Custom, Excise & Service Tax Tribunal
Cce, Hyderabad vs M/S. Innocorp Ltd on 2 May, 2012
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing:06/03/2012
Date of decision:.
Appeal No.E/392 & 396/2009
(Arising out of Order-in-original No.32/2008-CE-ADJN-HYD-III-COMMR. And No.31/2008-CE-ADJN-HYD-III-COMMR. all dt. 29/12/2008 passed by CC&CE, Hyderabad)
For approval and signature:
Honble Mr. P.G. Chacko, Member(Judicial)
Honble Mr. M. Veeraiyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordship wish to see the fair copy of the Order?
4.
Whether Order is to be circulated to the Departmental authorities?
CCE, Hyderabad
..Appellant(s)
Vs.
M/s. Innocorp Ltd.
M/s. Dart Manufacturing India Pvt. Ltd.
..Respondent(s)
Appearance Mr. Ganesh Haavanur, Addl. Commissioner(AR) for the Revenue.
Mr. Sujit Ghosh, Advocate for the respondents.
Coram:
Honble Mr. P.G. Chacko, Member(Judicial) Honble Mr. M. Veeraiyan, Member(Technical) FINAL ORDER No._______________________ [Order per: P.G. Chacko] These appeals were filed by the department, the first appeal against an order passed by the Commissioner of Central Excise, dropping the demand of duty and other proposals raised in two show-cause notices, dt. 8/5/2008 and 29/5/2008, issued to M/s. INNOCORP Ltd. (hereinafter referred to as INNOCORP) and the second appeal against a similar order passed by the Commissioner dropping the demand of duty and allied proposals raised in two show-cause notices, dt. 8/5/2008 and 28/5/2008, issued to M/s. DART Manufacturing India Pvt. Ltd. (hereinafter referred to as DART). The demands of duty in all the show-cause notices were for the period from April, 2007 to February, 2008.
2. The facts of the case 2.1. INNOCORP and DART were engaged in the business of manufacture of plastic tableware and kitchenware by induction moulding process. Each of them entered into a Contract Manufacturing Agreement with M/s. TUPPERWARE India Pvt. Ltd. (hereinafter referred to as TUPPERWARE) for manufacture and supply of plastic tableware and kitchenware to TUPPERWARE as per the specifications of the latter. The agreement between INNOCORP and TUPPERWARE was entered on 8/1/2001 and the one between DART and TUPPERWARE was entered on 9/5/2003. The terms and conditions of these agreements were similar. In the agreement, INNOCORP/DART was referred to as Manufacturer. A brief account of the relevant terms and conditions of the TUPPERWARE-DART agreement, taken as a specimen, is given below:
* TUPPERWARE appoints the Manufacturer on a non-exclusive basis to manufacture, assemble and sell the Products to TUPPERWARE in accordance with the terms hereof. In its sole discretion, TUPPERWARE may appoint any other manufacturer for the same or similar products [Clause 2]. Products shall mean the finished products of the specifications as detailed in the specific order made in writing by TUPPERWARE and placed on the Manufacturer specifying the quantity, specifications and delivery requirements. Products shall also mean such other products as may be specified by TUPPERWARE from time to time in writing to the Manufacturer to be manufactured and/or assembled and to be sold by TUPPERWARE [Clause 1].
* Purchase Order shall indicate the specifications and quantity of each product to be manufactured and/or assembled and supplied pursuant to such order and the date upon, and location to, which delivery of the manufactured/assembled products is to be made [Clause 3]. The moulds required for the manufacture of the Products shall be supplied by TUPPERWARE to the Manufacturer. Certain moulds will be imported by TUPPERWARE and supplied to the Manufacturer who shall return the moulds immediately after manufacture of the ordered quantities within the time prescribed in the relevant Purchase Order [Clause 4].
* All raw materials and supplies (packing and packing supplies used in connection with the finished products) shall be purchased by the Manufacturer from among a panel of suppliers nominated by TUPPERWARE and shall be of such specifications as that would result in the manufacture/assembly of the relevant products conforming to the specifications of TUPPERWARE. In case any raw materials or supplies are not available with the suppliers nominated by TUPPERWARE, the Manufacturer may purchase such raw materials/supplies from suppliers other than those nominated by TUPPERWARE, with prior written approval from TUPPERWARE. For the purpose of securing the manufacture of products on urgent basis, TUPPERWARE may arrange for the raw materials/supplies. In such event, the cost quotations shall be suitably modified by the manufacturer [Clause 5].
