2015 (3) TMI 826 - AT - Central Excise

Duty demand - Carpentry work - appellant has manufactured various items of furniture without obtaining Central Excise registration and without payment of excise duty and without following any Central Excise procedure - Manufacturer or not - Bar of limitation - Held that - appellant is not having control over the sub-contractor. Therefore, the appellant has clarified the test laid down by thisTribunal in the case of Shri Shankar Re-rolling Mills (1996 (8) TMI 229 - CEGAT, MUMBAI). However, other learned Judge has held that when the agreements were not produced during the investigation and the agreements produced before the Tribunal do not even speak anything about the scope of the work and the invoices produced very clearly indicate that the invoices are from labour contractor and are for carpentry labour charges, the appellant only can be considered as manufacturer. This will also be keeping in line with the practice for such industry. Invocation of extended period of limitation - Held that - in the show cause notice there is no allegation against the appellant that the appellant has not paid the duty by way of willful misstatement or suppression of facts or having mala fide intention not to pay central excise duty in contravention of the provisions of the Central Excise Act/Rules. In these circumstances, again we hold that, as held by HMM Ltd. (supra), the extended period is not invokable, hence the demands raised in the show cause notice are barred by limitation. - Decided in favour of assessee.

Issues Involved:
1. Whether the appellants are manufacturers.
2. Whether the extended period of limitation can be invoked.
3. Whether the matter requires re-quantification of the duty demand.

Issue-wise Detailed Analysis:

1. Whether the appellants are manufacturers:

The appellants contended that they subcontracted the manufacturing of furniture to independent contractors, thus not qualifying as manufacturers themselves. They provided agreements and invoices to support their claim, emphasizing a principal-to-principal relationship with subcontractors. The Tribunal referred to the case of AFL Pvt. Ltd. vs. CCE, Mumbai - II, where it was held that the entity subcontracting the work was not the manufacturer. The Tribunal noted that the appellants did not control the subcontractors' workers, who bore responsibility for defects and followed specifications independently. The Tribunal concluded that the subcontractors were the actual manufacturers, not the appellants.

However, a separate judgment by another judge disagreed, emphasizing that during the investigation, no mention of subcontractors was made. The agreements were identically worded and lacked specific details, indicating that the subcontractors were merely hired laborers under the appellants' supervision. The invoices also suggested labor charges rather than independent manufacturing. Thus, this judge concluded that the appellants were the manufacturers.

2. Whether the extended period of limitation can be invoked:

The appellants argued that the show cause notice issued on 3rd February 1998 for the period June 1995 to October 1995 was time-barred since there was no mala fide intention. They relied on the precedent set in the case of Louis Shoppe, which treated furniture as handicraft exempt from duty during the relevant period. The Tribunal agreed, noting that the issue of excise duty on furniture was subject to interpretation and that the appellants had no willful intention to evade duty. The Tribunal cited the case of Jay Arts, where the extended period of limitation was not applicable due to similar circumstances. The Tribunal also noted the absence of allegations of willful misstatement or suppression of facts in the show cause notice, further supporting the non-invocation of the extended period.

3. Whether the matter requires re-quantification of the duty demand:

Given the Tribunal's findings on the first two issues, the demand for duty was deemed unsustainable. The Tribunal noted that the provisions of Section 11AB and 11AC were not in force during the relevant period (June 1995 to October 1995), thus interest and penalty were not applicable. The Tribunal referred to the case of Lal Mining Engineering Works, which held that retrospective application of penal provisions was impermissible. Additionally, the show cause notice did not specify the clause of Rule 173Q contravened by the appellants, making the penalty under the said Rule non-imposable as per the case of Amrit Foods. The Tribunal also found that personal penalties on individuals were unwarranted if the firm was already penalized, referencing the case of Pravin N. Shah.

Conclusion:

The Tribunal concluded that the demand for duty, interest, and penalties was not sustainable, allowing the appeals with consequential relief. The separate judgment, however, held the appellants as manufacturers, but agreed on the non-invocation of the extended period of limitation and other issues, thus allowing the appeals on those grounds.

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