2007 (3) TMI 133 - AT - Central Excise

Duty liability - Department demand duty from two different persons in respect of same goods manufactured by them along with penalty - Held that on the same good two person are not liable to pay duty

Summary

Issues involved:
1. Demand of duty and penalties from two companies for manufacturing activity.
2. Whether duty could be demanded from two different persons for the same goods.
3. Interpretation of legal provisions regarding manufacturers and assesses under the Central Excise Act.

Analysis:

Issue 1: Demand of duty and penalties from two companies for manufacturing activity
The Commissioner demanded duty and penalties from two companies, M/s. Aravindh and M/s. Arudra, for bars and rods cleared from the factory during a specific period. The Commissioner considered the manufacturing activity as a 'joint venture' of both companies, holding them 'jointly responsible' for legal liability. Despite the relationship being viewed as that of a raw material supplier and job worker in one part of the order, both companies were deemed 'manufacturers' and 'assessees' for the goods cleared. The assessable value was determined based on prices charged by M/s. Arudra, leading to a duty demand. The companies were directed to pay the amount jointly and severally, with penalties imposed accordingly.

Issue 2: Whether duty could be demanded from two different persons for the same goods
The question arose whether duty could be demanded from two different persons for the same goods. The Tribunal cited precedents to establish that there cannot be two manufacturers for the same product. The interpretation of Section 13 of the General Clauses Act was crucial, emphasizing that charging provisions of a taxing statute should be strictly construed, allowing only one person to be charged with duty on specific goods. The Tribunal rejected the Commissioner's finding of joint manufacturing by both companies, emphasizing the statutory liability of a person for duty cannot be affected by any contract.

Issue 3: Interpretation of legal provisions regarding manufacturers and assesses under the Central Excise Act
The Commissioner's reliance on Section 13 of the General Clauses Act to interpret 'manufacturer' and 'assessee' in the plural was deemed repugnant to the duty collection scheme under the Central Excise Act. The Tribunal highlighted that the Act specifies 'the person chargeable with the duty,' indicating a singular entity. Precedents and legal provisions were cited to establish that only one person can be held liable for duty on specific goods, emphasizing a strict construction of charging provisions. The lower authority's emphasis on the Memorandum of Understanding between the companies was criticized, highlighting that statutory liability for duty is not influenced by contractual agreements.

In conclusion, the Tribunal set aside the show-cause notices and the Commissioner's order, allowing the Department to issue fresh notices and proceed in accordance with the law. The judgment clarified the singular liability for duty on specific goods, rejecting the notion of joint manufacturing by multiple entities and emphasizing strict adherence to statutory provisions in tax matters.