2001 (8) TMI 643 - AT - Central Excise

Manufacturing duty liability clarified as Tribunal rules assembly site as true manufacturer.

The Tribunal found that duty demands on the four firms involved in manufacturing textile machine parts were unjustified as Flamingo Machines Pvt. Ltd., ... Manufacturer Issues:Manufacturing liability attribution, Duty imposition on firms, Manufacturer determination, Facade existence evaluation, Misinterpretation of manufacturing definition, Confusion in departmental understandingManufacturing Liability Attribution:The case involves multiple firms engaged in manufacturing textile machine parts, assembly, and testing by Flamingo Machines Pvt. Ltd. The Collector confirmed duty and imposed penalties on the firms involved. The appellants argued that Flamingo should be considered the manufacturer, as the emergence of complete machines occurred at their premises. The Collector's order stated that the new commodity emerged at Flamingo, making them the manufacturer liable for duty payment.Duty Imposition on Firms:The Collector demanded duty and imposed penalties on the firms involved in the manufacturing process. However, the appellants contended that the duty demand from these firms, including Joy Silk Mills, Life Bond Fabrics Pvt. Ltd., Life Bond Sales & Consultancy Pvt. Ltd., and Contempra Sales & Services Pvt. Ltd., was not justified as Flamingo should be considered the true manufacturer.Manufacturer Determination:The key issue revolved around determining the true manufacturer of the textile machines. The appellants argued that Flamingo, where the assembly took place, should be deemed the manufacturer. The Collector's order supported this view, emphasizing that the emergence of the new commodity occurred at Flamingo, making them the manufacturer responsible for duty payment.Facade Existence Evaluation:The question of whether Flamingo was a facade or had a real existence was raised. The order highlighted that if Flamingo was a facade, duty would be demanded from the true manufacturer behind it. However, the Collector's order did not conclusively establish the true projectors behind Flamingo or clarify the relationship between the involved firms.Misinterpretation of Manufacturing Definition:The departmental representative's interpretation of the manufacturing definition under Section 2(f) was challenged. It was clarified that the term 'manufacturer' includes those engaging in production for their own account, not just those employing hired labor. The misinterpretation led to confusion in attributing manufacturing liability to the correct entity.Confusion in Departmental Understanding:The department's confusion regarding the relationship between the parties led to erroneous duty demands and penalties. The Tribunal found that duty demands on the four firms were unjustified as they were not established as the true manufacturers. The penalty on Flamingo was also deemed unsustainable as duty was not demanded from them. The appeal of Contempra Machines Pvt. Ltd. was dismissed, while all other appeals were allowed, setting aside the impugned order.