2017 (4) TMI 205 - AT - Central Excise

Manufacture - Job-work - captive consumption - Demand of duty - the case of appellant is that by any stretch of imagination the main appellant cannot be considered as a manufacturer of these item - Held that - the appellant had supplied mild steel to the job workers. The job workers have fabricated the reacting vessels and the distillation pots for the appellant hence the job worker becomes manufacturer in the absence of any procedure adopted by the appellant for accepting the duty liability on him as provided under N/N. 214/86-C.E - Further even if the appellant is considered as a manufacturer of these items like reacting pots and distillation pots no duty liability arises as it is undisputed that the appellant has installed these reacting pots and distillation pots in its factory premises and used the same for manufacturing of the chemicals on which duty liability has been discharged - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Manufacture of chemicals, duty liability on job worked items, show cause notice validity, duty liability of the main appellant, penalty imposition on appellants.

Manufacture of Chemicals:
The main issue in this case revolves around the manufacturing activities of the main appellant, who produced chemicals using reacting pots and distillation pots fabricated by job workers. The appellant argued that they are not the manufacturers of these pots but used them for manufacturing chemicals on which duty liability was discharged. The appellant contended that the pots were specialized machinery made from thick mild sheets for safety reasons due to the highly inflammable nature of the chemicals involved.

Duty Liability on Job Worked Items:
The show cause notice was issued based on the suspicion that duty liability was not paid on items produced through job work arrangements with various job workers. The lower authorities held the main appellant liable for duty payment, interest, and imposed penalties. However, the appellate tribunal found inconsistencies in the reasoning provided by the lower authorities and disagreed with their conclusions.

Validity of Show Cause Notice:
The main appellant raised the argument that the entire show cause notice was time-barred. Despite this contention, the tribunal focused on the substantive issues of duty liability and penalty imposition rather than solely on the procedural aspects of the notice.

Duty Liability of the Main Appellant:
The tribunal analyzed the role of the main appellant in the manufacturing process and concluded that the job workers who fabricated the pots should be considered the manufacturers in the absence of the main appellant accepting duty liability as per the prescribed procedures. Moreover, the tribunal emphasized that duty liability would only arise if the main appellant intended to sell the pots, which was not the case here as the pots were installed in the factory premises for internal use.

Penalty Imposition on Appellants:
The tribunal ultimately held that since the duty liability could not be sustained, the penalties imposed on all the appellants, including the main appellant, were unwarranted and should be set aside. The tribunal allowed the appeals, providing consequential relief based on the findings and circumstances of the case.

This detailed analysis of the judgment highlights the key issues, arguments presented by the parties, and the tribunal's reasoning leading to the final decision to set aside the impugned order and grant relief to the appellants.