2012 (6) TMI 73 - AT - Central Excise

Excisability - Manufacture - dispute regarding manufacturer - demand imposed in relation to fabrication of structural and other items of steel on ground that same were manufactured by the appellant in their factory whereas assessee contended that said goods were being fabricated by the contractors, it is the contractor who has to be held as manufacturer - Held that - Merely because the appellants were supplying the raw material, exercising supervisory quality control over the goods, and that the said fabrication was being done by the contractors as per the specifications of the appellants, it cannot be made a ground for holding that it is the appellants who had fabricated the goods when the contractors have admitted having fabricated the goods for and on behalf of the appellants. If that be so, the appellant cannot be held as a manufacturer. There is nothing in the Revenue s case to show that the said goods were manufactured by them for clearance from the factory. On the contrary, statements of contractors revealed that the goods were meant for use in the factory itself. Accordingly, applicants are entitled to the benefit of Notification No.281/86 dtd. 24.04.86 and Notification No.217/86, dtd. 02.04.86 It is well settled law that when during the relevant period, the decisions of higher appellate forum were in favour of the assessee or there were conflicting decisions, no suppression can be attributed to the assessee so as to invoke the longer period of limitation.

Summary

Issues:
Manufacture of steel items by appellants, applicability of duty, benefit of notifications, limitation period for demand.

Manufacture of Steel Items:
The case involved the manufacture of steel items by the appellants, which the Revenue claimed were fabricated in their factory and used in their units. The Revenue argued that processes like drilling, cutting, and welding amounted to manufacturing, rejecting the appellants' claim that the goods were manufactured by contractors. The demand of duty and penalty was confirmed by the authorities below.

Applicability of Duty:
The legal issue of whether cutting, drilling, welding, etc., amount to manufacture was decided against the appellants by a Larger Bench precedent. The appellants contended that the goods were fabricated by contractors, relying on legal precedents. They also claimed the benefit of specific notifications to challenge the demand, along with disputing the point of limitation.

Benefit of Notifications:
The appellants argued for the benefit of Notification No.61/90-CE, 281/86-CE, and 217/86-CE. They claimed that the goods were fabricated by contractors and used for repair and maintenance of machinery within the factory premises, making them eligible for duty exemption under the mentioned notifications.

Limitation Period for Demand:
The appellants contested the demand on the grounds of limitation, citing precedents where decisions of higher appellate forums favored the assessee during the relevant period. They argued that no suppression could be attributed to them, given the favorable legal landscape at the time.

The Tribunal found that the goods in question were indeed fabricated by contractors in the appellants' premises using raw materials supplied by the appellants. Disagreeing with the lower authorities, the Tribunal held that the appellants could not be considered manufacturers simply because they supplied raw materials and exercised quality control. The appellants were found entitled to the benefit of specific notifications, as the goods were used for repair and maintenance within the factory premises. The Tribunal also noted that during the relevant period, decisions of higher appellate forums favored the assessee, leading to the setting aside of the demand and penalty imposition, providing consequential relief to the appellants.