2015 (10) TMI 1673 - AT - Central Excise

Duty demand - Penalty u/s 11AC - Job works - Held that - On perusal of the adjudication order it is seen that the adjudicating authority proceeded on the basis that the job workers are hired labourers and the assessee herein, is manufacturer of the goods and liable to pay duty as per the provisions of Section 2(f) of the Central Excise Act, 1944. We are unable to accept such a finding of the adjudicating authority for the reason that there is no allegation in the show cause notice that the job workers are hired labourers. In any event, it is clearly coming out from the show cause notice that the appellant sent the material to the job workers, who issued the bills to the assessee. So, there is no material available that the job workers were the hired labourer of the assessee. - demand of duty alongwith interest can not be sustained. Accordingly, the demand of duty and interest is set-aside - Decided in favour of assessee.

Summary

Issues:
1. Liability of payment of Central Excise duty on job work basis
2. Interpretation of Rule 4(1) and (3) of Central Excise Rules, 2002
3. Amendment to Rule 4 by Notification No. 24/2003-CE (NT)
4. Classification of job workers as hired laborers
5. Appeal against demand of duty, interest, and penalty

Analysis:

1. The case revolves around the liability of payment of Central Excise duty on job work basis. The Assessee sent fabrics for stitching to job workers and received ready-made garments. The issue was whether the Assessee or the job workers were liable to pay the duty under Rule 4(1) and (3) of the Central Excise Rules, 2002.

2. The Tribunal examined Rule 4(1) and (3) of the Central Excise Rules, 2002, which specify the duty payable on removal of excisable goods. The Rule allows for goods produced by job work to be removed without payment of duty, with the duty payable by the job worker. An amendment to Rule 4 by Notification No. 24/2003-CE (NT) omitted the explanation of sub-Rules (1) and (3), affecting the liability of the Assessee.

3. The Tribunal addressed the classification of job workers as hired laborers. The adjudicating authority considered the job workers as hired laborers, holding the Assessee liable for duty payment. However, the Tribunal disagreed, noting that there was no evidence in the show cause notice to support the job workers being hired laborers of the Assessee.

4. Ultimately, the Tribunal set aside the demand of duty and interest, ruling in favor of the Assessee. The demand was deemed unsustainable based on the lack of evidence supporting the liability of the Assessee for duty payment. The appeal filed by the Revenue against the penalty was rejected, and the application for extension of stay order was dismissed as infructuous.

In conclusion, the judgment clarified the liability of payment of Central Excise duty on job work basis, interpreted the relevant rules, considered the impact of an amendment, and addressed the classification of job workers. The decision favored the Assessee, setting aside the demand of duty and interest while rejecting the Revenue's appeal.