1993 (12) TMI 212 - AT - Central Excise

Summary

Issues Involved: Eligibility for exemption under Notification No. 56/88 as amended by Notification No. 44/89; whether the clearances of job workers should be clubbed with those of the main manufacturer; invocation of the extended time-limit under Section 11A of the Central Excises and Salt Act, 1944.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption under Notification No. 56/88 as Amended by Notification No. 44/89:

The core issue revolves around whether M/s. Super Analysers Private Limited and M/s. Santha Raghu Industrial Products, acting as job workers for M/s. Elgi Tyre & Tread Limited (E.T.T.L.), are entitled to the concessional rate of duty under Notification No. 56/88. The Collector of Central Excise, Coimbatore, held that E.T.T.L., a large-scale unit, engaged job workers to avail of the concessional rate of duty, which they themselves were ineligible for. The Collector confirmed the demand for duty and imposed penalties on the appellants, arguing that the job workers were essentially acting on behalf of E.T.T.L.

The appellants contended that they were independent manufacturers and relied on the Supreme Court decision in the case of Collector of Central Excise v. Kerala State Electricity Board, which established that contractors working independently cannot be considered hired labor. The Tribunal's decision in the case of M/s. Anand Engineering & Others v. Collector of Central Excise, Madurai, was also cited, where it was held that job workers cannot be deemed hired labor of the main manufacturer.

2. Clubbing of Clearances:

The Collector's order sought to club the clearances of the job workers with those of E.T.T.L., arguing that they were producing the same commodity under the same brand name. The Collector noted that E.T.T.L. had other units manufacturing bonding gum and used job workers to circumvent the duty restrictions applicable to large-scale units. The Collector emphasized that the goods manufactured by job workers and E.T.T.L. were indistinguishable in the market, which justified the denial of the concessional rate of duty.

However, the Tribunal found that the job workers were independent manufacturers and that the mere supply of raw materials by E.T.T.L. did not make them hired labor. The Tribunal referred to the Supreme Court's affirmation of the Tribunal's decision in the Kerala Electricity Board case, which held that independent contractors could not be considered hired labor.

3. Invocation of Extended Time-Limit under Section 11A:

The Collector invoked the extended time-limit under Section 11A, arguing that the job workers failed to declare that they were manufacturing bonding gum for E.T.T.L. and thus suppressed vital information. The Collector held that E.T.T.L. was aware of the duty restrictions and deliberately used job workers to avail of the concessional rate. The appellants argued that they were entitled to the exemption and that the extended time-limit was unjustified.

Separate Judgments:

- Majority Opinion: The majority, including Member (T) and Vice President, held that the job workers were independent manufacturers and their clearances could not be clubbed with those of E.T.T.L. They found no evidence that the transactions were not at arm's length or that the job workers were dummy units. The majority concluded that the appellants were entitled to the exemption under Notification No. 56/88.

- Dissenting Opinion: Member (J) disagreed, holding that the job workers were not entitled to the exemption due to the introduction of the words "or from any factory by one or more manufacturers" in the amended notification. He argued that the clearances should be clubbed as the job workers were manufacturing goods under E.T.T.L.'s brand name.

Conclusion:

In view of the majority opinion, the appeals were allowed, and the impugned order was set aside. The Tribunal concluded that the job workers were independent manufacturers and entitled to the exemption under Notification No. 56/88, as amended by Notification No. 44/89. The extended time-limit under Section 11A was not justified.