1998 (4) TMI 304 - AT - Central Excise

Issues:
1. Whether the appellant firm is liable to pay Central Excise duty for footwear manufactured by its subsidiary company?
2. Whether the appellant firm can be considered a manufacturer of the goods produced by the subsidiary company?
3. Whether the demand of duty is time-barred?
4. Whether the penalty imposed is justified?

Analysis:

Issue 1: Liability for Central Excise Duty
The appellant firm, engaged in manufacturing rubber and canvas products, has a subsidiary company, Bihar Rubber Company (B.R.C.), which manufactures footwear for the appellant. The appellant provides raw materials, technical assistance, and finances a portion of the capital for B.R.C. The goods manufactured by B.R.C. are sold to the appellant, who markets them. A show cause notice alleged duty evasion by the appellant for the period from 1-8-1977 to 31-5-1981. The Commissioner confirmed the duty and imposed a penalty. The appellant contended that B.R.C. is a separate legal entity and should be liable for the duty, citing relevant notifications exempting the brand-name owner from being deemed the manufacturer. The Tribunal held that during the period from 9-8-1977 to 31-5-1981, the appellant was not the manufacturer of the goods, and the duty liability rested with B.R.C.

Issue 2: Manufacturer Status of the Appellant
The Commissioner considered the appellant as the manufacturer based on various factors, including supplying raw materials to B.R.C. and affixing the brand-name on the goods. The appellant argued that the law, as per Supreme Court judgments, dictates that the actual fabricator of goods is the manufacturer, not the raw material supplier. The Tribunal concurred, stating that being a holding company of B.R.C. does not make the appellant the manufacturer. The Tribunal distinguished an older Tribunal judgment relied upon by the Respondent, emphasizing the current legal position that the appellant was not the manufacturer for the relevant period.

Issue 3: Time-Barred Demand
The appellant contended that the demand of duty was time-barred, as the show cause notice was issued on 9-11-1981 for the period from 1-8-1977 to 31-5-1981. The Tribunal rejected this argument, noting that the appellant, being well-versed in Excise Procedures, should have been aware of the Notification requiring compliance. Therefore, the demand was not time-barred, and the duty liability for the specified period was upheld.

Issue 4: Penalty Imposition
The Commissioner imposed a penalty of Rs. 13,000. The Tribunal, considering the circumstances, reduced the penalty to Rs. 500. This reduction was based on the overall facts of the case and the appellant's conduct, acknowledging their familiarity with Excise Procedures.

In conclusion, the Tribunal ruled in favor of the appellant on the liability for duty and manufacturer status issues but upheld the duty liability for a specific period. The demand was not time-barred, and the penalty was reduced significantly.

This detailed analysis provides a comprehensive overview of the legal judgment, addressing each issue involved and the Tribunal's findings on the same.

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