Tax assessments under the Central Excise Act must clearly establish manufacturing versus job work roles among appellants to avoid wrongful liabilities.

PER: C J MATHEW

The fine issue in this dispute, brought before us by the two categories of appellants against two sets of orders of Commissioner of Central Excise & Customs, Belapur, is also a crisis of existence. On the one hand is an, indubitably success, business model for manufacture of a niche product in which quality and precision of very high order is of essence. On the other is one silo in the larger scheme of tax levy that has ensconced a particularity, and as an afterthought, at that, in the scheme of valuation for computation of levy that the adjudicators opined as having been skirted with deliberate intent. And on that rests the outcome in the orders of Commissioner of Central Excise &

Customs, Belapur impugned here.

2. The resolution of the dispute has its locus in the fitment adopted by the adjudicating authority that the cavil of appellants portray as emanating from conjecture and not facts. Briefly, M/s Standard Greases & Specialities Pvt Ltd manufactures ‘lubricants’ for automotives and, in particular, ‘engine oil’ in accordance with requirements of the other appellants; products emerging from calibrated mixing of ‘additives’ to ‘base mineral oil’ and the ‘additives’ are procured from suppliers acknowledged as fitted for their offering. Considering the sophistication and fine tuning of automobiles for markets as well as regulatory standards, the recipe for these products are not serendipitous output but the fruit of high investment research. Owing to the exacting parameters, the customers, also lined up here for their fair share of detriment as beneficiary of the ‘scam’, as the adjudicating authority has characterized it, provide formulation, technical inputs, trademarks and copyrights that are to be complied with at peril of rejection of consignment. So far so good, but clearance of impugned goods, by discharge of duty liability at rates, not in dispute, applied to assessable value at actual transaction price - aggregating cost of inputs, processing cost and specified add-on towards profit - that is, came under the scanner of the tax administrator. It is the case of the adjudicating authority that, notwithstanding the model projecting the ‘manufacturer’ and ‘oil marketing companies’ as independent principals, the contracted undertaking has all the hallmarks inviting valuation incorporated in Central Excise (Determination of Price of Excisable Goods) Rules, 2000 after its coming into force and specially designed after deep study and considered deliberations having preceded the design. The design itself is not new and nor the category. The quantum of tax leviable on ‘job workers’ that, for some reason, is bugbear, and a genetic distaste, stemming from dispute in Ujagar Prints that attained closure with that decision, [ Ujagar Prints etc v. Union of India [1988 (38) ELT 535 (SC)] of the Hon’ble Supreme Court. We are The adjudicating authority has not been particularly coy in liberally sprinkling references to that decision in the impugned order.

3. The second, [order-in-original no. Belapur/111/Bel-II/F-I/COMMR/KA/2013-14 dated 31st October 2013] order fastened differential duty liability of ₹ 1,19,23,310 on M/s Standard Greases & Specialities Pvt Ltd under section 11A of Central Excise Act, 1944 , along with interest as applicable under section 11AA of , besides imposing penalty of ₹ 30,00,000 under rule 25 of Central Excise Rules, 2002 while imposing penalties of ₹ 1,00,000 on M/s Reliance Petro Marketing Company, ₹ 7,00,000 on M/s Petronas Marketing (India) Pvt Ltd, ₹ 2,50,000 on M/s Shell India Markets Pvt Ltd (erstwhile M/s Bharat S