Final Order Nos. A/10002-10003/2014-WZB/AHD arising from in Appeal Nos. E/1696-1997/2010. Case: Leamak Healthcare Pvt. Ltd. Vs Commr. of C. Ex. & S.T., Ahmedabad. CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)
| Case Number | Final Order Nos. A/10002-10003/2014-WZB/AHD arising from in Appeal Nos. E/1696-1997/2010 |
| Counsel | For Appellant: Shri B.V. Kumar, Advocate and For Respondents: Shri S.K. Mall, AR. |
| Judges | Shri M.V. Ravindran, Member (J) and H.K. Thakur, Member (T) |
| Issue | Central Excise Valuation (Determination of Price of Excisable Goods ) Rules, 2000 - Rule 11 |
| Citation | 2014 (310) ELT 575 (Tri. - Ahmd.) |
| Judgement Date | January 01, 2014 |
| Court | CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal) |
Order:
H.K. Thakur, Member (T), (West Zonal Bench At Ahmedabad)
1. These appeals have been filed by the appellants against OIO number 26/Commr/HKJ/Ahd-II/2010, dated 10-8-2010, under which a demand of Rs. 3,70,31,551/- has been confirmed against the main appellant M/s. Leamak Healthcare Pvt. Limited (hereinafter referred to as M/s. Leamak for short) along with interest and equivalent amount of penalty is imposed under Section 11AC of the Central Excise Act, 1944. A penalty of Rs. 90 Lakh has also been imposed upon M/s. ITC Limited under Rule 26(i) of the Central Excise Rules, 2002.
2. Brief facts of the case are that M/s. Leamak is engaged in manufacturing confectionary items on behalf of M/s. ITC Limited at their factory premises as a job worker. It is the case of the Revenue that for the purpose of valuation and payment of duly, the goods manufactured by M/s. Leamak should have been worked out as per the provisions contained in Section 4(3)(b) of the Central Excise Act, 1944 and not in accordance with the principles laid down by the Hon''ble Supreme Court in the case of Ujagar Prints [1989 (39) ELT 493 (S.C.)] and in the case of Pawan Biscuit Company Pvt. Limited [1991 (53) ELT 595 (Tri.)]. As per the investigation conducted by the Revenue, both M/s. Leamak and M/s. ITC Limited are proposed to be related persons as per the definition contained in provisions of Section 4(3)(b) of the Central Excise Act, 1944, which has been upheld by the adjudicating authority as per OIO dated 10-8-2010.
3. The adjudicating authority, while deciding the issue against the appellants recorded following findings:-
(a) M/s. ITC Limited and M/s. Leamak have entered into agreements dated 4-1-2003 and 1-9-2005 for the manufacture of confectionery items at the factory premises of M/s. Leamak with respect to Minto fresh, Candyman, Candyman Eclair in various flavours for which the raw materials and packing materials are supplied by M/s. ITC Limited.
(b) All the raw materials required for manufacturing of above mentioned sugar boiled confectionary items were sugar, glucose liquid, high maltose corn syrup, flavours, cream, skimmed milk powder, GMS Powder, etc. are purchased by ITC Limited and directly supplied to M/s. Leamak from the of raw materials.
(c) that as per Para 4.18 of the agreement dated 24-1-2003 and Para 4.23 of the agreement dated 1-9-2005, both M/s. ITC Limited and M/s. Leamak have interest directly or indirectly in the business of each other and M/s. ITC Limited has all the rights of inspection in respect of the said manufacturing premises in order to verify the standards, etc. with respect to know-how provided by ITC Limited for manufacturing and packing of the product.
(d) M/s. ITC Limited has his own people to supervise the manufacturing activities at the factory premises of M/s. Leamak by deploying professionally qualified employees right from the receipt of the raw material stage till the despatch of the goods from the factory premises of M/s. Leamak.
(e) M/s. ITC Limited has provided machinery worth Rs. 1.78 Crores to M/s. Leamak for manufacturing of confectionery. M/s. ITC Limited has incurred all the expenses with respect to cost of such machinery, its installation, freight and other expenses and depreciation of such machinery were claimed by M/s. ITC Limited.
(f) As per agreement between M/s. Leamak and ITC Limited, a nominal rent of Rs. 12,000/- per annum was being paid by M/s. Leamak with respect to the machinery worth Rs. 7.38 Crores provided by M/s. ITC Limited. This machinery supplied by M/s. ITC Limited could be used for the manufacturing of confectionery belonging to M/s. ITC Limited only and not for any other client.
(g) M/s. ITC Limited has provided interest free loan to M/s. Leamak of Rs. 25,86,257/- and Rs. 49 lakhs in the years 2002-03 and 2005-06 respectively and no interest on such loan/advance has been paid by M/s. Leamak to ITC Limited.
(h) that after receipt of machinery from M/s. ITC Limited, as per agreement dated 1-8-2005, the manufacturing charges payable by M/s. ITC Limited to M/s. Leamak were reduced from Rs. 13.50 per Kg. to Rs. 9.00 per Kg. for the confectionery manufactured by M/s. Leamak in excess of 412 MT.
(i) that there was no sale of the confectionery manufactured by M/s. Learmark to M/s. ITC Limited because the entire goods manufactured in the factory were handed over to representative of M/s. ITC Limited at the factory gate and M/s. ITC Limited prepared invoices of the manufactured goods as stock transfer for further dispatching to M/s. ITC Limited hubs.
(j) that as per clause 4.30 of the agreement dated 1-9-2005, M/s. Leamak were restricted by M/s. ITC Limited to manufacture confectionery products for supply to any other party.
(k) that M/s. ITC Limited was also supplying items to M/s. Leamak for packing along with finished confectionery which were to be supplied free as an...
To continue reading
Request your trial