* Cost quotations for the products shall be determined from time to time with mutual agreement in writing. Cost of raw materials and parts (including goods manufactured by the Manufacturer and used as parts) and supplies including all shipping and forwarding costs and import duties, income tax and VAT imposed thereon, purchased from TUPPERWARE or suppliers authorized by TUPPERWARE, through delivery at the Manufacturers factory in India and all transport costs of the Products, shall be treated as expenses of the Manufacturer. For the purpose of substantiating the cost quotations, the Manufacturer shall at the request of TUPPERWARE provide the basis for such costs and duties and shall also provide photostat copies of invoices and receipts within 15 days of such request. In the event of invoice price of any raw materials/supplies supplied by TUPPERWARE or its associates remains outstanding when a payment is due from TUPPERWARE to the Manufacturer, TUPPERWARE shall be entitled to deduct from such payment the amount invoiced by the supplier and pay such supplier directly [Clause 6].
* The Manufacturer undertakes to manufacture/assemble the products to the superior quality standards and specifications of TUPPERWARE as set forth in the Purchase Orders and any manuals made available to the Manufacturer. TUPPERWARE shall at all times possess the right to use design and brand name of the Products to be manufactured by the Manufacturer including the brand name TUPPERWARE. The ability under this agreement is provided to the Manufacturer for the purpose of manufacture of the Products only. Any product that does not match with the quality standards of TUPPERWARE shall be destroyed by the Manufacturer with the prior consent of TUPPERWARE or disposed of in such manner as may be mutually agreed between the parties [Clause 7]. TUPPERWARE shall have the right to reject (within a period of 15 days from the date of manufacture) any product which fails to meet any of the specifications or requirements of TUPPERWARE set out in this agreement or the relevant Purchase Order [Clause 18].
* The Manufacturer shall arrange for all auxiliary equipment and labour necessary to manufacture/assemble, quality control test, package, pack and ship the products ordered by TUPPERWARE in terms of the Purchase Orders placed under this agreement. The Manufacturer shall not manufacture/assemble any other products for its own account or for the account of third parties, which are similar to the products or in competition with the products unless the prior written consent of TUPPERWARE is obtained. However, the Manufacturer shall be free to manufacture goods not similar to the Products or in competition with the Products for third parties. TUPPERWARE shall be free to source the products from other manufacturers [Clause 9].
* When TUPPERWARE receives from the Manufacturer the Products manufactured/assembled and sold by the Manufacturer pursuant to Purchase Order placed by TUPPERWARE, the Manufacturer shall provide to TUPPERWARE an original invoice for sale of the Products at such price that will be determined in accordance with the cost quotations agreed between TUPPERWARE and Manufacturer prior to any costs being incurred by Manufacturer. The cost quotations would take into account the Govt. levies on account of production/sale. The quotation shall include all costs (including overhead expenses) and profits of manufacture for the Products covered in such original invoice. TUPPERWARE shall have no responsibility to make any payments for such products other than the amounts set forth in the cost quotation and provided in the original invoice. The amount stated in the original invoice shall represent the amount due from TUPPERWARE in connection with the sale of the products. TUPPERWARE shall pay the invoice in full within 30 days [Clause 10].
* Upon expiration/termination of this agreement or upon specific request by TUPPERWARE, Manufacturer shall deliver to TUPPERWARE all products, unused raw materials and parts, masterbatch and supplies in the possession of the Manufacturer, and the Manufacturer shall account for any scrap, rejected products, unused raw materials and parts and masterbatch and supplies at the cost of Manufacturer, including overhead expenses, transportation and the costs and duties relating thereto to be billed to TUPPERWARE. Such unfinished products shall become the property of TUPPERWARE upon receipt by TUPPERWARE [Clause 11].
* TUPPERWARE shall cover under their marine policy all products or parts thereof manufactured and delivered to, and received by, TUPPERWARE. The Manufacturer shall not bear any risk or loss or damage to parts or products in transit [Clause 12].
