2016 (2) TMI 250 - AT - Central Excise

Duty liability - Manufacturing activity or not - activity of cutting and welding of steel angles - galvanizing steel items - Job work - Held that - Regarding the demand of duty from the appellant for galvanizing work done by the job worker, the original authority stated that certain processes like cutting welding were done before they are sent to galvanizing. This observation has not been supported by the original authority with source. Further, observation of the original authority that it is the duty of the appellant to follow the procedure for job work notification and to pay duty on final products is not supported by any legal provision. If the job work procedure is not followed then the duty liability is on the person who undertakes the manufacture activity. In the present case, it is the person who undertakes galvanization who is liable to duty, if any. As such, we find that the original authority is in error in his finding. In the statements of the proprietor of the appellant s firm various categories of the items and nature of process undertakes and nature of process undertaken on such items were given. It is necessary for the original authority to examine the processes carried out category wise and to give finding on such process resulted in production of totally a new identifiable and marketable product falling under specific classification in tariff. We find that the original authority has not followed these requirements to arrive at the conclusion of duty liability against the appellants. As such, we find that the impugned order is not sustainable and has to be set aside.

Summary

Issues:
1. Central excise duty liability on trading and processing activities of steel items.
2. Failure of the original authority to follow directions in the remand order.
3. Duty liability for galvanizing work done by job worker.
4. Examination of processes undertaken by the appellant for duty liability determination.

Central Excise Duty Liability:
The case involved the appellant engaged in trading, cutting, welding, and galvanizing of steel items. The central excise duty liability was disputed, with the original authority confirming a demand and penalty. The Tribunal remanded the matter for a fresh order, directing an examination of whether manufacturing activities were involved in the appellant's processes. The impugned order lacked detailed discussion on the nature of processes and final products, leading to a classification under CTH 73089090 based on invoice descriptions without clear explanation. The order failed to group similar goods together and specify duty liability for each group, as directed by the Tribunal.

Failure to Follow Directions:
In the second round of litigation, the Tribunal emphasized examining manufacturing activity for each item sold and the appellant's liability for processes done by job workers. The original authority did not conduct a comprehensive enquiry, merely relying on invoice descriptions and tariff headings for classification. The failure to segregate goods, group similar products, and specify duty liability demonstrated a lack of compliance with the Tribunal's directions, rendering the impugned order unsustainable.

Duty Liability for Galvanizing Work:
Regarding duty liability for galvanizing work done by job workers, the original authority's finding that the appellant should follow job work notification procedures and pay duty on final products was deemed erroneous. The responsibility for duty liability lay with the person undertaking galvanization, not the appellant. The original authority's lack of legal support for its findings and failure to examine processes category-wise indicated a flawed determination of duty liability.

Examination of Processes:
The appellant's processes, including cutting, welding, and galvanizing, were scrutinized for duty liability determination. The original authority's summary finding based on invoice descriptions and tariff headings was deemed insufficient. The failure to investigate processes category-wise and ascertain the production of new marketable products under specific tariff classifications highlighted the inadequacy of the original authority's analysis. The appellant's firm provided detailed information on processes, necessitating a thorough examination by the original authority, which was not conducted, leading to the setting aside of the impugned order.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order due to the original authority's failure to follow directions, lack of comprehensive examination of processes, and erroneous determination of duty liability for galvanizing work.