2024 (8) TMI 657 - AT - Central Excise

Liability of appellant to pay Excise Duty - Appellant does not even have any manufacturing facility to manufacture these products - Department has come to a conclusion that the Appellant is the manufacturer because they have claimed to be so when they have received the contract from various Electricity Boards - time limitation - HELD THAT - From the Show Cause Notice and order-in-original, it is not found that any investigation was taken up by the Department to check up as to whether the Appellant has the facility to manufacture such electrical items in their factory. Admittedly, the Electricity Boards were treating the the Appellant as the manufacturer and receiving the goods. Therefore, the manufacture had to be taking place in some place other than the premises of the Appellant. In this case, it is more or less certain that the manufacturing has taken place at the job worker's premises only. In such a case, in terms of section 2(f) of Central Excise Act, 1944, when the manufacture takes place at the premises of the job worker and then he steps into the shoes of the manufacturer. Here, the Show Cause Notice has not been issued to such job worker/manufacturer, but has been issued to the Appellant who has only got the job work of manufacturing done through third parties. The same issue had come up in the case of Combat Engineering 2023 (5) TMI 78 - CESTAT KOLKATA and this Bench has held ' it would be evident that in the present case, the job workers of the assessee company were independent contractors/manufacturers and hence, the assessee company and/or its directors cannot be saddled with any liability of payment of excise duty and/or consequential penalty with respect to the goods so manufactured by the said job workers.' The facts in the present case are similar/identical. Therefore, the ratio laid down in the above case law is squarely applicable to the facts of the present case. Accordingly, there are merits in the arguments of the Appellant - the impugned order is set aside - appeal allowed.

Summary

Issues:
1. Whether the Appellant is liable for excise duty as a manufacturer of electrical items supplied to Electricity Boards.
2. Whether the Show Cause Notice issued to the Appellant is time-barred.

Analysis:

Issue 1: Liability for Excise Duty
The Appellant, engaged in manufacturing railway wagon components, also supplied electrical items to Electricity Boards. The Department alleged the Appellant was the actual manufacturer of these items, leading to a demand of Rs. 82,32,163. The Appellant argued they outsourced manufacturing to job workers and were not the actual manufacturers. The Tribunal noted the Appellant's lack of manufacturing facility for electrical items and reliance on job workers for production. Referring to previous cases, the Tribunal held that job workers, not the Appellant, were the manufacturers. Citing the Central Excise Act, the Tribunal emphasized that when manufacturing occurs at a job worker's premises, the job worker is deemed the manufacturer. Consequently, the Appeal was allowed, and the demand set aside.

Issue 2: Time Bar on Show Cause Notice
The Appellant contended that the Show Cause Notice issued in 2008 for the period 2003-2006 was time-barred. The Department had gathered information between 2006-2008, justifying the delayed issuance of the notice. The Tribunal rejected the time-bar argument, stating that the Department needed time to gather all relevant details before issuing the notice. Thus, the Show Cause Notice was deemed timely, and the Appellant's plea on time bar was dismissed.

The Tribunal also set aside the penalty imposed on the Director, as the Appellant's liability for excise duty was negated. The judgment was pronounced on 09.08.2024 by the Appellate Tribunal CESTAT Kolkata, with detailed reasoning provided for each issue raised and resolved during the proceedings.