* The Manufacturer shall indemnify TUPPERWARE against any losses, claims, costs, damages, liabilities or expenses arising from or in connection with, (i) the manufacturers negligence or willful misconduct in manufacturing, assembling, handling, storing or shipping the products or (ii) any breach or non-performance, by the Manufacturer, any obligations or undertakings laid down in this agreement or (iii) any breach of any applicable laws or regulations in force. TUPPERWARE shall indemnify the Manufacturer against any claim arising out of any consumers use of any product in accordance with TUPPERWAREs instructions [Clause 20].
* Neither the Manufacturer nor its employees are employees or agents of TUPPERWARE. The Manufacturer and TUPPERWARE stand in the relationship of independent contractors only and neither party shall be an agent of the other. The relationship of TUPPERWARE and the Manufacturer will, at all times, be at arms length on a principal to principal basis, and neither will have any interest in the other. TUPPERWARE is the purchaser of the products manufactured by the Manufacturer. This buy-and-sell relationship is the sole relationship between TUPPERWARE and the Manufacturer [Clause 23].
2.2. INNOCORP/DART, in terms of the relevant agreement, manufactured the goods ordered by TUPPERWARE, from raw materials and packing materials procured from suppliers nominated by TUPPERWARE, by making use of moulds supplied by TUPPERWARE, and cleared the products to TUPPERWARE on payment of duty on an assessable value arrived at by the cost construction method. The assessable value so arrived at by the manufacturer consisted of the cost of raw materials and packing materials, the cost of labour, various overheads (fixed and variable), 10% of the cost of production as notional profit and the amortised value of the mould (which was supplied by TUPPERWARE and on which no CENVAT credit was availed by the manufacturer). It was on this assessable value, which was determined under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Section 4(1)(a) of the Central Excise Act, that duty was paid by the manufacturer in respect of the finished goods supplied to TUPPERWARE during the period of dispute.
2.3. The show-cause notices in question were issued to INNOCORP and DART on the basis of the results of investigations conducted by officers of Central Excise(anti-evasion), who had visited the office/godown premises of TUPPERWARE and the factory premises of INNOCORP and DART and had recovered certain records under Panchanamas and had also recorded statements of certain functionaries of TUPPERWARE, INNOCORP and DART under Section 14 of the Central Excise Act. It was alleged in these show-cause notices that INNOCORP/DART was not an independent manufacturer but only a job worker of TUPPERWARE and hence ought to have determined the assessable value of the goods in terms of Rule 10A of the Valuation Rules, 2000. It was alleged that, in respect of the finished goods cleared by INNOCORP/DART to various godowns of TUPPERWARE during the period of dispute, INNOCORP/DART ought to have paid duty on the transaction value adopted by TUPPERWARE at the time of sale of the same goods to their distributors. As this transaction value of the goods sold by TUPPERWARE to their distributors was higher than the assessable value on which INNOCORP/DART had paid duty while clearing the goods to TUPPERWAREs godowns, the show-cause notices demanded differential duty from INNOCORP/DART.
2.4. These show-cause notices also alleged that INNOCORP/DART had colluded with TUPPERWARE and undervalued the goods and short-paid duty thereon with intention to evade payment of correct duty. It was alleged that the goods were manufactured on job work basis for TUPPERWARE and this fact was not disclosed to the department by INNOCORP/DART. The show-cause notices also used expressions such as misdeclaration, suppression and fraud against INNOCORP/DART and, on this basis, invoked the proviso to Section 11A(1) of the Central Excise Act for recovery of the duty which was allegedly short-paid. These notices also demanded interest on duty from INNOCORP/DART under Section 11AB of the Act, proposed penalties on them under Section 11AC of the Act and also proposed separate penalties on them under Rule 25 of the Central Excise Rules, 2002. Penalties were also proposed to be imposed on TUPPERWARE under Rule 26.
2.5. The show-cause notices dt. 8/5/2008 were issued to INNOCORP and DART in relation to the goods cleared by them to TUPPERWAREs godown at Ghatkesar from April, 2007 to February, 2008. The show-cause notices dt. 29/05/2008 and 28/05/2008 were issued to INNOCORP and DART respectively in relation to their clearances of goods to other godowns of TUPPERWARE during the same period. The demands of duty and allied proposals were contested by the respective noticees in replies to the show-cause notices, and the resultant dispute was adjudicated upon by the Commissioner, who after hearing the parties passed the impugned orders dropping the demands and allied proposals after holding that Rule 10A was not applicable to the facts of the case.
