COMMNR. OF CENTRAL EXCISE, FARIDABAD versus M/S FOOD & HEALTHCARE SPECIALITIES & ANR.

Citation: [2012] 1 S.C.R. 908 · Decided: 13-02-2012 · Supreme Court of India · Bench: D.K. JAIN · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
(2012) 1 S.C.R. 908 
COMMNR. OF CENTRAL EXCISE, FARIDABAD 
v. 
M/S FOOD & HEALTHCARE SPECIALITIES & ANR. 
(Civil Appeal Nos. 6539-6540 of 2010) 
FEBRUARY 13, 2012 
[D.K.JAIN AND ANIL R. DAVE, JJ.] 
Central Excise Act, 1944: 
c 
Section 4(1) · Valuation of excisable goods for purposes 
of charging of excise duty · Contract between merchant-
manufacturer and processor-assessee for blending and 
packing 'Glucon D' · Held: If the processor-assessee is not 
at arm's length with the merchant-manufacturer and is a 
0 related person, assessable value for the purpose of levy of 
excise duty will have to be determined in accordance with the 
procedure contemplated ins. 4(1)(b) of the Act read with the 
relevant valuation Rules · Since neither did the Tribunal 
address this aspect of the matter nor did it consider whether 
the merchant-manufacturer and the processor-assessee were 
E related persons, the matter is remanded to it to examine in 
depth the agreement between the two and decide in 
accordance with law and observations made by Supreme 
Court in the instant judgment. 
F 
Respondent No.1 (assessee) was engaged in 
blending and packing of 'Glucon D' for respondent no.2, 
who was to supply raw material, packing material and 
technical know-how to the former. From March 2000 to 
September, 2000, the assessee paid excise duty on the 
G basis of wholesale price of the product at the depots of 
respondent no.2. However, for the period commencing 
from October, 2000, the assessee filed price declarations 
seeking to modify the assessable value of the product as 
the aggregate of cost of raw material, packing material and 
H 
908 
COMMNR. OF CENTRAL EXCISE, FARIDABAD v. 
909 
FOOD & HEALTHCARE SPECIALITIES 
their job work charges, and started paying duty on the A 
same. It was found that the said product was also being 
processed at the factory of respondent no.2 and duty on 
those clearance was being paid at the assessable value 
/depot sale price of respondent no.2. Consequently, 
notices were issued to the assessee for demand of B 
differential duty with penalties. The Adjudicating 
Authority confirmed the demand and imposed the 
penalties. The Customs, Excise and Service Tax 
Appellate Tribunal set aside the order in original. 
Allowing the appeals filed by the revenue, the Court C 
HELD: 1.1 In S. Kumars, it has been held that if the 
processor-assessee is not at arm's length with the 
merchant manufacturer and is a related person, the 
formula prescribed in Ujagar Prints (Ill) would not apply 0 
and assessable value for the purpose of levy of excise 
duty will have to be determined in accordance with the 
procedure contemplated in s. 4(1 )(b) of the Central Excise 
Act, 1944 read with the relevant valuation Rules. In the 
instant case, neither did the Tribunal address this aspect 
of the matter, nor did it consider whether the assessee E 
and respondent no.2 are related persons. It based its 
decision solely on the observation made by the 
Adjudicating Authority "that the status of the assessee 
was not better than that of a hired labour". Therefore, it 
would be necessary for the Tribunal to examine in depth 
F 
the agreement between the assessee and respondent 
no.2 as also any other additional material, the parties may 
like to adduce and determine the question whether or not 
both of them are related persons. [para 11-12] [921-E-H; 
922-A-C] 
G 
Commissioner of Central Excise, Indore Vs. S. Kumars 
Ltd & Ors. 2005 (5) Suppl. SCR 370 = (2005) 13 sec 266, 
relied on. 
Mis Ujagar Prints & Ors. (///) Vs. Union of India & Ors. 
H 
910 
SUPREME COURT REPORTS 
(2012] 1 S.C.R. 
A 1988 (3) Suppl. SCR 770 = (1989) 3 SCC 531); Mis Ujagar 
Prints & Ors. (II) Vs. Union of India & Ors. 1989 (1) SCR 344 
= (1989) 3 SCC 488), Empire Industries Limited & Ors. Vs. 
Union of India & Ors. 1985 (1) Suppl. SCR 292 = (1985) 3 
SCC 314 and Pawan Biscuits Co. Pvt. Ltd. Vs. Collector of 
B Central Excise, Patna 2000 (1) Suppl. SCR 628 = (2000) 6 
sec 489, referred to. 
1.2 Resultantly, the matter is remanded back to the 
Tribunal for the purpose of determining the nature of 
relationship between the assessee and respondent no.2. 
C If it is found that they are not related persons, then the 
decision of the Tribunal challenged in the instant appeals 
will stand affirmed. However, if the Tribunal finds that the 
assessee and respondent no.2 are related, it shall remit 
the matter to the Adjudicating Authority for determination 
D of the as
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