratio already laid down by Tribunal in Coromandal Paints Ltd. (supra), impugned order No.20/2010 dt. 03.09.2010 (relating to Appeals E/810/2010 and E/1/2011) are set aside and the said appeals are allowed in toto with consequential benefits, if any, as per law. 10. So also, the order of Commissioner (Appeals) No.222/2013 dt. 22.11.2013 (impugned order for Appeal E/40261/2014) is also set aside and the said appeal is also allowed with consequential benefits, if any, as per law. 11. For the same reasons, we do not find any infirmity in the orders No.12 & 13/2013 dt. 30.01.2013 (impugned orders for
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