3. The impugned order
3.1. The reasons stated by the learned Commissioner for holding Rule 10A inapplicable are as stated below:
i. Rule 6 is more specific than Rule 10A for the purpose of present valuation.
ii. Rule 6 specifically deals with the situation when excisable goods are sold by the manufacturer, and the price is not of sole consideration whereas; Rule 10A envisages manufacture of goods on behalf of a principal manufacturer.
iii. In their case, goods have been sold except that that price is not the sole consideration inasmuch as moulds have been supplied free by TUPPERWARE.
iv. In their case, sale is involved which is covered under Section 4(10)(a) read with Rule 6, whereas Rule 10A will apply where the goods are sold by the principal manufacturer and not the job worker.
v. They are selling the goods and therefore, they cannot be treated as job workers for the purpose of Rule 10A.
vi. Valuation Rules are to be read sequentially as has been held in Ispat Industries reported in 2007(209) ELT 185 (Tri.-LB) and since Rule 6 covers our case, Rule 10A is ruled out.
vii. It is well known that Rule 10A was introduced to counter the decision in Ujjagar Prints case. It is also a fact that they were never governed by Ujjagar Prints case and therefore, Rule 10A is not applicable.
viii. The conditions of Rule 10A(i) are not satisfied in their case.
ix. The conditions are that they should be manufacturing the goods on behalf of TUPPERWARE, they should be manufacturing the goods from any inputs or goods supplied by TUPPERWARE or by a person authorized by TUPPERWARE and the goods manufactured by them should be sold for delivery by TUPPERWARE at the time of removal of these goods from their factory.
3.2. His other findings are --- that the assessee and TUPPERWARE operated independently on a principal to principal basis; that there was absolutely no flow of funds from TUPPERWARE to the assessee or vice versa and the price charged by the assessee from TUPPERWARE was at arms length; that the stringent quality control exercised by TUPPERWARE over the activities of the assessee or the usage of TUPPERWAREs trade mark by the assessee would not, by itself, a lead to a conclusion that the manufacturing activity was carried out by the assessee on behalf of TUPPERWARE; that the assessee was neither an employee nor an agent of TUPPERWARE and the sole relationship between them was that of seller and buyer; that there was no mutuality of interest between the assessee and TUPPERWARE; that the suppliers nominated by TUPPERWARE could not be said to have been authorized by TUPPERWARE to supply raw materials to the assessee; that the supply of moulds by TUPPERWARE as capital goods for the assessee was not to be treated as starting point for the manufacture of goods and consequently Rule 10A was not invocable on the basis of the supply of moulds by TUPPERWARE; that the methodology adopted by the assessee for determining the assessable value under Section 4 of the Act read with Rule 6 of the Valuation Rules, 2000 was accepted by the Settlement Commission and the same was never challenged by the Department and therefore the assessee was entitled to maintain a bona fide belief that the valuation under Rule 6 was correct; that in these circumstances the assessee and TUPPERWARE could not be said to have colluded or to have committed fraud and therefore no penalty was warranted in this case.
4. The grounds of appeal
4.1. The Commissioner held that the impugned goods were manufactured from the moulds supplied by TUPPERWARE and that the raw material suppliers were authorized by TUPPERWARE. From these findings of the Commissioner, it is established that the manufacture of goods by INNOCORP/DART for TUPPERWARE amounted to job work in terms of Rule 10A.
4.2. The facts of these cases are different from those of the cases of Poona Bottling Co. Ltd. & another Vs. UOI & others [1981(8) ELT 389 (Del.)], UOI vs. Citabul Ltd. [1985(22) ELT 302(SC)] and Taggas Industrial Development Ltd. vs. CCE, Kanpur [1989(39) ELT 151 (Tri.)] relied on by the adjudicating authority.
