Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Colgate Palmolive (I) Ltd on 18 February, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/4/2006 (Arising out of Order-in-original No. 2/M-I/2005 dated 28/2/2005 passed by the Commissioner of Central Excise, Mumbai-I ) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P. R. Chandrasekharan, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see : No
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 : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
=============================================================
Commissioner of Central Excise, Mumbai-I
:
Appellant
Vs.
Colgate Palmolive (I) Ltd.
Respondent
Appearance:
Shri Manish Mohan, Authorized Representative (DR), for appellant
Shri Vikram S. Nankani, Advocate for respondent
CORAM:
Mr. M.V. Ravindran, Member (Judicial)
Mr. P.R. Chandrasekharan , Member (Technical)
Date of hearing : 18/02 /201
Date of decision :
ORDER NO.
Per : M.V. Ravindran, Member (Judicial)
This appeal is filed by the Revenue against the order-in-original No. 2/M-I/2005 dated 28.2.2005.
2. The relevant facts that arise for consideration are the respondent herein had cleared Compound of Aromatic Chemicals falling under Chapter Heading 3302.90 to their contract manufacturers discharging duty on the value arrived on basis of cost construction method, Show-cause notices were issued alleging that the respondent had under valued the clearances to their contract manufacturers in order to evade duty. The show-cause notices covered the period from May 2000 to March 2003. It was also alleged in the show-cause notices that the respondents had cleared the aromatic chemicals to their units at Aurangabad and Nepal, during the relevant period in question by under stating the overheads by not including various other cost. This according to the Revenue has resulted in evasion of Central Excise duty. The respondent herein contested the show-cause notices before the learned Commissioner on various grounds. The learned Commissioner after following due process of law, dropped the proceedings initiated by the show-cause notice in respect of the allegation of undervaluation of the aromatic compounds cleared to contract manufacturers, but upheld the demand of the duty on the aromatic compounds cleared to respondents own unit at Aurangabad and Nepal. Revenue is aggrieved by that portion of that order which has dropped the proceedings initiated by Show-cause notices.
3. The learned SDR would assail the order of the learned Commissioner (Appeals) on various following ground. It is the submission:
Adjudicating authority has accepted the value declared by the respondent as normal price without assigning any reason; as per the provisions of Section 4 of Central Excise Act, 1944 normal price is the price at which goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time of place and removal. It is the submission that the price which has been charged by the respondent to the contract manufacturers is not the normal price nor it can be considered as a transaction value. It is the submission that the Apex Court in the case of Ashok Leyland Ltd. Vs. Collector of Central Excise, Madras 2002 (146) ELT 503 (S.C.) has held Therefore, the normal price would be the price at which the goods are sold in the market in the wholesale trade. Generally speaking, the normal price is the one at which goods are sold to the public. It is the submission that the assessee has not produced any documents/details to consider the price declared by them as a normal price. It is also the submission that the price at which the respondent sold the aromatic compounds to the contract manufacturers could not be normal price, as it may be influenced, by the fact, that the respondent purchases the entire production of Tooth Paste/Tooth Powder from the contract manufacturers; it would indicate that the price charged by the respondent on the aromatic compounds cleared to contract manufacturers is influenced. It is also the submission that the price is not the sole consideration due to the reason that respondent purchases the entire quantity of the goods manufactured by the contract manufacturers. It is his submission that the assessee controls the entire activity of the contract manufacturers by giving process know-how, strict quality control, production schedule, and also the basic raw material like aromatic compounds. It is his submission that in view of this, the provisions the Section 4(1) (a) would be inapplicable, and per force, Revenue has to invoke the provision the Section 4(1) (b) of the Central Excise Act 1944, and arrive at the correct assessable value. It is the submission that the adjudicating authority has taken a divergent view in coming to the conclusion inasmuch as she has held that the contract manufacturers are not related persons. It is the submission that the department disputes the assessable value, for the purpose of discharged of duty and the same should be the value at which the goods are sold by the respondent in the course of wholesale trade. It is the submission, since that intermediate product manufactured by the respondent are only cleared to the contract manufacturers and, who in turn use the said product in the manufacture of respondents tooth paste and tooth powder, as such the transaction between the respondent and contract manufacturer with regard to these goods is a transaction between principal and job worker. He would submit, that though the Honble Apex Court has held that the relationship between raw material suppliers and the contract manufacturer is principal to principal basis, valuation of the goods manufactured on job work basis for Central Excise duty should be carried out on the cost of material. It is the submission that the intermediate products; the price of which is under dispute is sold to the contract manufacturers and sister units only and is not otherwise sold to any other independent buyer and nor there is any wholesale market for it. It is the submission that therefore, the price of the intermediate products is influenced by other consideration i.e. buy back of entire products manufactured out of these intermediate products by the respondent. He would rely upon the following decisions :
(i) Pawan Biscuits Co. (Pvt.) Ltd. Vs. Collector of Central Excise, Patna [2000 (120) E.L.T. 24 (S.C.)]
(ii) Poornalaya Electricals Vs. Commissioner of C. Ex. Coimbatore [1999 (107) E.L.T. 660 (Tribunal)].
