The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench quashed excise duty demand as there was purchase of raw materials and usage of them for manufacture as independent manufacturer.
The appellant,M/s.Star Boxes India (P) Ltd, is engaged in manufacture of carton boxes falling under Chapter 48 of Central Excise Tariff Act(CETA), 1985. Based on the intelligence that the appellant was not adopting the correct assessable value in respect of their clearances made to M/s.Mira Textiles and Industries (I) Ltd., documents and records were verified.
The department was of the view that the appellant, is manufacturing carton boxes as a job work for and on behalf of M/s.Mira Textiles. The price adopted by the appellant was only the cost of production at their hand as evidenced from the cost sheet prepared. The goods were sold by Mira to other customers.The department was of the view that amount received by the appellant was only compensation of the expenditure incurred by them and received by them through the sale invoices raised.
Radhika Chandrasekar appeared and argued for the appellant and submitted that both the authorities below erred in holding that the appellant is a job worker of Mira Textiles. It was asserted by the counsel that appellant is an independent manufacturer.
N. Sathya Narayanan appeared and argued the matter for the department and submitted that M/s.Mira Textiles exercises control on the appellant to adopt an artificial price for the purpose of assessment of duty which further indicate that the relationship between the appellant and M/s.Mira Textiles was one of job worker and Principal manufacturer. Hence duty on the goods cleared by the appellant requires to be determined in terms of provisions of Rue 10A of the Valuation Rules, 2000.
Section 4 (1) (a) of Central Excise Act, 1944 specifies the following conditions to be satisfied for adopting the transaction value for payment of excise duty: (a) the finished goods must be sold for delivery at the time and place of removal. (b) seller and buyer should not be related and (c) price must be the sole consideration for the sale.
The Two-Member Bench of the Tribunal comprising M Ajit Kumar, Technical Member and CS SulekhaBeevi, Judicial Member observed that “There is no evidence to support the case of the department. It clearly shows that the appellant has purchased raw materials and used them for manufacture of carton boxes as an independent manufacturer.”
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