2022 (8) TMI 609 - AT - Central Excise

Proceedings amounting to manufacture or not - activity of unloading of chemicals of Chapter 29 from the tankers and re-packing and labeled in small drums by the job workers - liability of duty on principal supplier or job-worker. If at all the activity carried out at the job worker s end is amount to manufacture whether the appellant is liable to pay the duty on such activity? - HELD THAT - If at all the activity amounts to manufacture the job worker is a manufacturer in the eyes of Central Excise Act, 1944 to hold a person as manufacturer. The ownership of goods is not relevant, therefore, in the present case even though the goods belongs to the appellant but the entire activities were carried out by the job worker. From the detailed finding of the Larger Bench in THERMAX BABCOCK AND WILCOX LTD., THERMAX LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2017 (12) TMI 266 - CESTAT MUMBAI , it is settled that irrespective of the ownership of goods whoever undertakes the manufacturing activity he has to pay the duty. Applying the ratio of the Larger Bench in the present case since, the job worker has carried out all the activities which as per the department amounts to manufacture, the job worker is alone to pay the excise duty, therefore, the duty demand raised against the appellant is not sustainable, hence, the same is liable to be set aside. Since, the issue that who is liable to pay the duty has been decided, the issue whether the activity per se is amount to manufacture or otherwise is not decided. The appellant in any case is not liable to pay the excise duty in the facts and circumstances of the present case - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the activity of unloading chemicals from tankers, repacking, and labeling in small drums amounts to manufacture and is liable to excise duty.
2. If the activities amount to manufacture, whether the appellant (principal supplier) or the job worker is liable to pay the excise duty.

Issue-Wise Detailed Analysis:

1. Whether the activity of unloading chemicals from tankers, repacking, and labeling in small drums amounts to manufacture and is liable to excise duty:

The appellant argued that the activity performed by the job worker, which involved unloading chemicals from tankers and repacking them into small drums with labeling, is a trading activity and does not amount to manufacture under the Central Excise Act, 1944. The appellant cited several judgments to support the claim that transferring chemicals from bulk to retail packs and labeling does not render the product marketable or constitute manufacture. The Tribunal, however, did not delve into whether the activity amounts to manufacture, as the primary issue of liability for duty payment was resolved in favor of the appellant.

2. If the activities amount to manufacture, whether the appellant (principal supplier) or the job worker is liable to pay the excise duty:

The Tribunal focused on determining who is liable to pay the excise duty if the activities are deemed to constitute manufacture. The Tribunal referred to the Larger Bench judgment in the case of M/s. Thermax Babcock and Wilcox Ltd., which clarified that the job worker, being the manufacturer of the goods, is liable to pay the duty on the manufactured goods unless exempted. The ownership of the goods is immaterial; what matters is who undertakes the manufacturing activity.

The Tribunal noted that the entire activity of transferring chemicals from tankers to small drums and labeling was carried out by the job worker. Hence, if the activity amounts to manufacture, the job worker is considered the manufacturer and is liable to pay the excise duty. The Tribunal cited various judgments and provisions under the Central Excise Act and Rules to support this conclusion, emphasizing that the liability to pay duty lies with the entity that undertakes the manufacturing activity.

Conclusion:

The Tribunal concluded that the job worker, who performed the repacking and labeling activities, is liable to pay the excise duty if the activities are considered manufacture. Consequently, the duty demand raised against the appellant (principal supplier) was deemed unsustainable and was set aside. The Tribunal did not address whether the activity itself constitutes manufacture, leaving that issue open. The appeals were allowed with consequential relief, and the miscellaneous application filed by the appellant was disposed of.