2019 (6) TMI 1499 - AT - Central Excise

Process amounting to manufacture or not - job-worker - Benefit of N/N. 214/86-CE dated 25.03.1986 - only allegation in the show cause notice is that supplier of raw material ROL does not have factory of their own although the Central Excise department has issued them registration - HELD THAT - The basis for allegation is that the supplier ROL has no factory on their own as per the statement before Commercial Tax department etc. There is no allegation that ROL have not fulfilled responsibilities given in their undertaking or that there is any loss of revenue on that count. When the Central Excise department themselves have given registration has manufacturers to ROL, and after citing such registration number, issued an undertaking to the jurisdictional Asst. Commissioner of appellant. The appellant could not have been expected to take any further precautions to ensure that notification 214/86 has been correctly availed. There is also no allegation whatsoever that there is any loss of revenue. The demand of duty as well as proposition to impose penalties upon appellant are not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of exemption notification 214/86-CE
- Validity of the undertaking given by the main manufacturer
- Liability of the job worker for Central Excise duty

Interpretation of Exemption Notification 214/86-CE:
The case involved the interpretation of exemption notification 214/86-CE, which exempts goods manufactured by a job worker if certain conditions are met. The notification requires the main manufacturer to give an undertaking that the goods will be used in the manufacture of final products or cleared for home consumption or export. The appellant, a job worker, claimed the benefit of this exemption based on the undertaking given by the main manufacturer. However, the main manufacturer was found to not have a factory for manufacturing activities, raising doubts about the fulfillment of the exemption conditions. The department argued that since the main manufacturer could not have used the goods for manufacturing or cleared them for consumption/export from a non-existent factory, the appellant was not entitled to the exemption.

Validity of the Undertaking Given by the Main Manufacturer:
The main manufacturer had given an undertaking to the job worker as required by the exemption notification. Despite not having a factory for manufacturing, the main manufacturer had Central Excise registration and had fulfilled other obligations under the notification. The appellant argued that any duty demand should fall on the main manufacturer, not on them, citing a precedent. The department contended that the exemption notification must be strictly construed, and since the main manufacturer lacked a factory, the appellant could not benefit from the exemption. The Tribunal noted that the main manufacturer's lack of a factory was the sole basis for denying the exemption to the appellant. As the main manufacturer had fulfilled its responsibilities and there was no revenue loss, the demand for duty and penalties on the appellant was deemed unsustainable.

Liability of the Job Worker for Central Excise Duty:
The department asserted that the job worker, the appellant, was liable for Central Excise duty as the manufacturer. However, the Tribunal found that the lack of a factory by the main manufacturer was the key issue. Since the main manufacturer had complied with its obligations and there was no revenue loss, the demand for duty and penalties on the appellant was deemed unjustified. The Tribunal ruled in favor of the appellant, setting aside the lower authorities' decision and allowing the appeal.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD provides a comprehensive overview of the issues involved, the arguments presented by both sides, and the Tribunal's decision based on the interpretation of the exemption notification and the validity of the undertaking given by the main manufacturer.