2017 (12) TMI 1175 - AT - Central Excise

Job-work - manufacture of furniture items at site - hotels items like wardrobe, under counters in toilets, waiter station, cabinet etc. were erected piece by piece - Held that - the demand raised on account of the work undertaken by the Respondents, where they received only labour charges from the hotel management, cannot be sustained because the same cannot be considered as manufacture , especially when the raw material, design etc. were supplied by the hotel management. The Respondents got only the labour charges and the same cannot be brought under the purview of the excise duty. Demand raised on some items of furniture, claimed as Handicrafts under the first agreement - Benefit of N/N. 76/86-CE dated 10.02.1986 - Held that - In the said certificate, it was certified that the said items come under the category of the Handicrafts . The adjudicating authority has not brought any material on record to rebut the above mentioned findings - handicrafts exempted. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Appeal filed by the Department against the order-in-appeal dated 04.06.2008 passed by the Commissioner of Central Excise (Appeals), Delhi-I for the period 1996 to 2001.

Analysis:

The Department filed an appeal against the order-in-appeal passed by the Commissioner of Central Excise (Appeals), Delhi-I for the period 1996 to 2001. The case involved the Respondents, engaged in manufacturing furniture items under Chapter 94 of the Central Excise Tariff Act, 1985. The Respondents undertook job work in hotels as per the management's requirements without paying duty on furniture manufactured at the customers' site from raw materials supplied by them. The Department contended that duty should be paid on the furniture manufactured in the hotel premises. The adjudicating authority upheld the demand, but the Commissioner (Appeals) dropped it, leading to the Department's appeal.

During the proceedings, it was revealed that the Respondents entered into agreements with customers for manufacturing items at the site, under two types of agreements. The first agreement involved creating handicraft items at the customer's site using raw materials and labor provided by the Respondents. The second agreement required the Respondents to work at the customer's site under the strict control and supervision of the hotel management, receiving only labor charges. The Respondents claimed exemption under Notification No. 76/86-CE dated 10.02.1986 for items considered as handicrafts.

After considering all the facts and agreements, the Tribunal concluded that the demand based on work where the Respondents received only labor charges and did not supply raw materials or designs cannot be considered as 'manufacture' liable for excise duty. Additionally, for items claimed as handicrafts under the first agreement, the Tribunal found that the exemption claimed by the Respondents was supported by photographic evidence and a certificate from the Deputy Director (Retd.), Consultant, Office of the Development Commissioner (Handicrafts). The adjudicating authority failed to provide evidence to counter these findings, leading the Tribunal to uphold the impugned order dropping the demand.

In conclusion, the Tribunal dismissed the appeal filed by the Department, stating that the demand on items where only labor charges were received could not be subjected to excise duty. The exemption claimed for items considered as handicrafts was supported by valid evidence, and the impugned order was sustained based on the findings presented during the proceedings.