Custom, Excise & Service Tax Tribunal
M/S. Bhavani Enterprises vs Commissioner Of Central Excise, ... on 2 February, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal Nos. E/121 & 122/2011
(Arising out of Order-in-Appeal No. 174 to 177/2010 (P) dated 6.12.2010 passed by the Commissioner of Central Excise (Appeals), Chennai)
M/s. Bhavani Enterprises
Sree Mookambikai Polymers Appellants
Vs.
Commissioner of Central Excise, Pondicherry Respondent
E/40310 & 40313/2014 (Arising out of Order-in-Appeal No. 234 & 235/2013 (P) dated 10.12.2013 passed by the Commissioner of Central Excise (Appeals), Chennai) M/s. Bhavani Enterprises M/s. Smith Enterprises Appellants Vs. Commissioner of Central Excise, Pondicherry Respondent E/41450/2013 (Arising out of Pre-deposit Cum Appeal Order No. 86/2013 (P) (PD) dated 11.2.2013 passed by the Commissioner of Central Excise (Appeals), Chennai) M/s. Bhavani Enterprises Appellant Vs. Commissioner of Central Excise, Pondicherry Respondent Appearance Shri Ramnath Prabhu, Advocate for the Appellants Shri K.P. Muralidharan, AC (AC) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Date of Hearing : 30.01.2018 Date of Pronouncement:02.02.2018 Final Order Nos. 40293-40297 / 2018 Per Ms. Sulekha Beevi, Since the issues involved are identical, they are taken up together for hearing and are disposed by this common order.
2. The appellants are engaged in the manufacture of Blow Moulded HDPE plastic bottles on job work basis on behalf of M/s. Marico Ltd. and availed the SSI exemption under Notification No.8./2003. M/s.Marico supplied HDPE granules for manufacture of bottles by appellants. M/s. Marico Ltd. used the said bottles for filling coconut oil for clearing their products. Since the appellants were a job worker, the assessable value of the goods manufactured by them was computed on the basis of formula laid down by the Honble Supreme Court in the case of Ujagar Prints Ltd. The department was of the view that the price has to be determined upto 1.4.2007 applying Rule 8 and thereafter under Rule 10A(iii) r/w Rule 4 / Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 wherein the appellant is required to pay duty @ 110% of the cost of production. Show cause notices were issued raising the above allegation and proposing to demand differential duty for the period 2003 04 to 2008 09. After adjudication, the original authority confirmed the demand, interest and also imposed penalties. Aggrieved, the appellants filed appeals before the Commissioner (Appeals) who upheld the same. Hence these appeals before the Tribunal.
3. On behalf of the appellant, ld. counsel Shri Ramnath Prabhu submitted that Rule 8 is not applicable to the valuation as the same applies to a situation where the goods are cleared for own consumption or for consumption on behalf of the supplier of raw materials. In the instant case, the appellant neither used the goods captively for his own consumption nor are they consumed by M/s. Marico Ltd. on behalf of the appellant. He further submitted that Rule 10A(i) and (ii) are not applicable as the goods are not sold by the appellant but are used as packing materials by M/s. Marico Ltd. for packing of coconut oil. In such a situation, it is Rule 10A(iii) being residuary rule which alone could be made applicable. According to this Rule, valuation is required to be done based on other Rules. That as there is no other Rule which applies to the appellants case, recourse has to be taken to Rule 11 which says that valuation is to be determined using reasonable means consistent with the principles and general provisions of the Valuation Rules and section 4(1)of Central Excise Act, 1944. In view of this, the value has to be determined on the principles laid down in Ujagar Prints case. The Board in Circular No. 643/34/2002-CX dated 1.7.2002 has clarified that Rule 8 applies only when the goods are not sold by assessee but are used for own consumption or on his behalf. In the instant case, goods are sold to M/s. Marico by the appellant who consume the same for filling the coconut oil. M/s. Marico Ltd. supplies the necessary raw materials to appellant. The HDPE bottles manufactured by appellants are cleared on cost plus conversion basis as per cost certificate given by M/s.Marico. the bottles are manufactured without caps. The conversion charges include the profit margin and therefore the addition of notional profit of 10% to the cost does not arise. He relied upon the decision of the Tribunal in the case of Advance Surfactants India Ltd. Vs. Commissioner of Central Excise, Mangalore 2011 (274) ELT 261 (Tri. Bang.). He also submitted that the legal position has been maintained by the Honble Supreme Court in the case of Commissioner Vs. Rolastar Pvt. Ltd. 2013 (298) ELT A186 (SC).
