2017 (3) TMI 549 - AT - Central Excise

Job-work - the material is sent to the principal manufacturer of valve in Kanpur where the finished valves are produced - demand on the ground that appellants were not registered under Central Excise - benefit of N/N. 214/96 and N/N. 84/95-CE - Held that - the principal requirement for availing N/N. 214/86 or N/N. 84/95 is that the principal manufacturer for whom a person is doing the job-work gives the undertaking to discharge the duty liability on the finished goods processed by the person, if the conditions of the notification are not met. These undertakings are not merely procedural undertaking but substantive undertaking in so far as by virtue of this undertaking, the principal manufacturer takes the responsibility of duty liability in case it arose - in the instant case, the benefit of these notifications cannot be extended to the appellant as the said undertakings have not been given by the appellant. The processes result in a substantial advance stage of manufacture of valves. The argument that there is no activity of manufacture, has no merit. Appeal dismissed - decided against appellant.

Issues involved:
1. Benefit of Notification No. 214/86 and Notification No. 84/95 for job-work activities.
2. Requirement of procedural formalities under the notifications.
3. Undertaking by principal manufacturer for duty liability.
4. Classification of activities as manufacturing process.
5. Appeal against duty demand, interest, and penalty imposition.

Detailed Analysis:

1. Benefit of Notification No. 214/86 and Notification No. 84/95 for job-work activities:
The appellants claimed entitlement to the benefits of Notification No. 214/86 and Notification No. 84/95 for the job-work they were performing for the principal manufacturer. They argued that since the principal manufacturer was paying duty on the final products, there was no revenue loss to the government. However, the Tribunal found that the benefit of these notifications could not be granted to the appellant as the necessary undertakings from the principal manufacturer were not provided by the appellant. The undertakings were deemed essential for availing the benefits of the notifications.

2. Requirement of procedural formalities under the notifications:
The Tribunal emphasized that the undertakings required under the notifications were not merely procedural but substantive in nature. These undertakings signified the principal manufacturer's commitment to discharge duty liability if the conditions of the notifications were not met. Without these undertakings, the benefits of the notifications could not be extended to the appellant. Thus, compliance with the procedural formalities, including obtaining the necessary undertakings, was crucial for availing the benefits under the notifications.

3. Undertaking by principal manufacturer for duty liability:
The judgment underscored the significance of the undertaking by the principal manufacturer to discharge duty liability on the finished goods processed by the appellant. This undertaking served as a guarantee that the duty obligations would be fulfilled by the principal manufacturer in case of any lapses or non-compliance with the conditions specified in the notifications. The absence of such an undertaking was a determining factor in denying the appellant the benefits of the notifications.

4. Classification of activities as manufacturing process:
The Tribunal analyzed the activities conducted by the appellants in converting steel raw material into semi-finished valves. The detailed description of the processes involved, such as cutting, grinding, extrusion, hardening, tampering, and finishing, demonstrated a substantial advancement in the manufacturing of valves. The Tribunal rejected the argument that there was no manufacturing activity involved, as the processes undertaken by the appellants clearly indicated a significant manufacturing process.

5. Appeal against duty demand, interest, and penalty imposition:
The appellants challenged the duty demand, interest, and penalty imposed on them for the activity of converting steel raw material into semi-finished valves. Despite the arguments presented in the appeal, the Tribunal found no merit in the appellant's case. Consequently, the appeal was dismissed, upholding the duty demand, interest, and penalty imposed on the appellants. The decision was pronounced in court on 28.02.2017.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal regarding the benefit of notifications, procedural formalities, undertakings by the principal manufacturer, classification of activities as manufacturing processes, and the dismissal of the appeal against duty demand, interest, and penalty imposition.

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