4. The learned counsel appearing on behalf of the respondent on the other hand would defend the order. It is his submission that in the entire grounds of appeal, the Revenue has not brought any evidence regarding the influencing of the price of the intermediate product sold to the contract manufacturers. It is his submission that the adjudicating authority has held that the contract manufacturers are not job-worker and they are independent manufacturers. It is his submission that findings of the lower authorities on this point are not being disputed by the Revenue. He would submit that in an identical issue, the adjudicating authority vide order-in-original No. 22 to 31/2000 dated 17.4.2000, where he was considering the very same issue, has held that the sale of the said compound is directly from the factory on a principal to principal basis, and the price is sole consideration of the sale. It is his submission that Revenue chose not to appeal against the said order and the said order has attained finality. It is his submission that the judgment of the Tribunal in the case of MTR Foods Ltd. Vs. Commissioner of C. Ex. Bangalore 2010 (252) E.L.T.580 (Tri.-Bang.) squarely covers this proposition. It is his further submission that the Larger Bench decision of the Tribunal in the case of Ispat Industries Ltd. Vs. Commissioner of C. Ex. Raigad 2007 (209) E.L.T. 185 (Tri.LB) would also cover the assessees case inasmuch as the Larger Bench has held if there is a sale of production to independent buyers, the value adopted for such clearance should be assessable value. He would also rely upon the judgement of the Tribunal in the case of Sai Mirra Innopharam P. Ltd. (SIMPL) Vs. Commissioner of C. Ex. Chennai-II & IV 2007 (215) E.L.T. 561 (Tri.Chennai) for the preposition that control of buyer-company would not mean that they are related and suggestion on sourcing of raw material could not be additional consideration. He would also rely upon the decision of the Honble Supreme Court in the case of Union of India & Others Vs. Cibatul Limited 1985 (22) E.L.T. 302 (S.C.) for the proposition that the goods produced under agreement with buyers brand would in any case cannot be treated as the related person and should be considered as a contract manufacturer.
5. We have considered the submissions made at length by both sides and perused the records.
6. The factual matrix in this case are for the period from May 2000 to June 2000 provisions of old Section 4(1) (a) of the Central Excise Act, 1944 will apply while for the period from July 2002 to March 2003. The provisions of Section 4(1) (a) as amended from 1.7.2000 will apply.
7. The undisputed facts in this case are the respondent has five independent contract manufacturers, who manufactured tooth paste and tooth powder of the respondent and sold the entire finished goods to respondent. For the purpose of such manufacturing of such tooth paste and tooth powder, the respondent had supplied the contract manufacturers aromatic chemicals. It is also undisputed that the five contract manufacturers are independent manufacturers and there is no averment that they are related to the respondent in any way. It is also not in dispute that the transaction entered by the respondent with a contract manufacturers is for the manufacturing of their final products like tooth paste and tooth powder and subsequently to be cleared to the depot/consignment agents of the respondent on the value as per the provisions of Section 4(A) of the Central Excise Act 1944. On this factual matrix, the findings of the adjudicating authority are very vital. The said findings recorded at paragraph 27, are reproduced.
Thus it has already been examined and established that out of the seven buyers five buyers are not related persons of the assessee. The show cause notices have not brought out any fresh facts to allege that material circumstances have changed in nay manner subsequently, to hold that these buyers were related persons of the assessee. Although, all the above judgments pertain to the period prior to 1.7.2000 i.e. prior to introduction of new Section 4 and Central Excise Valuation Rules, 2000, the same are applicable for subsequent period also. Since the five contract manufacturers are not held as Related persons, the price actually paid to them shall be the transaction value, as per Sec. 4(1) (a) of CEA 1944, effective from July 2000 onwards. As the value as per Sec. 4 (1) (a) is available in the present case, there is no need to take recourse of Section 4(i)(b) & Central Excise Valuation Rules 2000. Considering these facts, I find that the clearances to the five so called job workers or the contract manufacturer, for the entire period covered by four SCNs i.e. May 2000 to March 2003 at the value as determined by the notice were in order and therefore, the demand on these grounds is liable to be set aside.
As against the above recorded factual findings of the adjudicating authority, we find that the Revenue has not lead any contrary evidence that the price/ value charged by the respondent for the aromatic compounds cleared to contract manufacturers on an invoice is influenced in any way, nor there is any evidence that the value charged by the respondent to the contract manufacturers is less than the comparable prices in the market of identical products manufactured by some other assessee or in the respondents own sale to any other parties. We find that the proposition of the learned SDR that selling of the product to the public needs to be considered as only goods to be sold to the public is to say the least in presumption any basis. In this case the aromatic compounds cleared from the factory premises of the respondents were to independent manufacturers on an invoice under the provisions of Central Excise Act, and the Rules made thereunder. Such invoices are not disputed by the lower authorities and the price charged is only sought to be contested, that also without any cogent evidence. We find that the sale of aromatic compounds is for consumption and it need not be for sale to public. The contract manufacturers purchasing aromatic compounds from the respondent un-disputedly consume the same in the manufacture of the final product like tooth paste and tooth powder, if that be so, then it cannot be disputed that this is in wholesale trade. It is also to be noted that no evidence is brought on record either in form of statements or contracts which would indicate that the prices charged by the respondent for the aromatic compounds were influenced in any way or that they were abysmally low. It is also to be noted that there is no evidence is brought on record by the Revenue, to hold that the price was not the sole consideration for the sale of such aromatic compounds to the contract manufacturers. We find that buy back of the final products from the contract manufacturer is in itself would not indicate that the prices of the aromatic compounds are influenced, as per the decided case laws.
8. We would like to compliment the learned SDR in as much that he has put his best foot forward, while arguing for the revenue, but at the same time lack of evidences could not carry the case of revenue any further.
9. Since we have disposed off the appeal on factual matrix we are not recording any findings on the various submissions made by both sides.
10. Accordingly in view of this, we find that the appeal filed by the Revenue is devoid of merits and is liable to be rejected and we do so. The appeal is rejected.
(Pronounced in Court ) (P.R. Chandrasekharan ) Member (Technical) (M.V. Ravindran) Member (Judicial) Sm 9