4. The ld. AR Shri K.P. Muralidharan reiterated the findings in the impugned order.
5. Heard both sides and perused the appeal records.
6. The issue posing for consideration is whether the appellants have correctly arrived at the assessable value of the job worked goods. The appellants have paid duty on the assessable valueworked out by taking into account the cost of materials plus conversion cost as laid down in the case of Ujagar Prints. The principal manufacturer (M/s.Marico) used the bottles in its factory for filling coconut oil. The department therefore contends that assessable value has to be arrived as per Rule 8 of Valuation Rules, 2000. It is also contended that after 1.4.2007 the valuation should be done applying Rule 10A(iii) r/w Rule 8 of Central Excise Valuation Rules. It needs to be mentioned that Rule 8 applies when goods are not sold. The goods (HDPE bottles) are sold by appellant to M/s. Marico. The appellant does not captively consume the goods nor does M/s.Marico consume it on behalf of appellant. The very same issue has been considered by the Tribunal in the case of Advance Surfactants India Ltd. (supra) relied by the appellant. The Tribunal in the said case considered the Board circular F.No. 6/15/2009 dated 31.3.2010. The relevant portion of the order is reproduced for ready reference:-
6.?The undisputed fact in these cases is the appellant herein is a job worker manufacturing LABSA for M/s. HUL. It is also undisputed that HUL gives LAB and the appellant uses other consumables in the manufacture of LABSA. It is also undisputed that the appellant has been valuing the said LABSA cleared from factory premises, based upon the cost of material plus processing charges prior to 1-4-2007 when the provisions of Rule 10A were inserted into the Central Excise Valuation Rules, 2000. It is also undisputed that the said LABSA is returned back to M/s. HUL for further consumption in their factory premises for manufacturing of soaps and detergents. It is nobodys case that LABSA consumed by HUL is on behalf of the appellant herein.
7.?On these factual matrix we need to appreciate the provisions under Rule 10A, which is reproduced herein under :-
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 authorised by him.
7.1?It can be seen from the above reproduced provisions that provisions of Rule 10A can be brought into play only when there is a situation where excisable goods are produced or manufactured by a job worker on behalf of a person and cleared to the buyer of the principal and/or cleared to a depot or a consignment agent. The intention of the Legislature was to capture the tax on the goods, on the value of the said goods when cleared to the ultimate consumers. In the case in hand, we find that provisions of Rule 10A(i) and (ii) does not arise as has been recorded by us in the earlier paragraphs. Provisions of rule 10A(iii) gets attracted which talks about a situation where 10A(i) or (ii) does not apply. The said provision (iii) very clearly mandate that in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever applicable shall mutatis and mutandis apply for determination of value of the excisable goods. This would indicate that the provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 has to be gone through serially. It is not the Revenues case that provisions of Rules 3, 4, 5, 6 and 7 would also apply in this case. Revenue is of the view that provisions of Rule 8 will apply. In order to understand the Revenues case, we reproduce the provisions of Rule 8.
RULE 8.?Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be [one hundred and ten per cent] of the cost of production or manufacture of such goods.
7. The ratio of above decision is applicable to the present case also.
8. Following the same, we are of the view that the impugned orders are not sustainable and the same is set aside. The appeals are allowed with consequential relief if any.
(Pronounced in open court on 2.2.2018)
(B. RAVICHANDRAN) (SULEKHA BEEVI C.S.)
Member (Technical) Member (Judicial)
Rex
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