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TMI Blog2013 (9) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... tched according to certain measurements for different sizes and if such garments can fit many customers there was no reason why a garment made for one individual cannot fit another person - the argument that such garments cannot be sold in the market was not acceptable - For deciding marketability, what is to be considered was not whether it was actually brought to the market and sold but whether it can be brought to the market and sold – This rule does not state that for textile items job-worker was not the manufacturer - It only says that the duty was to be paid by the person supplying the material as if he was the manufacturer - the appellant had no obligation to pay excise duty on garments stitched out of fabrics bought or brought by the customers - Further if duty liability was determined as if the customer was the manufacturer he should be eligible for exemption for SSI units also. As per Rule 7AA of the Central Excise Rules, 1944 and its successor rules, the responsibility to pay duty on textile articles got manufactured on job-work basis was put on the person who gets goods manufactured on job-work basis - He had to discharge such liability “as if he was the manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal varies within this period. The main appellant M/s. Diwan Saheb Fashions (Pvt.) Ltd. was known as M/s. Diwan Sons (India) (Pvt.) Ltd. during the said period (hereinafter referred to as Diwan Sons ). 2. The appellants were engaged in the manufacture of ready-made garments falling under Chapter Heading 6201 of the First Schedule to the Central Excise Tariff Act, 1985 with their brand name, that is Diwan Saheb , selling garments under certain other brand names and also stitching garments out of fabric bought by customers from their shop or brought by the customers from outside. The appellants were paying excise duty on ready-made garments which they got manufactured on job work basis by supplying raw materials to their job workers. In respect of such goods though the manufacturing activity was undertaken by the job workers, they were paying excise duty in view of the special provisions under Rule 7AA of the Central Excise Rules, 1944 and its successor rules namely, Rule 4 of Central Excise Rules, 2001 and Rule 4 of Central Excise Rules, 2002. The duty liability on such goods is not under dispute in the present proceedings. But this fact is relevant for appreciating the disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Ethnocity in the hands of M/s. Diwan Sons (P) Ltd. 6. Three Show Cause Notices issued by Revenue raising excise duty demand on the above issues for the period April, 2001 to March, 2003 were adjudicated by Order-in-Original No. 27-29/2004 dated 31-8-2004 which resulted in confirmation of duty demand of Rs. 2,06,46,457/- along with appropriate interest. Further, penalty equal to the said duty amount was imposed on the appellant-company under Section 11AC. Further penalty of Rs. 25 lakhs each was imposed on Shri Surinder Diwan and Sudhir Diwan, Directors of M/s. Diwan Sons India (Pvt.) Ltd. under Rule 26 of the Central Excise Rules, 2002 and penalty of Rs. 5.00 lakhs each was imposed on Shri M.L. Diwan of M/s. East West Attire and Smt. Usha Diwan of M/s. Ethnocity under Rule 26 of Central Excise Rules, 2002. Aggrieved by the order, the appellants had filed appeals before the Tribunal. The Tribunal disposed of the appeals vide its Order Nos. 237-241/2008-EX.(DB), dated 2-5-2008 [2008 (229) E.L.T. 240 (Tri.)]. In the said order, the Tribunal held as under : 8. In view of the above, while holding that - (a) the clearances of Ethnocity and East West Attire are liable to be club ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 8-7-2007 was issued which was adjudicated by Order-in-Original No. 144/2005 dated 17-10-2005. The parties have filed Appeal Nos. E/104 to 106/2006 against that order which appeals also are being considered in this order. Further, in the meanwhile, the adjudicating authority completed the de novo adjudication vide Order No. 30/2008 dated 31-12-2008 re-confirming the entire duty demand in the first order and imposing the same amount of penalties. Against this order also, the appellants have filed appeals and the Appeal Nos. E/409-413/2009 are against that de novo order. 9. The first point argued by both sides was whether the remand made by the Supreme Court vide its order dated 27-3-2009, as reproduced above is an open remand to the Tribunal to decide all the issues involved or it is a restricted order to decide only whether the dummy units through whom some alleged transactions have taken place were really dummy units and to decide who was the real manufacturer of the garments cleared in the name of East West attire and Ethno City and then decide the applicability of SSI exemption notification. It is noted that no specific notification has been mentioned by Hon ble Apex Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other matters have to be examined keeping in mind of the decision already given by the Tribunal vide its order dated 2-5-2008 which was not overruled by the Apex Court in its order dated 27-3-2009 though the order itself has been set aside giving directions on other issues. The decision of the Supreme Court in the case of Orient Papers and Industries Ltd. supports only this view. 13. We have heard the ld. Advocate for the appellant on the issue whether the impugned activity amounts to manufacture of excisable goods. The main argument raised by the Advocate is based on the legislative intent as clarified by the Board vide F. No. B4/5/2001-TRU, dated 30-4-2001 issued at the time of imposing duty on ready-made garments as under :- 