1. The fact of the case is that appellant, M/s. Hindustan Lever Ltd., manufactured Breeze/Lux Soap Noodles falling under Chapter sub-heading No. 3401.19 of the schedule to the CETA, 1985 and cleared it to M/s. Aquagel Chemicals Pvt. Ltd. Gujarat and M/s. Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh on payment of Central Excise duty. Both the units manufactured branded soap on behalf of Hindustan Lever Ltd., out of soap noodles sold by M/s. Hindustan Lever Ltd. Khamgaon and all the quantities of finished branded soap manufactured by them are returned back to M/s. Hindustan Lever Ltd, who ultimately sell it to the wholesale trade. A show-cause notice was issued contending that this transaction of soap noodles to both the above said units are not of sale transaction. Therefore, the valuation is governed by Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Accordingly, the appellants should have applied the value of 115% upto 04/08/2003 and 110% upto 05/08/2003 as per amended Rule 8, of the cost of production or manufacture of such goods. The adjudicating authority applying Rule 8 confirmed the demand of differential duty amounting to Rs. 41,41,631/- imposed penalty of equal amount under Rule 25 and also demanded inter
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est under Section 11AB. Being aggrieved by the order-in-original, the appellant filed an appeal before the Commissioner (Appeals) who held that the transaction between the appellant and the manufacturers are one of "sale" and "purchase". Accordingly, demand is not sustainable, the appeal was allowed, therefore, the revenue is before us. Shri N.N. Prabhudesai, Ld. Superintendent, (AR) appearing on behalf of the Revenue reiterating the grounds of appeal submits that the Ld. Commissioner has held that the transaction is of "Sale" and "purchase" whereas as per the definition of sale in terms of Section 2 (h) of Central Excise Act, 1994, the important aspect to construe the sale is the possession of goods should be transferred by one person to another in the course of trade or business for cash or deferred payment or other valuable consideration. He submits that in the facts of the present case, the respondent cleared soap noodles to two parties for manufacture of soap for the assessee only under the agreement. Therefore, the transaction was not in ordinary course of trade and business but was influenced and conditioned for future obligation to be fulfilled in favour of the assessee. In the absence of specific ingredients for the transaction, it cannot be termed as sale. Therefore, the valuation in terms of Rule 8 of Central Excise Valuation Rules, 2000 will apply. Thus, the respondents have paid short duty. He placed reliance on the following judgements:
a) ITC Ltd : 2014 (36) STR 481 (Del)
b) Mahalaxmi Fabrics Mills Pvt. ltd : 2016 (339) ELT 427 (Tri-Ahmd)
c) Indorama Synthetics (I) Ltd : 2015 (323) ELT 20 (SC)
d) IFGL Refractories Ltd : 2005 (186) ELT 529 (SC)
2. Ms. Mansi Patil, Ld Counsel appearing on behalf of the respondent submits that the respondent submits that the respondent have sold the goods to two companies, M/s. Aquagel Chemicals Pvt. Ltd., Gujarat and M/s. Sree Rayalaseema Alkalis and Allied Chemicals ltd. Andhra Pradesh, on principle to principle basis, by raising sale invoices and charging sales tax. Merely, because the recipients of the goods have manufactured branded soap on behalf of the respondents, the nature of sale will not get altered. She submits that there are two transactions involved. One sale of noodles by the respondents to said two companies and sale of branded soap by those companies to the respondent. She placed sample copies of the invoices. She further submits that the agreement referred by the department in their grounds of appeal is not a sale agreement but it is a sourcing agreement particularly for the purpose of manufacture and supply of branded soap by the said two companies to the respondents. In the said agreement, both the two companies are free to purchase and procure all raw materials, packing materials, etc. for manufacture of finished products, i.e. soaps. Therefore, this agreement will not have any effect on the transaction of sale and purchase of noodles made between the respondent and the recipient. She placed reliance on the following judgements:
a) Indian Rayon and Industries : 2007 (212) ELT 358 (T)
b) Upheld by Supreme Court : 2015 (325) ELT 635 (SC)
c) Video Master : 1996 (88) ELT 117 (T)
d) Modern Food Industries : 1988 (37) ELT 294 (T)
We have carefully considered the submissions made by both sides and on perusal of records, we find that the transaction between the respondents and two companies, M/s. Aquagel Chemicals Pvt. ltd. Gujarat and M/s. Sree Ryalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh, are of sale on the basis of following invoices:
2.1 From the aforesaid invoices, it is clearly observed that the respondent, M/s Hindustan Lever Ltd. have sold the goods to M/s. Aquagel Chemicals Pvt.ltd. Gujarat and M/s. Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh. It is also observed that being a sale transaction, the Central Sales Tax @ 4% was also charged in the bill. As per the certification given in the bills also it is clear that the goods, i.e., soap noodles was sold by Hindustan Lever Ltd. to the said two companies against form "C". It is further observed that both the companies after purchase of soap noodles and also various other inputs sourced by them manufactured branded soap and the same was sold to Hindustan Lever Ltd., a sample sale invoice of the same is scanned below:
SAMPLE INVOICE ON NEXT PAGE
