2010 (3) TMI 392 - AT - Central Excise

Manufacturer- whether the appellants are liable to pay Central excise duty on storage tanks and pre-fabricated steel structures (canopy) got manufactured by them through job workers for supply to their retail outlets. The storage tanks and prefabricated steel structures had been manufactured by the job workers out of the MS plates supplied by the appellants. Held that- the appellant and the job workers were not on principal to principal basis nor any evidence in this regard has been produced in view of the settled legal position on this issue it is the job workers who have to be treated as the manufacturer and not the appellant and the appellants were not liable to pay the duty. The impugned order therefore is not sustainable. The same is set aside. The appeal is allowed.

Summary

Issues:
Whether the appellants are liable to pay Central excise duty on storage tanks and pre-fabricated steel structures manufactured by job workers.

Analysis:

The Department issued a show cause notice demanding Central Excise duty on storage tanks and steel structures manufactured by the appellants through job workers for supply to their retail outlets. The Commissioner confirmed the duty demand, interest, and imposed a penalty on the appellants. The Commissioner held that the appellants should be treated as the manufacturer and are liable to pay the duty. The appeal was filed against this order.

The appellant's counsel argued that since the goods were manufactured by job workers using raw materials supplied by the appellant, the job workers should be treated as the manufacturer and be liable to pay the duty. They cited precedents where job workers were held responsible for paying duty in similar situations. The Department, however, maintained that since the goods were manufactured based on the appellant's specifications and under their supervision, the appellants should be considered the manufacturers.

After hearing both sides, the Tribunal examined the facts and legal precedents. It noted that the transactions between the appellant and job workers were on a principal-to-principal basis. Citing various judgments, including those by the Tribunal and High Courts, the Tribunal concluded that in such cases, where the job workers operate independently and on a principal-to-principal basis, they should be treated as the manufacturer liable to pay duty, not the appellants. The Tribunal found no evidence to suggest otherwise and set aside the impugned order, allowing the appeal.

In summary, the Tribunal held that in situations where job workers operate independently and on a principal-to-principal basis, they should be considered the manufacturer liable to pay duty, not the party supplying raw materials and specifications. The legal precedents and lack of evidence suggesting otherwise supported this conclusion, leading to the appeal being allowed and the impugned order set aside.