3. It is understood that readymade garments, particularly those bearing brand names, are manufactured in a big way through job workers. Not only that, stitching and other ancillary activities are entrusted to different job works, sometimes smaller ones. Keeping this aspect in view it has been decided that in the case of garments manufactured on job work basis, the liability to pay the excise duty shall be on the person who gets the goods manufactured o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e texture, colour and quality and given his own instructions in the matter of style, the transaction would remain a contract for sale of goods, that is, a stitched suit piece inasmuch as the object of the contract was to transfer property in the stitched suit piece along with delivery of the suit by the tailor to the customer, all investments, whether of material or of skill and labour having been made by the tailor incidental to the fulfilment of the contract. Yet another illustration is provided by Benjamin (ibid., para 1.046). A doctor or veterinary surgeon who supplies medicines does so as an incident to a contract for professional services, which include diagnosis and advice over and above any work in the making up of the medicine. In contrast, a chemist who makes up a prescription sells it, since his work and skill goes entirely into the product - it is simply a component reflected in the price of the goods. Benjamin concludes - where work or skill is involved over and above what goes into the making of the goods delivered, it is possible and often correct to view the contract as substantially one for work or services. In our opinion a reverse case would be one of sale. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), manufactured on job-work, the provisions of these rules shall apply subject to the provisions of rule 7AA. 16. He points out that this rule was retained as Rule 4 in Central Excise Rules, 2001 and also as Rule 4 of Central Excise Rules, 2002. As per these rules the responsibility to pay excise duty rests on the persons supplying the raw materials, though this rule is in contradiction with the decision of the Supreme Court in the case of Collector v. Kerala State Electricity Board - 1992 (62) E.L.T. A52 (S.C.) and other cases. The appellant had accepted the liability under this rule and that is the reason why they paid excise duty on ready-made garments manufactured by their job workers out of materials supplied by them. If the job workers were to be considered to be liable to pay excise duty they did not have to pay any excise duty on such goods. The Appellant is not contesting excise duty paid by them on such goods. The appellant is only arguing that for the fabrics bought or brought by the customer to the appellants also the same rule should be applied. That is to say excise duty liability, if any, on such ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Though the notice issued to the appellant was also issued to the alleged dummy units proposing imposition of penalty, he argues that in that notice the alleged dummy units were not asked why clearances in their name should not be clubbed with value of clearances of Diwan Sons and duty demanded from Diwan Sons. So it is argued that the order based on such SCN is bad in law. 19. The Counsel also submits that duty liability has not been worked out considering the cum-duty benefit that should have been given to the appellants while quantifying assessable value. The Counsel also submits that the value of apparels should have been determined under provisions of Notification No. 20/2001-C.E. (N.T.), dated 30-4-2001 under which tariff values are fixed for payment of duty on articles of apparel falling under Chapter 62. He further points out during the period 1-3-2001 to 30-4-2001, garments not bearing a registered brand name was exempted from duty under Notification 12/2001-C.E., dated 1-3-2001. Their brands were not a registered brand name during the said period and they should be given the benefit of the notification for the said period. 20. He also points out that there is no spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em to show cause why the values should be clubbed is only a technical objection and if they had any real case they had enough opportunity to put up their defence. In support of his argument, he relies on the decision of the Apex Court in the case of CCE v. V. Madhu @ C.V. Maadhesh - 2002 (146) E.L.T. 252 (S.C.). He further relies on the decision of the Tribunal in Harnik Nutrients Pvt. Ltd. v. CCE - 2009 (238) E.L.T. 235 (Bom.) and in Chaitanya Polypack Industries v. CCE - 2005 (179) E.L.T. 581 (Bang.). 24. In the case of time-bar the ld. SDR submits that it is already settled in the proceedings so far in these appeals that these demands are not time- barred. He further relies on the decision of the Supreme Court in the case of CCE v. Mehta Co. reported at 2011 (264) E.L.T. 481 (S.C.). 25. Further, he argues that in this case of clandestine removal the benefit of working out assessable value considering the amount realised as cum-duty realisation cannot be given and the amounts realised from the customers should be taken as the assessable value. 