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TMI Blog1990 (11) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... een 1-4-1981 and 28-2-1986. There appears to be a clerical mistake in mentioning the date 28-2-1982 in the show-cause notice instead of 28-2-1986. This is made clear in the statement of objections filed on behalf of the respondents. 4. The allegations made against the petitioners in the impugned show-cause notice are :- (i) that the petitioners got manufactured excisable goods from small-scale manufacturers, viz., job-workers, out of the raw-materials supplied by them and manufactured under their supervision and control, and, thus suppressed the clearances of such goods, and have evaded payment of excise duty on the value of the articles manufactured and supplied by job-workers during the period 1-4-1981 to 28-2-1986; and (ii) the value of the total clearances during the period is estimated at Rs. 9,25,96,498/-, and, a differential duty of Rs. 73,42,587.37ps., is demanded on the goods alleged to have been removed clandestinely without payment of duty during the said period. 5. In the annexure to the show-cause notice the modus operandi adopted by the petitioners is mentioned. It is stated therein, that the petitioners used to get the excisable goods manufactured through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral excise duty is being paid wherever it is due, and, this is not disputed by the Department; (iii) petitioners also purchase parts/equipments from other dealers and manufacturers, viz., bought-out items, which are sent direct to the worksite for installation/erection, etc.; (iv) they also purchase parts/equipments fabricated by the other manufacturers out of the raw-materials and the designs supplied by them. These items are also sent directly to the work-site for erection and installation purposes; (v) the manufacturers, who supplied the goods to the specifications and designs supplied by the petitioners are job-workers and are independent manufacturers having their own factory and recognised as small-scale units; (vi) that the job workers who supply the goods to the petitioners pay excise duty on their manufacture under the Act and are also exempted from duty as small-scale manufacturers wherever it is permissible, and, (vii) that the petitioners while billing their customers, prepared consolidated invoice including all the items manufactured through job-workers and other charges - like, freight, insurance, etc. The said invoices also include design and commissionin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hally, that the writ petitions should be dismissed in limine, since the petitioner has approached this Court at the stage of show-cause notice; that there was sufficient material collected by the Department from the seized books to indicate that the petitioner had indulged in large scale suppression and had evaded payment of excise duty. The writ petition was also opposed on the ground that there is a prima facie case against the petitioners and it should be left to the adjudicating authority to give a finding on the several issues that arise in the case and this Court should not interfere with the show-cause notice. 12. Sri Ganesh, learned Counsel appearing for the petitioners along with Mr. M.R. Naik, advanced the following arguments in support of the several contentions raised in the writ petition challenging the validity of the show-cause notice. Elaborating the contentions, the learned Counsel argued that the petitioners' activity, namely getting certain components and equipments manufactured by outside agency, namely, the sub-contractors and job-workers, does not automatically attract the levy of central excise duty. The argument of the learned Counsel is that the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessees through job-workers was considered and treated as assessees' manufacture. Reliance was placed mainly on the cases which arose in Maharashtra State where the manufacture and supply of cotton fabrics or textiles by an arrangement or agreement with the powerloom owners or societies, is very common. 17. On the arguments advanced by both sides, the following points arise for consideration :- (i) whether on the facts and arguments advanced on behalf of the petitioners, this is a fit case to interfere with the show-cause notice and quash it? (ii) whether a prima facie case is made out by the Department in proposing to levy duty on goods got manufactured through sub-contractors? (iii) whether the show-cause notice is liable to be quashed on the ground of absence of allegations as to fraud and suppression and lack of particulars as to the actual evasion of duty? (iv) whether in the absence of allegation that the job-workers are all sham or bogus, the Department was justified in issuing the impugned demand notice? (v) whether the show-cause notice is liable to be quashed on the ground of limitation under the proviso to Section 11A? 18. I now deal with cases cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was whether the value of goods sold by Food Specialities Co. to Nestle's should include the value of trade mark. The Supreme Court negatived the contention of the Department that the value of trade marks should be added to the wholesale price of the respondent charged to Nestle's, for purposes of computing the value of goods manufactured by the Respondent-Company. 21. The second point is about the infirmity in the show cause notice viz., absence of allegations of suppression, fraud or collusion, misstatement etc., in the show-cause notice. The learned Counsel has cited two decisions of the Supreme Court on this point, viz., (i) Collector of Central Excise v. Chemphar Drugs and Liniments - 1989 (40) E.L.T. 276 (SC) (ii) Padmini Products v. Collector - 1989 (43) E.L.T. 195 (SC). 22. The arguments advanced relying on these two decisions is that the show cause notice in the present case does not satisfy any of the ingredients of the provisions of Section 11A of the Act and hence, the show cause notice is liable to be quashed on this ground. 23. Reliance is also placed on the observations made by the Supreme Court in Union of India v. Madhu Milan Syntex -1988 (3) SCC 348 = 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a case of manufacture of cloth by powerloom owners who were employed by the petitioner to weave the cloth and return it to the petitioners. 29. In the last case of Gujarat High Court also, the petitioner had entered into agreement with the co-operative weavers' society to supply yarn and get the cloth back on the society being paid only the manufacturing charges. It was held, that it was a device to avoid excise duty though the society was an independent contractor. 30. From an analysis of the decisions relied upon by the petitioners the ratio of the several cases that may be summed is : (i) that mere supply of raw-materials to job-workers will not make the petitioner, a manufacturer of the goods manufactured by job-workers; (ii) using brand name of the customers will not render the independent contractors mere dummies; (iii) that the Department must prove that the job-workers are not manufacturers on their own account. 31. The Department has, on the other hand, tried to drive support from the line of cases dealing with manufacture of cloth by societies and powerloom weaver in support of the contention that the job-workers in the present case also must be held as m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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