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2023 (5) TMI 802 - AT - Central ExciseJob-work - duty liability of job-worker or supplier? - raw material supplier undertakes the responsibility of paying duty as per provisions of Notification No. Notification No. 83/94-CE, 84/94-CE or 214/86-CE - entitlement to the exemption from payment of excise duty - Wrong availment of benefit of SSI exemption Notification No. 08/2003-CE dated 01.03.2003. and Notification No. 83/94-CE, 84/94- CE or 214/86-CE - non-payment of duty on goods manufactured by the respondents as job worker - extended period of limitation - penalty - HELD THAT - Note (6) of the SECTION V of CHAPTER 25 of Central Excise Tariff Act,1985, in relation to products of headings 2515 and 2516, specifies that the process of cutting or sawing or sizing or any other process, for converting of stone blocks into slabs or tiles, shall amount to manufacture . It is noted that the process undertaken by the respondent on job work i.e. sawing of marble blocks into marble slabs amounts to manufacture and that a new article having a distinctive character or use has emerged from the said process. The marble slabs manufactured by the respondent falling under chapter heading 2515 are new article having a distinctive character or use and marketable, therefore eligible to levy of excise duty. A Manufacturer is the one who actually undertakes the manufacturing activity. A customer does not become manufacturer by merely supplying raw materials or getting goods manufactured according to his drawing or specification. Once the goods have been manufactured, duty liability arises and fastened on the manufacturer of the said goods as Central Excise duty is on manufacture . From the facts on record, it is found that the respondent assessees have done the job work of sawing the green marble blocks and cleared the same as such (without finishing, polishing etc.) to the principal manufacturers. It is the principal manufacturers who also have established units for processing of marble who have done the further process of finishing, polishing etc. and thereafter cleared the goods from their premises - though the respondent assessees is liable to pay excise duty on the job work goods, it is found that such duty have been wrongly calculated both with respect to the quantum of clearance and also the calculation of duty, as have been rightly observed by learned Commissioner (Appeals). Such observations have not been disputed by revenue. In the case of KARTAR ROLLING MILLS VERSUS COMMISSIONER OF C. EX., NEW DELHI 2006 (3) TMI 63 - SUPREME COURT the Supreme Court has held that unless there is an undertaking by the principal manufacturer that they would discharge the duty liability, the job worker is liable to discharge duty on the clearances from the premises of job worker. The Tribunal in the case of ETERNIT EVEREST LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BHOPAL 2010 (1) TMI 601 - CESTAT, NEW DELHI has been held that duty has to be demanded from job worker, and not from principal manufacturer, when transaction between the two are on principal to principal basis. It is noted that in the present case, the transaction between job worker and principal manufacturer are on principal to principal basis. It is not in doubt that the marble slabs/tiles were manufactured by the job worker and the duty liability as per excise laws is only on the manufacturer. The duty liability can be shifted to the supplier of raw materials or semi-finished goods only if the supplier gives an undertaking in terms of the notification - it is noted that the learned counsel s argument that this is a procedural lapse. It is opined that this is a substantial condition which cannot be taken as a procedural condition, as it shifts the duty liability from the job worker to the supplier of raw materials or semi-finished goods. Until and unless this condition of giving undertaking is fulfilled, the duty cannot be fastened on the supplier of raw materials or semi-finished goods, as they were not the manufacturers of marble slabs/tiles. It is noted there are several case laws that have held that the condition of the exemption notification has to be construed strictly and if any condition is not fulfilled the same cannot be applied to a situation. Appeals of revenue allowed by way of remand to the original Adjudicating Authority with the following directions i) To calculate the quantum of marble slabs cleared on job work basis as per the formula prescribed in the tariff. ii) To calculate the duty on the job work by taking value of job work goods (including cost of marble blocks) iii) To recalculate the SSI exemption from the turnover after taking into account the exempt and export turnover. iv) The penalty amount under Section 11AC shall also be modified accordingly. v) The respondent assessees shall be entitled to pay the reduced amount of penalty, upon such redetermination, in accordance with law. vi) We also direct the respondent assessees to appear before the Adjudicating Authority with a copy of this order and seek opportunity of hearing within a period of 45 days from the date of receipt of this order.
Issues Involved:
1. Duty liability of job worker vs. supplier of inputs. 2. Applicability of exemption notifications. 3. Wrong availment of SSI exemption. 4. Correct calculation of duty. 5. Invocation of extended period of limitation. 6. Liability for penalty. Summary: Issue 1: Duty Liability of Job Worker vs. Supplier of Inputs The Tribunal noted that the process of sawing marble blocks into slabs amounts to "manufacture" as per Chapter 25 of the Central Excise Tariff Act, 1985. The job worker, who undertakes the manufacturing activity, is liable for excise duty. The principal manufacturers did not furnish the required undertakings under Notification Nos. 83/94-CE, 84/94-CE, or 214/86-CE, making the job worker responsible for the duty. Issue 2: Applicability of Exemption Notifications The Commissioner (Appeals) held that the principal manufacturers were not required to file declarations under job work exemption Notification No. 83/94-CE as marble blocks are not excisable. The Tribunal disagreed, stating that the duty liability shifts to the supplier only if they provide the necessary undertaking, which was not done in this case. Issue 3: Wrong Availment of SSI Exemption The Tribunal found that the respondent's sales were below the threshold exemption limit as per Notification No. 8/2003-CE. However, the method of calculating turnover and duty was erroneous. The Commissioner (Appeals) had noted errors in the valuation adopted by the revenue, as the job worker cleared rough marble slabs, not finished ones. Issue 4: Correct Calculation of Duty The Tribunal observed that the duty was wrongly calculated both in terms of the quantum of clearance and the calculation method. The Commissioner (Appeals) had pointed out that the valuation should be based on the cost of raw materials plus job charges, not the principal manufacturer's sale price. The Tribunal directed a recalculation of the duty and SSI exemption. Issue 5: Invocation of Extended Period of Limitation The Tribunal did not explicitly address the extended period of limitation but remanded the case for de-novo adjudication, implying that this aspect should be reconsidered by the original adjudicating authority. Issue 6: Liability for Penalty The Tribunal directed that the penalty under Section 11AC should be modified according to the recalculated duty. The respondent would be entitled to pay a reduced penalty amount upon redetermination. Conclusion: The appeals and cross objections were allowed by way of remand to the original adjudicating authority for de-novo adjudication, with specific directions for recalculating the duty and penalty. The respondent was instructed to seek a hearing within 45 days from the receipt of the order.
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