1996 (11) TMI 145 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification No. 80/80-C.E. for exemption eligibility.
2. Determination of real manufacturer in the context of job work.
3. Clubbing of clearances for exemption calculation.
4. Legal position of job workers as independent manufacturers.

Analysis:
The appeal before the Appellate Tribunal CEGAT, New Delhi involved a dispute regarding the eligibility of exemption under Notification No. 80/80-C.E. The respondents, manufacturers of electric motors, had claimed exemption under the said notification but the department contended that their clearances exceeded the prescribed limit due to clubbing with another entity, M/s. AEL, Thana. The department argued that the respondents were not entitled to the exemption as they were manufacturing electric motors on a labor basis from materials supplied by M/s. AEL. The department sought to deny the benefit by combining the clearances of both entities. The Collector (Appeals) had allowed the appeal of the assessees, stating that the respondents were not a dummy company set up by M/s. AEL, and therefore, the clubbing of clearances was incorrect.

In response, the respondents argued that they were merely job workers for M/s. AEL, and the criteria for clubbing clearances were not met. They relied on various judgments, including the case of M/s. Lucas India Services Ltd., to support their contention that a job worker should be treated as an independent manufacturer when the relationship with the raw material supplier is on a principal-to-principal basis. The Tribunal agreed with the respondents, emphasizing that the department failed to provide evidence to substantiate their claim for clubbing clearances. The Tribunal highlighted that if M/s. AEL had exceeded the limit, the proceedings should have been directed against them, not the respondents.

The Tribunal further clarified that the legal position regarding job workers as independent manufacturers had been established through previous orders. It distinguished the present case from the scenario in the case of Shree Agency, where the issue involved laborers engaged on behalf of the real manufacturer. The Tribunal concluded that the department's contention to club the clearances of M/s. AEL with the respondents for denying the exemption was not acceptable. Ultimately, the Tribunal rejected the department's appeal, affirming the order of the Collector (Appeals) and emphasizing that the proceedings had been misdirected against the respondents in the absence of evidence supporting the department's case.