2.2 From the aforesaid invoice of M/s. Aquagel Chemicals Pvt. Ltd. Gujarat, issued to respondent, M/s Hindustan Lever Ltd. It is observed that it is a sale invoice wherein Central Sales Tax @ 4% was charged. From the aforesaid transaction, it is clear that in respect of noodles there is a transaction of sale from the respondent to M/s. Aquagel Chemicals Pvt. ltd. Gujarat and M/s. Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh and similarly in respect of soap, there is a sales transaction from M/s Aquagel Chemicals Pvt. Ltd. Gujarat and M/s. Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh to the respondents. Accordingly, it cannot be said that these transactions are not a sale transaction in the ordinary course of trade. This be so, the transaction value has to be taken for charging of Central Excise duty in terms of Section 4(1)(a) of Central Excise Act, 1944. Rule 8 can be resorted to for valuation only when the transaction is not of sale. In the facts of the present case, the possession of the goods and ownership stands transferred from the respondents to M/s. Aquagel Chemicals Pvt. Ltd. Gujarat and Ms. Sree Rayalaseema Alkalis and Allied Chemicals Ltd. Andhra Pradesh, in respect of sale of soap noodles. The show-cause notice only made a charge that transaction is not of a sale, which is absolutely incorrect on the face of the evidences as referred above. On perusal of the impugned order, we find that the Ld. Commissioner (Appeals) has given an elaborated findings, which is reproduced below:
"I have carefully gone through the facts of the case on record, submissions made and contentions put forth at the time of personal hearing. The issue before me to be decided is whether the transaction between the appellant and two buyers namely M/s Rayalaseema Alkalis and Allied Chemicals Ltd., Kurnool, Andhra Pradesh and M/s. Aquagel Chemicals Pvt. Ltd. Gandidham, Gujarat (referred to as manufacturer) are in the nature of sales or otherwise and if they are not coming within the purview of the term "sales" what should be the value for the purpose of computing duty on the goods transacted between the appellant and these two manufacturers (purported buyers). The following facts are not under any dispute.
The appellant is manufacturing toilet soap noodles chargeable to excise duty and these noodles are sold as per appellant, under an agreement to these two separate legal entities, which are in no way related to the appellant. These two (manufacturers) manufacture toilet soaps under the brand name of the appellant out of the soap noodles and supply back entire quantity so produced to the appellant. While supplying the goods back the duty on soaps is paid on MRP basis. The appellant based on the purchase order and negotiated price issued commercial invoice and central excise invoice while clearing noodles to these two manufactures. In the similar way the finished goods, i.e. toilet soaps manufactured by these two manufacturers are received under the cover of commercial as well as central excise invoices. The departments contention is that the transaction between the appellant and the manufacturers is not that of sale but the manufacturers are working as job worker for the appellant as the entire quantity manufactured out of soap noodles supplied to the manufactures are received back by the appellant. There is no allegation that the consideration for sale as appearing in the commercial invoice is not transacted.
The sale has been defined under Sect. 2 (h) of Central Excise Act, 1944 as under:
"Sale" and "Purchase" with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuation consideration".
A perusal of invoices and terms and conditions thereof, a consideration in the form of per unit price is evident and the goods are also in fact transferred physically from the possession of appellant to the manufacturers. Therefore, in the present case the element of sale and purchase stand satisfied in as much as that there is a transfer of ownership of the property from appellant to the manufacturers.
In case of Video Master v. CCE : 1996 (88) ELT 117 the tribunal has held that even the transfer of goods on security deposit, was almost equivalent to the value of the goods and the goods were not returned after the rent paid was over, the transaction to be in the nature of sales, as per the definition of sale as given in the Central Excise Act.
The matter of the present case are even at better footing than the one cited above. In as much as that while transferring the possession of the goods the monitory consideration is duty indicated whereas in case referred above there was not even a whisper of the value of consideration.
Further in the case of Collector, Central Excise, V. Modern Food Industries : 1988 (37) ELT 294 CEGAT observed as under:
7. We have carefully considered the facts of the case and the submissions made before us. As per the order in appeal the transaction between the manufacturer and the branches cannot be considered as sale because it is mere transfer of products to these b ranches on book adjustments. We are unable to accept this finding. The learned Collector (Appeals) in this connection ignored the definition of sale as contained in Section 2(h) of the central Excises and Salt Act, 1944, which clearly includes transfer of the possession of goods of the kind as represented by the transactions in this case. There is no denial on behalf of the respondents that the transfer memos are indicative of their being monetary transferee. Merely because there is no payment in cash of because there is book adjustment, it cannot be claimed that there has been no sale. Book adjustment is also a form of payment. Once we hold that these transactions are in the nature of sale, then it is quite clear that the learned Collector (Appeals), has erred in coming to the view that the goods are not "ordinarily intended for sale". The fact is that they are in fact manufactured for sale to the sister units.
In view of the consistent pronouncements, as regards what constitute the sale and in view of the fact that the department has not brought any evidence except mere allegation that the transaction between appellant and the manufacturers are sham and not actual sales. The transaction between the appellant and the manufacturers are held to be one of sale and purchase and accordingly the demand is not sustainable. Consequently the penalty is also not leviable. As such in view of the above findings, the appeal is allowed."
2.3 From the reading of the above findings, we find that the Ld. Commissioner (Appeals) has come to the conclusion that the transaction is of sale, dealt with the statutory provisions relevant to the issue and held that the transaction is one of sale and purchase. We fully concur with the findings of the ld. Commissioner, therefore, the impugned order is upheld, Revenue appeal is dismissed