Sujhan Instruments Versus Commissioner of Central Excise, Chennai-II, Honeywell Electrical Devices and Systems India Ltd. Versus Principal Commissioner of Central Excise, Chennai-I And Commissioner of GST &Central Excise, Chennai Versus Sujhan Instruments
Central Excise
2018 (7) TMI 420 – CESTAT CHENNAI – 2019 (368) E.L.T. 135 (Tri. – Chennai)
CESTAT CHENNAI – AT
Dated:- 21-6-2018
E/810/2010, E/1/2011, E/40261/2014, E/40964/2013, E/40965/2013 – Final Order No. 41924-41928 / 2018
Central Excise
Hon'ble Shri Madhu Mohan Damodhar, Member ( Technical ) And Hon'ble Shri P. Dinesha, Member ( Judicial )
Shri Joseph Prabhakar, Advocate For the Appellant
Shri K. P. Muralidharan, AC ( AR ) For the Respondent
ORDER
Per Bench
All these appeals since relating to the same issue, they are taken up together for disposal.
2. The facts of the case are that Sujhan Instruments (hereinafter referred to as Sujhan) are engaged in the manufacture of electronic devices such Fan Speed
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he 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 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 Hence the goods required valuation as per Valuation (Determination of price of Excisable goods) Rules, 2000 under Sect
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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 respective SCNs; on appeal, the Commissioner (Appeals) concerned, set aside the orders of the adjudicating authority and allowed the appeals of the assessee. Hence department have filed these appeals.
4. In appeal E/40261/2014, the proposals in the related SCN were confirmed by the adjudicating authority which on appeal was upheld by the Commissioner (Appeals), h
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ection
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 Central Excise Valuation Rules, 2000 w.e.f. 1.3.2007 in respect of goods manufactured by job worker. However, Sujhan was never a job worker of Honeywell. The transaction between the two appellants were always on principal to principal basis.
v) As per Board's circular No.902/22/2009 dt. 20.10.2009 on the subject of scope of Rule 10 (a) o
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ment, 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 found fault with the framing of issues by the Commissioner in the impugned order dt.3.9.2010 (impugned order for Appeal No.E/810/2010 & E/1/2011) that the adjudicating authority should have examined the issue first under section 4 (1) (a) of the Act and not under Rule 10 (a) of the Valuation Rules. We are not able to appreciate this contention.
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ol 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 goods supplied by the said principal manufacturer or any other person authorized by him'. Thus to qualify as job worker, in our view, the following hard sticks require to be satisfied :
(i) Job worker should be engaged in manufacture or production of goods on behalf of another manufacturer
(ii) Inputs or goods should be supplied by the said prin
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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 between Sujhan and Honeywell is only a camouflage for job working. There is also no evidence put forth to indicate that apart from the alue invoices by Sujhan to Honeywell there is an additional value component which is separately paid by the latter to the former or that there is any additional flow back of funds. This being the case, ther
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