26. We have considered arguments on both sides. The decision of the Apex Court in the case of Hindustan Shipyard Ltd. v. State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions like that of the Apex Court in the case of Kerala [State] Electricity Board Others (supra) is not correct. The matter as to who is the manufacturer when raw material is supplied by a person and manufacturing activity is done by another first arose in the context of deciding eligibility for exemption notification issued under Section 5A of the Act mentioning criteria with reference to the manufacturer. The finding that the person doing manufacturing activity is the manufacturer was applied for deciding who has to pay duty, as per the provisions of Central Excise Rules also because as per the Rule such liability is normally on the manufacturer. But these are different issues. There is no ruling by the Courts that a rule cannot be framed to make the supplier of raw material liable to pay duty. This is to say that there is no ruling that a Rule like Rule 7AA and its successor rules are bad in law. That is to say even when the manufacturer of the goods is the job worker, the liability to pay duty can be on another. This position becomes very clear if the definition of assessee and the Rules prescribing who has to pay duty are scrutinized. Rule 7AA was for making a deviation, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r so authorised undertakes to discharge all liabilities and comply with all the provisions of these rules. Explanation I. - For the purposes of this rule, the expression job worker shall be deemed to mean the person who undertakes the process or processes that brings into existence the finished goods, complete in all respects, falling under Chapter 61 or 62 of the said First Schedule, in his factory. For the removal of doubt, it is further clarified that the job-worker may also get part of the processing required for the manufacture of the said goods done by another person but should bring back the same for the completion of the manufacturing process in his factory. Explanation II - For the purposes of this rule, excisable goods manufactured in a factory and utilised, as such or after subjecting to any process, for the manufacture of any other commodity, in such factory shall be deemed to have been removed from such factory immediately before such utilisation. 28. This rule does not state that for textile items job-worker is not the manufacturer. It only says that the duty is to be paid by the person supplying the material as if he is the manufacturer. So this position is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not argue on these points. Further it is noticed that in the written submissions given before the hearing the appellants have contested the issue stating that they have only purchased ready-made garments from the two units and sold the same from their trading premises and that M/s. Diwan Sons had no connection with these two firms which were independently managed by their proprietors. The written submissions also mention the following case laws in support of their argument : (i) Renu Tandon v. UOI - 1993 (66) E.L.T. 375 (Raj.) (ii) CCE v. Saint Laboratories - 2006 (201) E.L.T. 85 (iii) CCE v. Vaspar Concepts - 2006 (196) E.L.T. 95 (iv) Studioline Interior System v. CCE - 2006 (201) E.L.T. 250 (v) Alpha Toyo Ltd. v. CCE - 1994 (71) E.L.T. 689 (vi) CCE v. Sotex - 2007 (209) E.L.T. 9 (S.C.) (vii) CCE v. Auto India - 2007 (213) E.L.T. 436 (viii) Shiplachem v. CCE - 2005 (187) E.L.T. 360 (ix) Summerking Electricals v. CCE - 2004 (176) E.L.T. 302 (x) Bright Paints Chemicals v. CCE - 2007 (216) E.L.T. 36 (xi) Jifcon Tools Pvt. Ltd. v. CCE - 2007 (208) E.L.T. 345. 30.1 Issue (i). The evidence collected shows that these firms had no employees, no equipment or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to pay excise duty as if the goods were manufactured by them. Since they do not qualify for exemption for SSI units and were in fact paying excise duty on goods shown as manufactured on their own account, they will not be eligible for SSI exemption on goods got manufactured by them with the brand names of Ethno and Ethnic Fusion . 31.1 Now it is proper to examine the legal submission made by the Counsel for the appellant that no notice was issued to the two firms M/s. East West Attire and M/s. Ethnocity. He relies on the following decisions in support of his argument :- (i) CCE v. N. Manikandan - 2009 (246) E.L.T. 349 (Tri.-Chennai) (ii) Ramsay Pharma (P) Ltd. v. CCE - 2001 (217) E.L.T. 789 (Tri.-Del.). Out of these cases, the Counsel is relying more on the first case because in that case the notice was issued to one of the partners of the allegedly dummy unit for imposition of penalty but no notice was issued to the allegedly dummy firm itself. Still the Tribunal held that order for clubbing the clearances of the allegedly dummy firm with the other firm cannot be made for the reason that no notice was issued to the allegedly dummy firm. In the second case the two pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding though such claim was made in the first round of litigation. We are in agreement with the earlier finding that the garments cannot be given exemption meant for handicrafts. 33. Thus the demand confirmed on account of clubbing of the clearances of M/s. East West Attire and M/s. Ethnocity with that of M/s. Diwan Sons is upheld and other demands are set aside. 34. We notice that the quantum of duty involved on account of the issue of clubbing is not coming out very clearly in the impugned order because such demand is jumbled with a few other issues and hence it needs to be re-determined. The claim for exemption under Notification 12/2001-C.E. for the period 1-3-2001 to 30-4-2001 also needs to be examined and the consequence of such claim on the duty demanded needs to be determined. The question whether the valuation has been done as per Notification 20/2001-C.E. (N.T.) needs to be looked into once again. We also notice that the appellant have substantially paid the duty on this count and had at the investigation stage expressed their willingness to settle this matter if that was the only issue involved. However the adjudication order in the first round and second round conf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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