2020 (10) TMI 316 - AT - Central Excise

SSI Exemption - clubbing the clearances of job worker with that of the appellant - period April, 2008 to August, 2009 - benefit of N/N. 8/2003-CE dated 01.03.2003 - HELD THAT - The similar issue has been decided in favour of the appellant under the similar facts and circumstances in the case of M/s.Mewar Hi-Tech Engg. Ltd. 2019 (8) TMI 1363 - CESTAT NEW DELHI , wherein this Tribunal held that the taxable event for the central excise duty is the manufacture of excisable goods, and the moment, there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes, manufacture takes place and liability to duty is attracted. Thus, the sale or the ownership of the end product is absolutely irrelevant for the purpose of taxable event under the scheme of the Central Excise Act, read with the Rules. Further, the job worker is not liable to pay duty only in the circumstances under the erstwhile Rule 57(F) of Central Excise Rules, 1944, or according to the present Rule 4 (5)(a) of CCR, 2004 read with the relevant Notification No.214/86-CE dated 25.03.1986, wherein the principal manufacturer gives an undertaking to the jurisdictional Central Excise Authority of the job worker to pay the duty. In the present case, admittedly, no such procedure was undertaken. Hence, under the scheme of the Act, ipso facto the duty liability is on the job worker - the appellant is not liable to pay any central excise duty for the goods got manufactured and cleared from the job worker s premises. Time Limitation - HELD THAT - Admittedly, the appellant has maintained proper books of accounts register and vouchers of their transactions and has also disclosed such transactions before other Tax Authorities, as the appellant was not liable to pay central excise duty being an SSI Unit, not requiring registration under the Central Excise Provisions - the demand for the extended period of limitation is also not maintainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of SSI exemption under Notification No.8/2003-CE by clubbing clearances of job worker with the appellant and consequential demand of duty.

Analysis:
The appellant engaged other manufacturers for job work basis manufacturing, where raw materials were supplied by the appellant, but the manufacturing activity was undertaken by job workers in their own premises. The appellant did not operate under specific rules or undertake responsibility for using job worked goods in further manufacture. The Department noticed discrepancies in the financial statements, leading to a show cause notice for duty demand under the Central Excise Act, alleging that clearances from the appellant's factory and job workers' factories should be clubbed.

The Adjudicating Authority held that the appellant correctly availed the SSI exemption as the job workers were the actual manufacturers liable to pay duty. The Department appealed the decision, leading to the confirmation of duty demand by the Commissioner (Appeals) invoking the extended period of limitation. The appellant contested the decision, citing similar favorable judgments and arguing that they were not liable for duty as the job workers independently manufactured the goods without the appellant's control.

The Tribunal referenced a previous case where it was held that duty liability arises when there is a transformation into a new commodity, irrespective of ownership or sale of the end product. Since the job workers did not undertake the duty payment procedure as required by law, the duty liability fell on them, not the appellant. The Tribunal also found the extended period of limitation not applicable as the appellant maintained proper accounts and disclosed transactions to other tax authorities.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant, stating they were not liable to pay central excise duty for goods manufactured and cleared by the job workers. The appellant was entitled to consequential benefits as per the law.