4.3. From the various clauses of the agreement between INNOCORP/DART and TUPPERWARE, it can be implied that the transactions were not at arms length [Clauses 6.5, 9, 11 and 12 of the INNOCORP-TUPPERWARE agreement and Clauses 6.4, 7.3, 9.2, 11 and 12 of the DART-TUPPERWARE agreement referred to by the appellant in this connection.] Some of the terms of the agreement implied that TUPPERWARE had proprietary interest in the goods manufactured by INNOCORP/DART, from the raw material stage itself. The agreement imposed many conditions on INNOCORP/DART and consequently they had very little liberty in the matters relating to production. Therefore the reliance placed by the Commissioner on the above case law is out of context.
4.4. The Commissioner held that the assessee was manufacturing the goods for TUPPERWARE and not on behalf of TUPPERWARE, without even attempting to justify such differentiation.
5. The submissions 5.1. The learned Addl. Commissioner(AR) reiterated the above grounds of the appeals and submitted that the scope of manufacturing activities of each of the assessees was that of job work as envisaged under Rule 10A of the Valuation Rules, 2000. It was not in dispute that the raw materials were supplied by persons nominated by TUPPERWARE and that moulds were supplied directly by TUPPERWARE and that the finished goods cleared by the assessees to the godowns of TUPPERWARE were sold by the latter. On these facts, it was contended that the assessable value of the goods should have been determined under the above rule. In his endeavour to justify the grounds of the appeals, the learned Addl. Commissioner(AR) referred extensively to the various provisions of the agreements.
5.2. The learned counsel for the respondents also elaborately referred to various provisions of the agreements and submitted that the nature of relationship between the assessees and TUPPERWARE was explicit on the relevant terms and conditions of the agreement. That the transactions between them were on principal to principal basis at arms length was clear from the agreements. The agreements expressly declared that the sole relationship between the parties was a buy-and-sell relationship. Other terms and conditions of the agreements justified this declaration. Therefore, according to the learned counsel, there is no merit in the contention of the appellant that the respondents were job workers of TUPPERWARE and hence should have determined the assessable value of the goods in terms of Rule 10A. With regard to the meaning of the phrase on behalf of, the learned counsel invited our attention to the Honble Delhi High Courts judgement in the case of Poona Bottling Co. Ltd. & another vs. UOI [1981(8) ELT 389 (Del.)]. The civil appeals filed against the High Courts judgment were dismissed by the Honble Supreme Court vide UOI vs. Poona Bottling Co. Ltd. [2003(154) ELT A240(SC)]. It was also pointed out that, in the case of UOI & others vs. Citabul Ltd. [1985(22) ELT 302(SC)], the question considered by the Honble Supreme Court was whether the goods in question were manufactured by the seller on behalf of the buyer. After examining the provisions of the relevant agreement and other materials on record, the apex court held that the goods were manufactured by the seller on their own account and sold the goods (with trademarks of the buyer affixed thereon) to the buyer. The learned counsel also claimed support from the Tribunals decision in the case of Taggas Industrial Development Ltd. (supra). Finally, the learned counsel submitted that an issue identical to the one involved in the present case was considered by this Bench in the case of Coromandel Paints Ltd. Vs. CCE, Visakhapatnam [2010-TIOL-1312-CESTAT-BANG.] = [2010(260) ELT 440(Tri. Bang.)] and the applicability of Rule 10A was ruled out. The learned counsel elaborately referred to the facts of the cited case and prayed that the present appeals be dismissed in view of the decision.
6. The issue Whether the goods manufactured by INNOCORP and DART (the assessees) in terms of the Contract Manufacturing Agreements with TUPPERWARE and cleared to the latters godowns during the period from April, 2007 to February, 2008 were to be valued for the purpose of assessment of duty in terms of Rule 10A of the Valuation Rules, 2000, which reads as follows:-
RULE 10A. Where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer), then, -
(i) in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer;
(ii) in a case where the goods are not sold by the principal manufacturer at the time of removal of goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of job-worker and where the principal manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of said goods from the factory of job-worker;
(iii) in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever applicable, shall mutatis mutandis apply for determination of the value of the excisable goods :
Provided that the cost of transportation, if any, from the premises, wherefrom the goods are sold, to the place of delivery shall not be included in the value of excisable goods.
Explanation. - For the purposes of this rule, job-worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorized by him.
