AHMEDABAD, MAY 23, 2013: IN these appeals, M/s. Abhishri Packaging Pvt. Limited ( Abhishri ) is engaged in the manufacture of various plastic moulded articles. M/s. Abhishri was manufacturing Air Coolers with Symphony brand name, falling under chapter 84 and cleared the same to M/s. Symphony Limited (Symphony) after discharging Central Excise duty on the basis of transaction value, shown in the Central Excise invoices raised by them to M/s. Symphony. On an intelligence that there was under valuation of the goods cleared by M/s. Abhishri , investigation was taken up, premises of M/s. Abhishri and M/s. Symphony was visited by the revenue authorities and various statements were recorded. After investigation of the case in hand, the revenue officers arrived at a conclusion that the appellant M/s. Abhishri had cleared Air Coolers to M/s. Symphony by resorting to under valuation, inasmuch as the valuation of the goods cleared was not in terms of rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (Valuation Rules), read with provisions of Section 4(1) (b) of Central Excise Act, 1944. Accordingly, a show cause notice was issued and the same was adjudicated by the Commissioner, Central Excise, Vapi vide order in original No. 02/DEM/VAPI/2012 dated 29.03.2012. The adjudicating authority vide the impugned order has confirmed the demand of duty for the period November 2009 to March 2011 and imposed equivalent penalty on M/s. Abhishri and penalty on others, under various provisions of Central Excise Act read with rules made there under.

The counsel submits that the issue involved in this case is directly covered by the decision of the Tribunal in the case of CCE, Hyderabad vs. Innocorp Limited - 2012-TIOL-956-CESTAT-BANG. He would submit that the facts in the appellant's case and in the case of Innocorp Limited are identical. It is his submission that not only the facts are identical, but in Innocorp Limited case, they indicate more stringent control of the principle manufacturer. It is his submission that despite this, the Bench has clearly held in favour of the assessee by rejecting the appeal filed by the Revenue. He would point out the commonness between the appellant's case and in the case of Innocorp Limited. It is his submission that as regards the supply of moulds free of cost by Symphony, the only requirement inclusion of amortisation cost of such moulds is also satisfied by the appellant and would rely upon the invoices raised by the appellant during the period January 2010 to June 2010, wherein such amortisation has been indicated. He would refer to the said invoices which are annexed to the submissions made by them. He would submit that the appellant during the relevant period had filed returns with the lower authorities very clearly indicating therein the details of Central Excise duty paid on the clearances made by them. The revenue authorities having not raised any query at that time cannot now invoke the extended period and demand duty on the ground of suppression / misstatement of facts.

The issue involved in this case whether the goods manufactured by M/s. Abhishri in terms of agreement entered with M/s. Symphony and cleared to godown of latter, during the period November 2009 to March 2011 needs to be valued for the purpose of assessment of duty in terms of Rule 10A of the Valuation Rules, 2000, as held by the adjudicating authority or to be valued as per the provisions of Section 4(1)(a) of the Central Excise Act, 1944 as done by M/s. Abhishri .

Tribunal observed, “ there is no dispute as to the fact that M/s. Symphony had supplied moulds to M/s. Abhishri for manufacturing of Air Coolers. Non-inclusion of the amortized cost of such moulds, in the value of Air Coolers sold by M/s. Abhishri to M/s. Symphony, would, at the most require redetermination of value, read with provisions of Rule 6 of Valuation Rules, which talks about determination of correct value, even for the transaction falling under the ambit of Section 4(1 )( a) of Central Excise Act, 1944. When we apply the said rules, we find that the provisions of Rule 6 would apply in this case as the said provisions very clearly indicate that the cost of the free supply of moulds needs to be included in the transaction value, for the discharge of duty liability. The said cost of moulds has to be amortized and included in the value of goods manufactured and cleared by M/s. Abhishri . We find that the application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. We find that by applying such norm, rule 6 of the Valuation Rules should the correct Rule, as it is more specific rule than the Rule 10A, for the purpose of valuation of the goods manufactured and cleared by M/s. Abhishri . This ratio is laid down by the Larger Bench Decision in the case of ISPAT Industries Limited - (2007-TIOL-245-CESTAT-MUM-LB) . Applying the said ratio, since Rule 6 covers the issue more specifically, invoking the provisions of Rule 10A of the Valuation Rules in this case, does not arise. The conditions which are required for invocation of provisions of Rule 10A are also not satisfied in this case. We are fortified in our views as to the agreement between M/s. Abhishri and M/s. Symphony is on principle to principle basis and interpretation of the provision of Rule 10A is not applicable in this case, by the decision of the coordinate Bench in the case of Innocorp Limited. In the said case of Innocorp Limited, an identical issue was raised by the Revenue holding that M/s. Innocorp Limited being job worker of M/s. Tupperware is covered under the provisions of Rule 10A of the Valuation Rules, 2000. In that case, the first appellate authority had held in favour of the assessee and Revenue had preferred appeal before the Tribunal. The issue involved in this case is squarely covered by the decision of the Tribunal in the case of Innocorp Limited (supra). We would hasten to hold that in the case of Innocorp Limited, the agreement clauses are more stringent than the clauses of agreement in the case in hand, inasmuch as the Tupperware had strict quality control procedure set up, were also controlling and directing M/s. Innocorp Limited for control of the cost of the production, M/s. Innocorp Limited were also required to return the balance goods back to M/s. Tupperware immediately. We find that despite such terms and conditions, Tribunal had held in favour of assessee M/s. Innocorp . In our considered view, the ratio of the order of the Tribunal is that, if any assessee manufacture final products, independently procuring inputs, paying for the same, utilizing his own manpower and sells the finished products to a purchaser based upon the price agreed between them, the said transaction will be covered by Section 4(1 )( a) of the Central Excise Act, 1944. Trying to bring such type of transactions under provisions of Rule 10A of Valuation Rules, is not in consonance with the settled law, even if the finished products are sold at higher price by the buyer.”

Tribunal added, “We find from the written submission filed by learned counsel that ld counsel has attached the copies of invoices for the period January 2010 to June 2010, wherein it is clearly indicated that the cost of amortization of the moulds has been included. Though they have included the cost of amortization for a specific period, subsequent period, it seems there is no invoice which is produced before us for coming to conclusion that M/s. Abhishri has amortized the value of the moulds while discharging the duty liability. We hold that the appellant M/s. Abhishri is required to amortize the cost of the moulds supplied by M/s. Symphony, we direct the lower authorities to quantify amount of duty liability on the appellant on such amortized cost of the moulds, which we are informed in the written submissions that the same has been paid by the appellant M/s. Abhishri . If that be so, lower authorities are directed to look into the limited question of quantification of the said duty and if paid by the appellant with interest, accept the same.”

The impugned order is set-aside.

(See 2013-TIOL-772-CESTAT-AHM)