2009 (7) TMI 935 - AT - Service Tax

Summary

Issues Involved:

1. Liability of the appellant to pay excise duty.
2. Invocation of the extended period of limitation.
3. Financial hardship as a ground for waiver of pre-deposit.
4. Calculation errors in the duty amount.

Issue-wise Detailed Analysis:

1. Liability of the appellant to pay excise duty:

The appellants contested the excise duty demand of Rs. 61,22,732/- on the grounds that they were not the manufacturers but merely supplied raw materials to M/s. Tristar Beverages Pvt. Ltd., who were the actual manufacturers. They argued that the agreement dated 7-12-04 between the appellant and Tristar Beverages clearly indicated that the manufacturing process was controlled by Tristar Beverages. The appellants claimed they were merely marketing the product and assisting in procurement of raw materials, not manufacturing it. The adjudicating authority, however, found that the appellants had pervasive control over the production process, including specifications, raw material supply, and packing, which made them the actual manufacturers as per the Central Excise Act, 1944. The Tribunal upheld this finding, referencing the Apex Court's decision in Ujagar Prints Textile v. UOI, which clarified that excise duty is imposed on the production or manufacture of goods, independent of ownership.

2. Invocation of the extended period of limitation:

The appellants argued that there was no justification for invoking the extended period of limitation as there was no suppression of facts. They contended they were not obligated to submit ER 1 returns since they were not the manufacturers. The Tribunal, however, found that the appellants were indeed the manufacturers and thus were required to disclose the manufacturing activities. The Tribunal rejected the appellants' reliance on the decision in Gufic Pharma v. CCE, stating that the principle of non-disclosure not amounting to suppression did not apply in this case.

3. Financial hardship as a ground for waiver of pre-deposit:

The appellants claimed that they suffered heavy financial losses during the financial year 2008-09, and insisted that depositing the demanded duty would cause undue financial hardship. The Tribunal noted that financial losses alone do not justify waiving the requirement of pre-deposit, as established in settled law. Therefore, the claim of financial hardship was not accepted as a valid ground for waiver.

4. Calculation errors in the duty amount:

The appellants pointed out that there was an error in the calculation of the duty amount by the adjudicating authority. They argued that the demand was incorrectly raised on the entire job charges, which included conversion of inputs into fruit drinks and packing charges, instead of being limited to the manufacture of bottles. The Tribunal acknowledged the potential error but noted that the appellants had not presented any specific calculation to the lower authorities. Despite this, the Tribunal found merit in the contention and decided to direct the appellants to deposit a reduced amount of Rs. 25 lakhs, waiving the rest of the demand and penalty during the pendency of the appeal.

Conclusion:

The Tribunal directed the appellants to deposit Rs. 25 lakhs within eight weeks and waived the remaining duty and penalty demands during the appeal's pendency. The matter was scheduled for a compliance report on 18-9-2009.