2018 (11) TMI 730 - AT - Central Excise

Process amounting to manufacture- activity of galvanization - job-work - N/N. 214/86-CE - demand of duty. Activity of galvanization - bonafide belief that activity of galvanization does not amount to manufacture - time limitation - Held that - Ignorance of law is not an excuse. Therefore, non payment duty on the galvanization activity, which amounts to manufacture, the appellant is liable to pay duty - As the appellant has concealed the vital fact from the department, therefore, malafide of the appellant is proved - appellant liable to pay duty - extended period rightly invoked. Post April, 2007, the activity of galvanization undertaken by the job worker - liability of job worker is to pay duty - Held that - As the appellant has filed undertaking to pay duty on the activity of galvanization done by the job worker, therefore, the appellant is liable to pay duty for the period May, 2007 to January, 2010 - demand confirmed. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the appellant is liable to pay duty on the activity of galvanization for the period in question.
2. Whether the demand for duty is barred by limitation for the period up to April 2007.
3. Whether the job worker is liable to pay duty on the activity of galvanization post-April 2007.

Analysis:

Issue 1: Liability to Pay Duty on Galvanization Activity
The appellant contested the demand on the grounds that they believed galvanization did not amount to manufacture until April 2007. However, Chapter note 3 to Chapter 73 effective from April 1, 2003, established that galvanization was considered manufacturing. The tribunal held that ignorance of the law is not an excuse, and the appellant was liable to pay duty on the galvanization activity. The appellant's concealment of this fact proved malafide intent, leading to the confirmation of duty, interest, and a penalty for the period from February 2005 to April 2007.

Issue 2: Limitation Bar for Demand up to April 2007
The tribunal ruled that the appellant's belief about duty exemption on galvanization activity until April 2007 was not a valid defense. Due to the public availability of Chapter note 3 to Chapter 73, the appellant's ignorance of the law did not absolve them of the duty liability. The tribunal confirmed the duty, interest, and penalty for the period in question by invoking the extended period of limitation based on the appellant's malafide actions.

Issue 3: Liability of Job Worker for Duty Post-April 2007
Regarding the period post-April 2007, the appellant claimed that the job worker was responsible for paying duty on the galvanization activity. However, the appellant had filed an undertaking under Notification No.214/86-CE to pay duty on the galvanization activity by the job workers. The tribunal found that the appellant's knowledge of their product's duty exemption meant they should not have filed the undertaking. By doing so, the appellant committed fraud against the department, leading to the confirmation of duty and penalty for the period from May 2007 to January 2010.

The tribunal dismissed the appellant's appeal, upholding the impugned order due to the appellant's malafide intentions and fraudulent actions in not paying duty on the galvanization activity. The case law cited by the appellant was deemed irrelevant as it did not support the appellant's fraudulent behavior.