2008 (9) TMI 171 - AT - Central Excise

Assessee had sent timber/flinches to KSVL (job worker) for conversion into Veneer which were received back by the assessee - assessee had filed an undertaking with the jurisdictional authorities of KSVL declaring themselves as an SSI unit even if the assessee had carried out any process of gumming with gummed paper tape such process would not amount to manufacture of Veneer - since goods (Veneer sheets) not used further in manufacture duty liability is to be discharged by assessee

Summary

Issues: Duty liability on receipt of finished goods under job work exemption, application of Notifications 83/94 and 84/94, imposition of penalties, liability of job worker.

Duty Liability on Receipt of Finished Goods under Job Work Exemption:
The case involved the receipt of Veneer sheets by an assessee from a job worker, KSVL, under the guise of job work. Despite the assessee's claim that further processing was done on the received goods, the panchnama and proprietor's admission indicated that the Veneer sheets were already finished goods when received. The Tribunal held that the process carried out by the job worker constituted the complete manufacturing process of Veneers. Citing the Kanohar Electricals Limited case, the Tribunal upheld the duty demand and penalty on the assessee, as they did not use the received Veneers in further manufacturing activities.

Application of Notifications 83/94 and 84/94:
Notifications 83/94 and 84/94 were crucial in this case, providing exemptions for goods manufactured on a job work basis and goods cleared for job work, respectively. The assessee's failure to comply with the requirements of these notifications led to the shift of duty liability from the job worker to the assessee. The Tribunal emphasized the conditions laid down in the notifications regarding the usage of goods received under job work and upheld the duty demand and penalties based on non-compliance.

Imposition of Penalties:
The original order proposed penalties under Rule 173Q of the Central Excise Rules and Section 11AC of the Act on the assessee and its proprietor. The Tribunal confirmed the penalties equal to the duty amount on the assessee but set aside the penalty on the proprietor, stating that a separate penalty on the proprietor of a proprietary concern is not warranted as they are considered as one in the eyes of the law.

Liability of Job Worker:
The job worker, KSVL, was found to have completed the manufacturing process of Veneers, making them liable to pay duty. However, due to the assessee's failure to comply with the notification requirements, the duty liability was shifted to the assessee. The Tribunal's decision focused on the non-usage of the received goods in further manufacturing activities by the assessee, leading to the confirmation of duty demand and penalties against them.

In conclusion, the Tribunal upheld the duty demand and penalties on the assessee while dismissing the appeal filed by the proprietor. The withdrawal of the appeal by the proprietor was permitted, resulting in its dismissal. The judgment highlighted the importance of compliance with notification requirements in determining duty liability in cases involving job work arrangements.