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CUSTOMS, EXCISE AND GOLD (CONTROL) APPELLATE TRIBUNAL, BANGALORE
G.A. BRAHMA DEVA, S.S. Sekhon, JJ.
Mysore Kirloskar Ltd. -Appellant
Versus
Commissioner of Central Excise, Belgaum -Respondent
Final Order No. 78/2002 Appeal No. E/744/95, 78 of 2002, 744 of 1995
Decided On : 25-01-2002
Per S.S. Sekhon :
The appellants (hereinafter referred to as MKL) are registered manufacturers of machinery and parts thereof and also carry out business of manufacture of machine tools and its accessories, high grade castings, pollution control equipments and other incidental and ancillary equipment and owns and operates a main machine manufacturing factory at Harihar. They accepted order to develop, fully engineering machine set ups and manufacture the said machines as per the drawings, patterns, jigs, fixtures and tools, etc. which they would develop on separate orders to be negotiated and placed on a principal to principal basis. The agreement dated 10.5.91 was entered into with ITC. The agreement related the preparation of drawings, patterns, jigs, fixtures and tooling necessary for manufacture of certain machines, which ITC requires and would place orders separately, once they approve the designs. This agreement stipulated the supply of a prototype machine by ITC to MKL to develop such drawings, patterns, jigs, fixtures and tools and it specifies that such items will be prepared by MKL, yet they would remain the property of ITC and shall be handed over to ITC on termination of this agreement dated 10.5.91 or earlier once the same are approved by ITC. The agreement specifically provided that the orders placed on MKL, from time to time for the manufacture of such machines, they were to be in writing, at negotiated prices for subsequent machines for this agreement they were paid Rs. 43 lakhs, which has been accounted as "OTHER INCOME" in the accounts and balance sheet of MKL.
2. In this appeal, we are concerned with the question of whether the amount of Rs. 43 lacs received by MKL towards such charges for drawing designs, tooling, jigs and fixtures, etc., as per the agreement dated 10.5.91, could be loaded on to the value of the machines, made and delivered subsequently as per separate written orders, and cleared on basis of such separate orders on gate passes:- G.P.1 No. 1087/4.12.92, G.P.1 No. 1088/4.12.92, G.P.1 No. 0867/22.10.93 and G.P.1 No.0387/10.5.93.
3. On this issue the Commissioner vide his impugned order finds as follows :
"10. Part III at page 4 of the Contract dated 10.5.91 in respect of manufacture of the machines, clearly states as follows:-
a. The Company shall place upon MKL orders from time to time for manufacturing the machines and all such orders shall be in writing.
b. MKL shall manufacture the machines strictly in accordance with the specifications, the prototype and the drawings and patterns prepared by it and approved by the company in writing in terms of this agreement; as detailed in Schedule B hereto.
c. In order to ensure that MKL manufactures the machines strictly in accordance with the specifications, the prototype and drawings and patterns approved by the company in writing; the Company's representatives will have the liberty of examining the machines manufactured by MKL during the process of manufacturing of such machines and also after the manufacture of the machines is completed, before or after the delivery of machines by MKL to the company.
Part IV at page 6 is for the prince of the machines and states:
"The price of the machines will be stipulated by the company in the orders placed upon MKL. All such prices shall be arrived at after prior negotiation between the parties hereto."
Part VIII at page 7 is for excise duty and states:-
"The company shall reimburse the MKL the amount or amounts of excise duty paid by MKL on the manufacture of the Machines in terms of this agreement".
11. As per the terms extracted from the contract above it is clear that the agreement in consideration is not merely for the preparation of the design and drawing but a total contract for design, drawing, manufacture of prototype, supply of the machines and payment of excise duty etc. The contract cannot be read in isolation in parts i.e. to say design & drawing separately and supply of machinery separately. It is no
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