2017 (9) TMI 1315 - AT - Central Excise

Manufacture - The appellant was supplied both steel and lead free of cost for fabrication of 42 Nos. of Base Trans receiver Stations involving cutting, bending, slitting, drilling and galvanizing - Department took the view that process carried out by the appellant including that of galvanization amounts to manufacture - Held that - the said fabricated structure was required to be supplied to M/s. Reliance Engineering Associates Pvt. Ltd., after galvanizing. This being so, the entire processes undertaken on the steel and lead received free of cost by the appellant, including that of galvanization will amount to manufacture - demand upheld. Penalty - Held that - the appellant had not informed the department about the receipt of the raw materials nor did they make any intimation concerning the fact of getting the fabricated structures galvanized through their own job worker. Such an omission on their part will definitely take the color of suppression of facts with intent to evade payment of duty - penalty upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
Determination of duty liability on job work for steel structures and tower components. Imposition of penalties under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002.

Analysis:

Issue 1: Duty Liability on Job Work
The appellants undertook job work for the manufacture of steel structures and tower components as per the specifications of a company for telecommunication purposes. The Department contended that the processes carried out by the appellants, including galvanization, amounted to manufacturing, leading to a duty liability. The original authority confirmed a differential duty liability along with interest. The Commissioner (Appeals) upheld the decision, leading the appellants to appeal. During the hearing, the appellants argued that they did not perform galvanization as it was done by another company. However, the Tribunal held that since the appellants were responsible for fabricating and supplying the complete item, including galvanization, the processes undertaken by them constituted manufacturing. Therefore, the duty liability was upheld.

Issue 2: Imposition of Penalties
The Department imposed penalties under Section 11AC of the Act and Rule 25 of the Rules. The appellants were penalized for not informing the Department about receiving raw materials and for not disclosing the galvanization process carried out by their job worker. The Tribunal found that the appellants' omission to provide this information amounted to a suppression of facts with the intent to evade duty payment. Consequently, the penalty under Section 11AC was deemed justified. However, the penalty under Rule 25 was set aside by the Commissioner (Appeals). The Tribunal concluded that no merit was found in the appeal, leading to its dismissal.

In summary, the Tribunal upheld the duty liability on the job work undertaken by the appellants for steel structures and tower components. Additionally, the penalties imposed under Section 11AC of the Central Excise Act, 1944 were upheld, while the penalty under Rule 25 of the Central Excise Rules, 2002 was set aside. The appeal was dismissed, and the operative part of the order was pronounced in open court.