2014 (9) TMI 956 - AT - Central Excise

Penalty under Rule 173Q(1) of the Central Excise Rules, 1944 - Whether in respect of the Aluminium and lead electrodes fabricated by the job workers out of the raw materials supplied by the appellant, it is the appellant who are to be treated as manufacturer and hence, liable to pay duty and or it is the job workers, who are to be treated as manufacturer and, therefore, liable to pay duty - Held that - The appellant had got the zinc and lead electrodes fabricated through job workers in their own premises out of the raw materials and design supplied by them. Though the job worker had brought their own machinery and appliances and their own workers, the job had been done in the appellant s premises and under the appellant s supervision. It is seen that in terms of the appellant s contract with their job workers, the job workers were to pay the minimum wages to the skilled and unskilled labourers as per the Government s orders and were to comply with the Government s regulations in this regard. In case of injury to any worker in any accident, it is the job workers, who would be liable to pay compensation to the worker and if any compensation is paid by the appellant, the same would be recoverable from the job workers. In terms of the conditions of the contract, the job workers were to ensure the safety of the labour employed by them as provided under the Factories Act. Job workers role was much more than mere receiving wages for labour involved in manufacture of Lead and Aluminium Electrodes and, therefore, the job workers cannot be said to be mere hired labourers. Applying the ratio of the Chennai Bench judgement to the facts of this case, we hold that it is the job workers who have to be treated as the manufacturers and, therefore, the duty on Aluminium and lead electrodes got manufactured by them on job work basis cannot be demanded from the appellant by treating them as manufacturers. The impugned orders are set aside. - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant should be treated as the manufacturer and be liable to pay duty for Aluminium and lead electrodes fabricated by job workers.
2. Interpretation of contracts with job workers.
3. Application of previous judgments on similar cases.

Analysis:
1. The appellant, a manufacturer of non-ferrous metals, had job workers fabricate electrodes using raw materials supplied by them. Previous orders confirmed duty demands against the appellant. The Apex Court remanded the matter to determine the manufacturer. The Tribunal held that the job workers, not the appellant, should be treated as manufacturers. The duty demands against the appellant were set aside.

2. The appellant argued that contracts with job workers were on a principal-to-principal basis. They contended that job workers used their own machinery and labor, so should not be considered hired laborers. The Commissioner's conclusion that job workers were hired laborers was deemed incorrect. The Tribunal found that the job workers' role went beyond mere labor and that they should be considered manufacturers.

3. The Tribunal noted that the job workers' responsibilities and the nature of their work indicated they should be treated as manufacturers. The Chennai Bench's judgment on a similar case supported this view. The Tribunal set aside the duty demands against the appellant based on the job workers' manufacturing role.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the job workers, not the appellant, should be considered manufacturers of the electrodes. The duty demands against the appellant were set aside based on the job workers' role in the manufacturing process.