2003 (12) TMI 87 - AAR - Central Excise

Manufacturer - Job Work - Brand Name - The draft job work agreement between the Joint Venture company (applicant) and Metropolitan Trading Company envisages that the latter will undertake manufacture of readymade garments and clothing accessories on a job work basis including washing ironing etc. at the rates and other terms to be mutually agreed upon between them. The Joint Venture company will supply the raw materials for such manufacture - Held that - the applicant cannot claim to be a manufacturer for some purposes and a non-manufacturer for other purposes. - The argument of the applicant that the introduction of clause 5(I) in the notification No. 8/2002-CE dated 1.3.2002 is to overcome the difficulty of following a non-manufacturer to claim the benefit of SSI exemption notification (which benefit such a non-manufacturer would not otherwise be able to claim) is fallacious. The objective of clause 5(I) is only to clarify beyond doubt that for the purpose of the SSI notification (and not merely for purposes of payment of duty) the expression manufacturer would include the person made liable for payment of duty in respect of excisable goods falling under Chapter 61 & 62 of CET and manufactured on job work basis - a person cannot be deemed not to be a manufacturer of goods (though liable to pay duty) and yet be a manufacturer (of the same goods) for availing the benefit of SSI exemption.

Issues Involved:
1. Whether the Joint Venture company would be the manufacturer of goods manufactured by the export units only.
2. Whether the Joint Venture company would not be a manufacturer of goods manufactured by Metropolitan Trading Company on a job work basis for the Joint Venture company and sold by the Joint Venture company.
3. Whether the Joint Venture company would be liable to pay duty on goods manufactured by Metropolitan Trading Company and would do so by directing Metropolitan Trading Company to pay duty and would therefore, be entitled to exemption under notification No. 8/2002-CE, dated 1.3.2002.
4. Whether the Joint Venture company can continue to enjoy procedural concessions including exemption from registration and export procedure available under Board's Circular No. 212/46/96-CX dated 20.05.1996 read with Notification No. 36/2001-CE (NT) dated 26.06.2001.

Issue-wise Detailed Analysis:

1. Manufacturer of Goods by Export Units:
The Authority ruled that the Joint Venture company would be the manufacturer of excisable goods manufactured by its export units. This includes goods manufactured on their account on a job work basis by Metropolitan Trading Company. The ruling is based on the interpretation of the Central Excise Act, 1944, and relevant judicial decisions such as Ujagar Prints vs UOI and CCE vs. M.M. Khambhatwala, which support the view that the entity undertaking the manufacturing process is considered the manufacturer.

2. Manufacturer of Goods by Metropolitan Trading Company:
The Authority concluded that the Joint Venture company would be the manufacturer of goods manufactured by Metropolitan Trading Company on a job work basis for the Joint Venture company and sold by the Joint Venture company. This conclusion stems from the draft job work agreement and the relationship between the parties being on a principal-to-principal basis. The premises, labor, and machinery employed are of Metropolitan Trading Company, making them the actual manufacturer, but the Joint Venture company is treated as the manufacturer for legal and duty purposes.

3. Liability to Pay Duty and Entitlement to Exemption:
The Authority determined that the Joint Venture company would be liable to pay duty on goods manufactured by Metropolitan Trading Company. The duty can be paid by directing Metropolitan Trading Company to pay it. The Joint Venture company would be entitled to exemption under notification No. 8/2002-CE, dated 1.3.2002, if eligible, after including the value of clearances for home consumption made from its factories and those manufactured on its account on a job work basis by Metropolitan Trading Company. The Authority emphasized that the "deeming fiction" created by the Central Excise Rules, 2002, extends to the Joint Venture company being considered the manufacturer for all relevant purposes, including availing SSI exemptions.

4. Procedural Concessions and Exemptions:
The fourth issue regarding whether the Joint Venture company can continue to enjoy procedural concessions, including exemption from registration and export procedure, was rejected as not an admissible question under section 23C of the Act. The Authority did not provide a ruling on this procedural matter, indicating that it falls outside the scope of the issues that can be addressed through an advance ruling.

Conclusion:
The Authority ruled that the Joint Venture company would be considered the manufacturer for both the goods produced in its export units and those manufactured on a job work basis by Metropolitan Trading Company. The Joint Venture company would be liable to pay the duty and could direct Metropolitan Trading Company to pay it, thereby being entitled to applicable exemptions. The fourth procedural issue was not addressed as it was deemed beyond the scope of an advance ruling.

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