2019 (10) TMI 956 - AT - Central Excise

Liability of service tax or duty of excise - whether the appellant is manufacturer or job-worker - It has been the consistent contention of the appellant that the inputs for these products were being supplied by M/s Shakti Udyog and, therefore, assembled by using the facilities at the premises and that the appellant was a mere job-worker discharging appropriate liability under Finance Act, 1994 as provider of service - HELD THAT - The privileges as job-worker, claimed by the appellant, are available only as procedural consequences of such assumption of responsibility. Hence, under law, notwithstanding the claims of the appellant of not being in possession of the premises, of not procuring any of the raw materials or inputs or not being in control of manufacturing facility, and of merely having been a provider of labour, their liability to duty is not erased. Transfer of materials from M/s Shakti Udyog has also not taken place in accordance with the procedure prescribed for such job-worker. In these circumstances, the appellant must necessarily be considered as the manufacturer - The appellant is unable to bring on record any evidence to substantiate that the production of branded goods was only for a limited period. The liability to duty, therefore, devolves on the appellant. Imposition of penalty on Shri Pradeep Kainya - HELD THAT - It is seen that he is the proprietor of the principal manufacturer which had merely utilized the facilities of M/s Electroclad to undertake manufacturing on their behalf. It has been held that the liability, as manufacturer, vests with M/s Electroclad and not upon the principal manufacturer to whom goods were supplied. Further, with the uncontested compliance with the tax liability under Finance Act, 1994, there is no ground to attribute any motives to Shri Pradeep Kainya - penalty set aside. Appeal allowed in part.

Summary

Issues: Identification of 'person liable to pay duty' on manufactured goods bearing a specific brand name. Interpretation of 'manufacture' and 'manufacturer' under Central Excise Act, 1994. Liability of job-worker in relation to duty payment.

The judgment by the Appellate Tribunal CESTAT Mumbai revolves around the identification of the 'person liable to pay duty' on manufactured goods bearing the brand name 'PAG'. The case involves M/s Electroclad and Shri Pradeep Kainya, appealing against an order-in-appeal dated 17th February 2011. The central issue is whether M/s Electroclad, as the owner of the premises where manufacturing activities took place, should be considered the 'manufacturer' liable to pay duty, or if they were merely acting as a job-worker. The primary contention is that the inputs for the products were supplied by another entity, M/s Shakti Udyog, and that M/s Electroclad was providing labor services only.

The tribunal delves into the interpretation of 'manufacture' and 'manufacturer' as per the Central Excise Act, 1994. The appellant argues that they should be considered a job-worker, citing precedents like Duroflex Ltd and Heinz India Pvt Ltd. However, the tribunal notes that the liability to duty cannot be escaped unless the appellant qualifies as a job-worker under notification no. 8/2003-CE or if M/s Shakti Udyog assumes responsibility for duty payment. Since there is no evidence of such assumption, and the appellant cannot prove that the branded goods production was limited, they are deemed the 'manufacturer' and liable for duty payment.

Regarding the liability of the job-worker, the tribunal emphasizes that the privileges claimed by the appellant are contingent on M/s Shakti Udyog assuming duty payment responsibility. As this assumption is absent, the appellant cannot evade duty liability. The tribunal dismisses the appeal of M/s Electroclad, highlighting that the primary tax liability rests with the 'manufacturer,' and escape is only possible under specific conditions and compliance procedures.

In a separate judgment related to Shri Pradeep Kainya, the tribunal clarifies that as the proprietor of the principal manufacturer utilizing M/s Electroclad's facilities, his liability as a manufacturer does not stand. Since M/s Electroclad is held responsible for duty payment and there is no evidence of non-compliance, the penalty imposed on Shri Pradeep Kainya is set aside.

In conclusion, the tribunal upholds the duty liability on M/s Electroclad as the manufacturer of the goods in question, emphasizing the importance of compliance and responsibility allocation in excise matters.