7. Our findings 7.1. We have given careful consideration to the submissions of both sides. For the above rule to apply, the subject goods should be shown to have been produced or manufactured by the assessees qua job workers on behalf of TUPPERWARE. According to the appellant, the manufacturing activities carried out by the assessees under the relevant agreements constituted job work for TUPPERWARE who is sought to be presented as principal manufacturer. The appellant considers the assessees as job workers of TUPPERWARE. As per Explanation to Rule 10A, job-worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorized by him. According to this definition, any person to enter within its ambit of the definition should satisfy three requirements viz.
i. he should manufacture or produce goods;
ii. he should do it on behalf of a principal manufacturer;
iii. he should do it from any inputs or goods supplied by the principal manufacturer or by any other person authorized by him.
In the present case, INNOCORP and DART satisfied the first condition, which is not in dispute. Whether they satisfied the remaining conditions has to be ascertained from the terms and conditions of the agreements entered into between INNOCORP/DART and TUPPERWARE.
7.2. The terms and conditions of the two agreements are undisputedly similar. The relevant provisions of one of the agreements have been recorded in sub-para (2.1.) of para 2 of this order. The parties to this agreement declared that neither of them was an agent of the other, that their relationship was at arms length on a principal-to-principal basis, that neither of them had any interest in the other and that they had a buy-an-sell relationship only vide clause 23 of the agreement. It was also declared that TUPPERWARE was the purchaser of the products manufactured by DART. On a perusal of other clauses of the agreement, we have found these declarations contained in clause 23 to be true.
7.3. It is easily discernible from the agreement (a) that the assessee was appointed by TUPPERWARE, on a principal-to-principal basis, to manufacture the products as per the latters specifications and to sell the goods to TUPPERWARE, (b) that TUPPERWARE was liable to pay to the assessee the price of the goods invoiced by the latter as per the settled cost quotations for the product, (c) that the raw materials and packing materials required for the manufacture of the goods were to be sourced by the assessee from suppliers named by TUPPERWARE, (d) that none of the suppliers was authorized by TUPPERWARE to supply the raw materials or packing materials to the assessee, (e) that the moulds supplied by TUPPERWARE to the assessee for manufacture of the goods were returned after use (without availing CENVAT credit), (f) that the brand name of TUPPERWARE was affixed on the products by the assessee as required by the buyer, (g) that the assessee indemnified TUPPERWARE against any losses, damages, liabilities etc. which might arise from the formers negligence or wilfull misconduct in manufacturing, assembling, handling, storing or shipping the products, and TUPPERWARE indemnified the assessee against any claim arising out of consumers use of the products in accordance with TUPPERWAREs instructions, (h) that the assessee had to use their own equipments, labour and knowhow to manufacture/assemble the products, to carry out quality control tests on the products and to pack and ship the products in terms of the Purchase Orders of TUPPERWARE, (i) that the agreement left the assessee free to manufacture goods not similar to the products for third parties and (j) that TUPPERWARE was free to source the products from other manufacturers. All these features of the contract would clearly indicate that the assessee was manufacturing the goods for TUPPERWARE and selling the goods to them for a price at arms length on principal-to-principal basis. Therefore, the contention of the appellant that the respondents were manufacturing the goods as job workers on behalf of TUPPERWARE cannot be accepted. The second requirement noted in para (7.1.) was, therefore, not satisfied in this case.
