1996 (8) TMI 229 - AT - Central Excise

Summary

Issues:
- Whether the appellants were liable to pay Excise duty for fabricating items without payment?
- Whether M/s. Shrinivas Industries were considered as hired labourers or job-workers?
- Whether the activity undertaken amounted to manufacturing attracting duty liability?
- Whether the order imposing penalty on the appellants and M/s. Shrinivas Industries was justified?

Analysis:

1. The appeal challenged an Order-in-Original confirming a demand for Excise duty against the appellants for fabricating items without payment. The appellants claimed the items were fabricated by job-workers, M/s. Shrinivas Industries, who were not registered as an SSI Unit nor paid any Excise duty.

2. The Adjudicating Authority concluded that M/s. Shrinivas Industries were hired labourers of the appellants, considering the lack of a written contract and the direct involvement of the appellants in material supply and transportation. Penalties were imposed on both parties under specific Central Excise Rules.

3. The consultant for the appellants argued that the role of M/s. Shrinivas Industries was misconstrued and cited tribunal decisions to support that the activity did not amount to manufacturing. The consultant contended that the order should be set aside based on these grounds.

4. The respondent contended that the material supplied by the appellants and the labor charges by M/s. Shrinivas Industries indicated a hired laborer relationship. It was argued that the processing resulted in a distinct product, justifying duty liability.

5. The Tribunal considered the factual position, noting the lack of control and supervision by the appellants over M/s. Shrinivas Industries. It was highlighted that M/s. Shrinivas Industries had their own factory and machinery, indicating a job-worker relationship rather than hired laborers. The absence of a written contract further supported this finding.

6. The Tribunal accepted that M/s. Shrinivas Industries were job-workers, leading to the conclusion that the duty demand against the appellants as manufacturers could not be sustained. The Tribunal also addressed the argument that the fabrication process did not amount to manufacturing, citing precedent to support this position.

7. Consequently, the Tribunal set aside the order, ruling in favor of the appellants. The demand for duty and the penalties imposed were deemed unjustified. The decision provided relief to the appellants based on the findings regarding the nature of the relationship with M/s. Shrinivas Industries and the manufacturing activity involved.