2018 (2) TMI 1099 - AT - Central Excise

Benefit of N/N. 67/1995-CE dated 16.03.1995 - process of extraction of catechin from gambier extracts - Indian Katha - it appeared to Revenue that India Katha was attracting nil rate of duty and, therefore, the benefit of Notification was not admissible - Held that - It is undisputed fact that catechin were manufactured by Bareilly Chemicals Pvt. Ltd. and the main appellant used the said goods in the manufacture of their final product. Therefore, by no stretch of imagination use of catechin in the manufacture of Indian Katha can be treated as captive consumption and, therefore, the question of eligibility of main appellant for the benefit of Notification No. 67/1995 does not arise. It is admitted fact that the goods manufactured by the main appellant i.e. Indian Katha were attracting nil rate of duty. Therefore, the question of opting to file any declaration under Notification No. 214/1986-CE did not arise in the circumstances of the case. In the present appeals the liability to pay Central Excise Duty on catechins manufactured by Bareilly Chemicals Pvt. Ltd was not on M/s Indian Wood Products Company Ltd. - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Common issue involving multiple appeals regarding the liability to pay Central Excise Duty on catechins manufactured by a third party for the main manufacturer of goods.

Detailed Analysis:

Issue 1: Liability of the main appellant for Central Excise Duty on catechins:
The main appellant, engaged in manufacturing Indian Katha, utilized catechins extracted by a third party, Bareilly Chemicals Pvt. Ltd., from gambier extract. The Revenue alleged that the main appellant should pay Central Excise Duty on the catechins. Show cause notices were issued, demanding significant amounts. The main appellant argued that the duty liability should fall on Bareilly Chemicals Pvt. Ltd., as they were the ones manufacturing the catechins. They contended that the duty, if any, should be paid by the manufacturer of the goods, not the main appellant. The Original Authority imposed penalties and confirmed the duty demand, holding that the main appellant was liable as they used the catechins in manufacturing Indian Katha. However, the main appellant argued that they did not undertake the duty liability under relevant notifications and that the CBEC Circular supported their position that Bareilly Chemicals Pvt. Ltd. should be considered the manufacturer of the catechins.

Issue 2: Interpretation of agreements between main appellant and Bareilly Chemicals Pvt. Ltd.:
The main appellant presented agreements with Bareilly Chemicals Pvt. Ltd., highlighting that they were independent legal entities operating on a principal-to-principal basis. The agreements detailed that Bareilly Chemicals Pvt. Ltd. would manufacture catechins from raw materials like gambier extract on a job worker basis. The main appellant argued that since Bareilly Chemicals Pvt. Ltd. manufactured the catechins, the duty liability should not fall on them. They emphasized that the Central Excise Act places the duty liability on the manufacturer of the goods, which, in this case, was Bareilly Chemicals Pvt. Ltd.

Judgment:
After considering the contentions, the Tribunal found the arguments of the main appellant valid in law. They concluded that the liability to pay Central Excise Duty on the catechins manufactured by Bareilly Chemicals Pvt. Ltd. did not rest with the main appellant. As a result, the impugned Orders-in-Original, demanding duty and imposing penalties, were set aside. The Tribunal ruled in favor of the main appellant, allowing the appeals and entitling them to consequential relief as per the law. The miscellaneous applications were also disposed of as infructuous.