2018 (12) TMI 1771 - AT - Central Excise

Manufacturer of goods - manufacture and supply of Railway Wagon and Bogie components falling under Chapter 72, 73 and 86 of the Central Excise, Tariff Act, 1985 - whether the assessee is to be considered as the manufacturer of the goods supplied by them to Electricity Boards/Railway Wagon manufacturers? HELD THAT - Admittedly, goods have been got manufactured by various job workers by payment of job charges and supply of raw materials. After receipt of goods from the job workers, the mandatory inspection by third party Agency has been carried out at the assessee s premises before supply of the goods to the customers. Further the assesses have represented themselves as manufacturer of the goods before their customers. In these circumstances, the question for decision is whether the assessees are liable to be considered as manufacturer and liable to payment of Excise Duty - Revenue has justified the view that the assessee is the manufacturer with the argument that inspection is an important process without completion of which, the goods do not become marketable, since they cannot be supplied to the customers. The definition of the term Manufacture in section 2 (f) includes any process which is ancillary or incidental to the completion of the manufactured product. Revenue has sought to sustain the view that the assessee is the manufacturer with the submission that they have engaged the job workers, supplied the raw material and supervised the activities there and hence, are to be considered as the manufacturer. Even though, the idea is attractive, it does not merit acceptance. The transformation of the raw material into the final product has been done by the job worker at his premises and hence, the job worker alone is to be considered as the manufacturer and the liability to payment of Excise Duty would be upon him. The assessees cannot be considered as manufacturers of the goods supplied to Railway Wagon manufacturers as well as Electricity Boards. The respective job workers who have manufactured the goods will be liable to payment of Excise Duty. In this view, there are no infirmity in the order passed by the Commissioner dated 30/11/2012 and hence, it is sustained and all the revenue appeals are rejected. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Liability for payment of Central Excise Duty on goods supplied to Electricity Boards and Railway Wagon manufacturers.
2. Determination of the manufacturer for the purpose of excise duty.
3. Validity of the trading goods claim by the assessee.

Detailed Analysis:

1. Liability for Payment of Central Excise Duty:
The core issue revolves around whether the assessee is liable for paying Central Excise Duty on goods supplied to Electricity Boards and Railway Wagon manufacturers. The department's investigation revealed that no excise duty was paid on these supplies. The adjudicating authority initially confirmed the demand for excise duty amounting to ?50,93,726/- along with interest and penalties. However, upon appeal, the Tribunal had to decide if the assessee or the job workers were liable for the duty.

2. Determination of the Manufacturer:
The Tribunal examined whether the assessee could be considered the manufacturer under Section 2(f) of the Central Excise Act, 1944, which includes any process incidental or ancillary to the completion of a manufactured product. The assessee procured raw materials, sent them to job workers, and supervised the manufacturing process. The job workers were paid only labor charges, and no excise duty was paid by them. The department argued that since the final inspection was done at the assessee’s premises, the assessee should be considered the manufacturer. However, the Tribunal concluded that the job workers, who transformed the raw materials into final products, should be considered the manufacturers. The inspection process at the assessee’s premises was deemed ancillary and did not constitute manufacturing.

3. Validity of the Trading Goods Claim:
The assessee claimed some goods as trading goods, which were procured from outside manufacturers and sold separately. The department presumed that trading was a cover for manufacturing through job workers. The assessee rebutted this by providing invoices and evidence of VAT payments. The Tribunal found no reason to dispute the trading goods claim and accepted that these goods were not liable for excise duty.

Conclusion:
The Tribunal concluded that:
- The assessee cannot be considered the manufacturer of goods supplied to Railway Wagon manufacturers and Electricity Boards.
- The respective job workers, who manufactured the goods, were liable for the payment of excise duty.
- The trading goods claimed by the assessee were genuine and not liable for duty.

The Tribunal sustained the order passed by the Commissioner dated 30/11/2012, rejecting the revenue appeals, and set aside the order dated 23/01/2009. Consequently, the appeals filed by the assessee and the directors were allowed.