7.4. It is true that stringent quality standards were prescribed by TUPPERWARE to be strictly maintained by the manufacturers at every stage of the manufacture. TUPPERWARE could inspect the process of manufacture to ensure that the specified quality standards for the products were being maintained. They also had the liberty to reject the finished goods which did not conform to the specified standards. These things are part of normal commercial practice in respect of business houses who insist on the quality of their merchandise. These cannot be considerations to hold that the manufacturing activities of the assessees were under extensive control of TUPPERWARE reducing the status of the manufacturers to job workers. That the brand name of TUPPERWARE was affixed on the finished goods by the assessees is also immaterial. In this context, in our view, the learned Commissioner is justified in having claimed support from the decisions in the cases of Poona Bottling Co. Ltd. etc. 7.5. The third requirement (vide para (7.1.) supra) for the assessees to be job workers of TUPPERWARE has also not been satisfied in this case inasmuch as the goods were not manufactured from any inputs supplied by TUPPERWARE or by any other person authorized by them. It is not in dispute that the necessary raw materials and packing materials were procured by the assessees from suppliers named by TUPPERWARE. The cost of these materials were expressly recognized as expense of the assessees. That the suppliers were chosen by the assessees from a panel furnished by TUPPERWARE does not mean that the actual suppliers were authorized by TUPPERWARE to supply the materials to the assessees. In so far as the moulds are concerned, undisputedly, they were returned by the assessees to TUPPERWARE after use (without availing CENVAT credit) and the amortised value thereof was included in the assessable value of the finished goods. On these facts, it has to be held that the third condition also remains unfulfilled in this case. In the result, the respondents in these appeals were not manufacturing the subject goods as job workers on behalf of TUPPERWARE. Needless to say, therefore, that Rule 10A was not applicable to the assessment of the subject goods.
7.6. We have also perused the text of the order passed by this Bench in the case of Coromandel Paints Ltd.(supra). The assessee in that case was engaged in the manufacture of paints, varnishes and thinners. They entered into an agreement with M/s. Sigmakalon India Pvt. Ltd. (SIPL) for manufacture and supply of paints to SIPL. COROMANDEL accordingly manufactured paints and sold the same to SIPL. They paid duty on the transaction value (the value shown in the invoice raised on SIPL by COROMANDEL) of the goods under Section 4(1)(a) of the Central Excise Act, 1944. The invoice amounts were adjusted against the advances paid by SIPL. The work undertaken by COROMANDEL appeared, to the Department, to be a job work and therefore show-cause notices were issued to them demanding differential duty on the basis of Rule 10A of the Valuation Rules, 2000. The assessee resisted this demand mainly on the ground that they were not job workers and that the transaction between them and SIPL was on principal-to-principal basis. This contention of the assessee was rejected by the adjudicating authority which held that the assessee was job worker of SIPL and hence liable to pay the differential duty on the basis of Rule 10A. The orders of the adjudicating authority came to be upheld by the Commissioner(Appeals). Aggrieved, the assessee approached this Tribunal. After examining the various clauses of the Agreement for Manufacture and Supply of Paints, between COROMANDEL and SIPL, this Bench found (a) that both parties had understood the arrangement to be on principal-to-principal basis, (b) that COROMANDEL procured the raw materials and packing materials and manufactured paints as per SIPLs specifications and sold the paints to SIPL, (c) that there was nothing on record to indicate that SIPL had supplied raw materials or other goods to COROMANDEL and (d) that certain general equipments such as computers, printers etc. supplied by SIPL were never installed in the factory or used by COROMANDEL. On these facts, this Bench took the view that the relationship between COROMANDEL and SIPL was not that of a principal manufacturer and job worker. In COROMANDELs case, they were also required to select suppliers named by SIPL because the raw materials from those suppliers were of the special kind required for the manufacture of the paints for which purchase orders were placed by SIPL on COROMANDEL. This fact pleaded by the Department was not accepted as a ground for holding COROMANDEL to be a job worker of SIPL.
7.7. The learned Addl. Commissioner(AR) picked one aspect of COROMANDELs case to distinguish it from the present case. In that case, this Bench had noted that there was no evidence of return of unused materials, scrap etc. to SIPL. In the present case, such materials were to be returned to TUPPERWARE. But, then, the cost of these materials could be billed by the manufacturer to be paid by TUPPERWARE vide clause (11) of TUPPERWARE-DART agreement, which arrangement also reflected a seller-and-buyer relationship between the parties.
7.8. In COROMANDELS case, this Bench also found that their case was supported by the decision of a coordinate Bench in the case of Gillette Diversified Operations Ltd. Vs. CCE, Chennai [2007-TIOL-2341-CESTAT-MAD]= [2007(217) ELT 0551(Tri. Mad.)].
8. The respondent can claim strong support from the decision of this Bench in COROMANDELs case. There is no merit in the grounds of these appeals. The appeals are dismissed.
(Pronounced on ) (M. VEERAIYAN) MEMBER (TECHNICAL) ( P.G. CHACKO ) MEMBER (JUDICIAL) Nr 26