1986 (1) TMI 251 - AT - Central Excise

Issues Involved:
1. Whether the amount of sales tax should be taken into account for determining the clearance.
2. Whether the value of clearance by the appellants of stainless steel utensils on job work should be excluded for the purpose of exemption under Notification No.176/77.
3. Whether the value of clearance of stainless steel sheets on job work basis by others should be included in the value of clearances of the appellants.

Detailed Analysis:

Issue 1: Sales Tax Consideration in Determining Clearance
The appellants argued that the sales tax amount should be excluded in determining the clearance value, relying on the Supreme Court decision in Bata Shoe Company (P) Ltd. v. The Collector of Central Excise. The Supreme Court had observed that the "value" should be calculated according to Section 4 of the Central Excises and Salt Act, 1944, which excludes sales tax from the value of excisable goods. The Tribunal agreed, noting that the sales tax paid on stainless steel utensils and the notional sales tax on job work by the appellants should not be included in the total value of clearance. The additional documents submitted by the appellants, indicating no collection of sales tax on job work, were accepted.

Issue 2: Exclusion of Job Work Clearance Value for Exemption
The appellants contended that the value of clearances for job work should be excluded from their total clearance value. The Tribunal examined the provisos to Notification No.176/77, which provide that the exemption applies if the total value of all excisable goods cleared by or on behalf of the manufacturer in the preceding financial year did not exceed Rs.30 lakhs. The Tribunal found that the appellants should not be deemed manufacturers for the job work done by third parties, as there was no control or connection between the appellants and the job workers, who operated independently and paid their own excise duties. The Tribunal cited the Allahabad High Court decision in Philips India Limited and others v. Union of India and Others, reinforcing that a company placing orders for manufacturing does not become a manufacturer unless the manufacturing company is a dummy. The Tribunal concluded that the job workers were the manufacturers, and their clearances could not be added to the appellants' clearances.

Issue 3: Inclusion of Job Work by Others in Clearance Value
The Tribunal analyzed whether the value of stainless steel sheets re-rolled by third parties should be included in the appellants' clearance value. The Tribunal noted that the Notification No.176/77 refers to "manufacturer" and "cleared by him or on his behalf." The Tribunal found that the job workers were independent manufacturers and there was no evidence to show that the job workers were acting on behalf of the appellants. The Tribunal referenced several decisions, including the Tribunal's own decisions in Metal Box India Limited, Calcutta v. Collector of Central Excise, Calcutta, and Modoplast (P) Limited, Coimbatore, which held that merely supplying raw materials does not make the supplier a manufacturer unless the manufacturing company is a dummy. The Tribunal concluded that the clearances by job workers could not be added to the appellants' clearances.

Conclusion
The Tribunal allowed the appeal, setting aside the impugned order. The Tribunal concluded that the sales tax should not be included in the clearance value, the appellants should not be deemed manufacturers for job work done by others, and the value of clearances by job workers should not be added to the appellants' clearances. The deductions allowed included:
- Sales Tax on S.S. Utensils: Rs.78,353.02
- Sales Tax on S.S. Utensils (Job work by Appellants): Rs.53,909.88
- S.S. (Pataas) sheets (Job work by others): Rs.12,30,105.53
- S.S. Flats (Job work by others): Rs.87,124.05
- Total: Rs.14,49,491.98

After these deductions, the balance clearance value was within the exemption limit of Rs.30 lakhs.

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