1995 (8) TMI 203 - AT - Central Excise

Summary

Issues Involved:

1. Whether the job workers were dummies set up by the appellants to avoid payment of excise duty.
2. Whether the appellants were the actual manufacturers of the carbon paper.
3. The admissibility of evidence submitted after the adjudication.
4. The impact of non-filing of declaration for exemption by job workers.

Detailed Analysis:

1. Whether the job workers were dummies set up by the appellants to avoid payment of excise duty:

The Principal Collector concluded that the job workers were dummies set up by the appellants. The appellants argued that the job workers were independent entities. The Tribunal examined the status of the job workers:

- M/s. Chirag Enterprises (P) Ltd.: The Managing Director, Sh. Rajiv Tandon, stated that the firm manufactured carbon paper on a job work basis for the appellants. The Tribunal found that this unit had an independent existence and was engaged in its production work.

- M/s. Precision Paper Products: Partner Sh. Gupta stated that the firm manufactured computer stationery and carbon paper for its use and the appellants. The Tribunal concluded that this unit had its production program and was not a dummy.

- M/s. Bindal Traders: Partner Sh. Naresh Kumar mentioned dismantling the machinery after stopping carbon paper manufacture for the appellants. The Tribunal noted no evidence that the machinery belonged to the appellants, suggesting independence.

- M/s. Mahendra Kumar & Co.: Enquiries revealed no such unit existed. However, delivery challans and job work orders were on record. The Tribunal found the Principal Collector's reliance on the unit's non-existence and rubber-stamped bills insufficient to prove it was a dummy.

The Tribunal referred to case law, including Fusion Polymers Ltd. v. Collector of Central Excise and concluded that the Principal Collector's reasoning based on the dictionary meaning of "dummy" was not sustainable. It emphasized that to establish dummy status, it must be shown that the raw-material supplier exercised complete control over production and had financial link-ups with the units, which was not proven here.

2. Whether the appellants were the actual manufacturers of the carbon paper:

The department argued that the appellants were the manufacturers since they supplied raw materials and controlled the quality. The Tribunal found that the job workers operated on a principal-to-principal basis, manufacturing carbon paper from raw materials supplied by the appellants and returning the finished product for labor charges. Citing case law, the Tribunal reiterated that ownership of raw materials does not make one a manufacturer. The appellants' role as raw material suppliers did not establish them as manufacturers.

3. The admissibility of evidence submitted after the adjudication:

The department contended that the affidavit from the Pradhan of Samalkha village, submitted after the Principal Collector's adjudication, was inadmissible. The Tribunal did not explicitly rule on the admissibility but focused on the overall evidence and legal principles to determine the status of the job workers.

4. The impact of non-filing of declaration for exemption by job workers:

The Principal Collector noted that the job workers had not filed declarations for exemption. The appellants argued that this was a technical breach. The Tribunal referred to Tufail Ahmed v. Collector of Central Excise, stating that non-filing of declarations should not bar exemption. The Tribunal found that the job workers' failure to file declarations did not affect their status as independent manufacturers.

Conclusion:

The Tribunal concluded that the job workers were not dummies of the appellants, and the appellants were not the manufacturers of the carbon paper. The appeal was allowed, and the Principal Collector's order was set aside.