2016 (12) TMI 711 - AT - Central Excise

Whether the assessee is liable to pay duty on the goods manufactured by the job workers which were removed without payment of duty to their duty paid spare parts store? - Held that - When the principal ground of the appellant is that job workers were entitled to the SSI benefit, appellant was deprived of the process of justice without consideration of such defence plea by the Authorities below. Appellant also categorically submitted that in absence of any undertaking given by it and such undertaking not borne by record, it cannot be presumed otherwise to hold against the appellant on the allegation that it had undertaken to bear the duty liability on the job worked goods. We did not find any material showing any undertaking by the appellant in the order of the ld. Adjudicating authority. Law is well settled that job worked goods shall be liable to duty in the hands of the job worker being manufacture unless otherwise exempt. But such liability is subject to consideration as to whether job worker was entitled to SSI benefit. Such specific plea being made by the appellant, authority should confine his re-adjudication to this limited issue for verification of record with the plea of the appellant made before him in the course of the proceeding. If he is satisfied with the pleading and that is borne by record as well as the material suggest that the appellant had not given any undertaking to bear duty liability on the goods manufactured by job worker, there shall be no duty liability on the appellant. As it appears that except interpretational issue there was no intention to cause evasion, there shall not be penalty. Appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant is liable to pay duty on goods manufactured by job workers?
2. Whether the job workers were entitled to the SSI benefit?
3. Whether there was any undertaking by the appellant to bear duty liability on the job worked goods?
4. Whether there should be a penalty imposed?

Analysis:
1. The appellant contended that if the job worker's status is considered as SSI, the goods should not be liable for duty as the job worker is entitled to SSI benefit. The appellant argued that part of the goods used in manufacture were dutied, while the rest were not liable as the job workers themselves were exempt. The appellant emphasized that there was no undertaking to bear duty liability on the job worked goods.

2. The Revenue argued that duty liability arose when there was manufacturing carried out, but the appellant should not be held liable if the job workers, who were liable for duty, enjoyed SSI benefit. The Revenue also mentioned certain bought-out items sent to job workers for processing that did not incur duty.

3. The Tribunal noted that the appellant was deprived of justice as the plea regarding job workers' entitlement to SSI benefit was not considered by the lower authorities. The Tribunal emphasized that unless there was evidence of an undertaking by the appellant to bear duty liability on job worked goods, no duty liability should be imposed. The Tribunal directed the adjudicating authority to re-examine the issue based on the appellant's plea and evidence on record.

4. Regarding penalties, the Tribunal found no intention to cause evasion except for an interpretational issue. Therefore, no penalty was imposed. The appeal was remanded to the adjudicating authority for further examination based on the limited issue of the job workers' entitlement to SSI benefit and the absence of any undertaking by the appellant regarding duty liability on the goods manufactured by job workers.