2019 (2) TMI 1235 - AT - Central Excise

Job work - duty liability is on Job worker or on principal - readymade garments (trousers) - Neither M/s Ayush Apparel nor Job worker M/s S.P. Associates paid the duty on the said readymade garments - Revenue s contention is that the cum duty benefit extended by the Commissioner is not correct - Held that - During the relevant period, in terms of Rule 7 AA of Central Excise Rules, 1944, there is a specific provision that in case of Job work, the principle was supposed to pay the duty unless and until he authorizes the job worker to discharge the duty. In the present case, the principal that is M/s Ayush Apparels has not authorized the job worker M/s SP associates to discharge the Excise Duty. Therefore, the M/s Ayush Apparels was legally liable for payment of duty even though he did not manufacture the goods and the job worker has manufactured the goods. Accordingly, there is no doubt that the principal M/s Ayush Apparels is liable to pay the duty. As regard the submission of Ld. Counsel that the manufacturer alone has to discharge the duty, it has no force for the reason that as per section 3 of Central Excise Act, 1944, it is provided that there shall be levied and collected in such manner as may be prescribed a duty of excise . As per this provision, the Government has power to prescribe the manner of levy and collection of duty. In the case of readymade garments, the Government has prescribed the manner by way of Rule 7AA in the Central Excise Rule, 1944. Therefore, by this specific provision even though in normal course, a manufacturer is supposed to pay duty but, in this case, the principal supplier of Raw material is legally liable to pay the duty. Therefore, the demand confirmed on the principal M/s Ayush Apparels is in principle upheld. Cum-duty benefit - Held that - There is nothing wrong in that benefit given by the Commr. (A) as the same was on the basis of Hon ble Supreme Court judgment in the case of Maruti Udyog Ltd. 2002 (2) TMI 101 - SUPREME COURT . Appeal allowed in part.

Summary

Issues:
1. Duty liability of the principal supplier for readymade garments manufactured on job work basis.
2. Denial of SSI exemption due to lack of documents.
3. Claim for 25% penalty under section 11AC.
4. Filing of separate appeals by proprietorship concern and proprietor.
5. Cum duty benefit extended by the Commissioner.

Analysis:

1. Duty Liability of Principal Supplier:
The case involved the appellant, a principal supplier of raw material, engaging a job worker to manufacture readymade garments. The Tribunal upheld that the principal supplier was legally liable to pay the duty under Rule 7AA of the Central Excise Rules, as they did not authorize the job worker to discharge the duty. The duty demand against the principal supplier was confirmed, emphasizing the specific provision in the Central Excise Act regarding duty collection.

2. Denial of SSI Exemption:
The appellant's claim for Small Scale Industry (SSI) exemption for the year 2002-03 was denied due to the failure to submit necessary documents like invoices/challans. The Tribunal affirmed the denial, stating that without the required documents, the correct aggregate value for granting the exemption could not be determined. The appellant's inability to provide documents led to the rejection of the SSI exemption claim.

3. Claim for 25% Penalty under Section 11AC:
The Tribunal addressed the issue of the 25% penalty under the proviso to section 11AC, noting that the Adjudicating Authority had not provided this option in the original order. Following the precedent set by the Honorable Supreme Court, the Tribunal granted the benefit of the 25% penalty, subject to the condition that the total duty liability, interest, and penalty be paid within a specified timeframe.

4. Filing of Separate Appeals:
Regarding the Revenue's appeal on the filing of separate appeals by the proprietorship concern and the proprietor, the Tribunal ruled that since the concern and proprietor were the same person, only one appeal was necessary and legally correct. The penalty dropped on the proprietor was sustained, and the appeal against the penalty on another party was dismissed due to technical grounds.

5. Cum Duty Benefit Extension:
The Tribunal found no issue with the cum duty benefit extended by the Commissioner, citing the Honorable Supreme Court judgment in a relevant case. The Tribunal dismissed the Revenue's appeal on this matter, concluding that the benefit given was justified.

In conclusion, the Tribunal partially allowed the appellant's appeal while dismissing the Revenue's appeal, addressing various legal aspects related to duty liability, SSI exemption, penalty provisions, and appeal procedures. The judgment provided detailed reasoning and legal interpretations to resolve the disputes raised by the parties involved.