2007 (10) TMI 218 - AT - Central Excise

Appellant job worker as per Circular 306/22/97 duty liability is on principal manufacturer not on job worker even if principal mfr. has not availed benefit u/not. 83/94 - liability of the principal manufacturer can t be extinguished on ground that relationship between them is on a principal-to-principal basis - held that demand of duty on job worker for reason that raw material supplier has not followed provisions of Not. 214/86 is not correct demand also time barred no suppression

Summary

Issues Involved:
1. Liability for Central Excise Duty on goods manufactured by job workers.
2. Applicability of Notification No. 83/94.
3. Entitlement to the benefit of small-scale exemption under Notification No. 9/2002.
4. Invocation of the longer period for demand.
5. Imposition of penalties under Section 11AC and Rule 173Q/Rule 25.

Detailed Analysis:

1. Liability for Central Excise Duty on goods manufactured by job workers:
The appellants, manufacturers of HDPE/PP tapes, woven fabrics, and sacks, received raw materials from principal manufacturers (M/s. Vishnu Synpac and M/s. Kudva Plastisac) and converted them into finished goods. The Revenue contended that the appellants were liable to discharge duty on these goods, as the principal manufacturers did not file the necessary declaration under Notification No. 83/94. The Adjudicating Authority concluded that the job worker (appellant) was the manufacturer and liable for Central Excise duty.

2. Applicability of Notification No. 83/94:
Notification No. 83/94 provides exemption for goods manufactured on a job work basis if certain conditions are met. The principal manufacturer must use the goods in their factory or undertake to pay excise duty if the goods are not returned. The Tribunal found that the duty liability rests on the principal manufacturer, not the job worker, as the principal manufacturers had not complied with the conditions of Notification No. 83/94. The Tribunal emphasized that the job worker returned the goods to the principal manufacturers, who then sold them, making the principal manufacturers liable for the duty.

3. Entitlement to the benefit of small-scale exemption under Notification No. 9/2002:
The Revenue argued that the appellants were not entitled to the small-scale exemption for 2001-2003, as they did not include the value of clearances made on a job work basis in their aggregate value of clearances. The Tribunal noted that the appellants had been filing declarations for availing SSI exemption and the department was aware of their activities. Consequently, the Tribunal found no merit in denying the benefit of the small-scale exemption.

4. Invocation of the longer period for demand:
The Tribunal held that the longer period for demand was not justified, as the appellants had been regularly filing declarations and the department was aware of their activities through audits. The Tribunal found no evidence of suppression of facts with an intention to evade duty, thus rejecting the invocation of the longer period.

5. Imposition of penalties under Section 11AC and Rule 173Q/Rule 25:
The Adjudicating Authority imposed penalties on the appellants under Section 11AC and Rule 173Q/Rule 25. The Tribunal, however, found no justification for these penalties, as the appellants had not intended to evade duty and had complied with the relevant regulations. The Tribunal set aside the penalties, along with the duty demands.

Conclusion:
The Tribunal concluded that the duty liability rests on the principal manufacturers, not the job workers, as the principal manufacturers failed to comply with Notification No. 83/94. The appellants were entitled to the small-scale exemption, and the longer period for demand was not applicable. The penalties imposed were also unjustified. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.