2023 (5) TMI 518 - AT - Central Excise

Liability of Central Excise Duty - appellants were job workers of M/s Nilkamal Limited - requirement of appellant to pay duty on the sales price of M/s Nilkamal Limited at their depots - HELD THAT - There is nothing in the contract to show that the appellants have manufactured the goods on behalf of M/s Nilkamal Limited despite the facts that the entire manufactured goods were sold to M/s Nilkamal Limited. Moreover, the goods are not manufactured from any inputs or goods supplied by the principal manufacturer i.e. M/s Nilkamal Limited. The appellants might have used the raw material as per the specifications supplied by M/s Nilkamal Limited. This fact alone will not satisfy the contention that the inputs for the manufacturing of the goods are supplied by the principal manufacturer. The crux of the definition of job worker is in the use of inputs supplied by the principal manufacturer. It is a common understanding that a job worker is the one who works upon the goods supplied directly or indirectly by the principal manufacturer. This fact is totally missing in this case; neither from the terms of contract nor from the show cause notices, it is inferred that the goods are supplied by M/s Nilkamal Limited; therefore, the appellants do not fit into the definition of job worker even for the purpose of Rule 10A. The Commissioner of CGST CE, Nagpur-I vide order dated 31.10.2018 has dropped substantial amounts of demand on this issue. Appeal allowed.

Summary

Issues involved:
The issue involved in this case is whether the appellants should be considered as "job workers" of M/s Nilkamal Limited and be required to pay duty on the sales price of M/s Nilkamal Limited at their depots.

Summary of Judgment:

Issue 1: Definition of 'job worker' under Rule 10A of Central Excise Valuation Rules, 2000

The Department contended that the appellants are liable to pay duty based on the definition of 'job worker' under Rule 10A. However, the Tribunal found that the appellants did not manufacture the goods "on behalf" of M/s Nilkamal Limited and the goods were not manufactured from inputs supplied by M/s Nilkamal Limited. The Tribunal emphasized that a job worker typically works on goods supplied by the principal manufacturer, which was not the case here. The Tribunal also referenced a previous order where it was established that mere supply of moulds does not make one a job worker. Additionally, similar demands against other suppliers of M/s Nilkamal Limited were dropped by the Tribunal and the Department. The Commissioner of CGST & CE, Nagpur-I also dropped substantial demands on this issue. Therefore, the demands and penalties imposed on the appellants were set aside.

In conclusion, the Tribunal allowed both appeals, emphasizing that the appellants did not fit the definition of 'job worker' under Rule 10A and that demands were dropped in similar cases. The judgment was pronounced in court on 12.05.2023.