Contractor absolved of penalty under Central Excise Law for acting on manufacturer's instructions

The Tribunal allowed the contractor's appeal, setting aside the penalty of Rs. 50,000 imposed on them. The Tribunal held that since the main manufacturer settled the duty liability, the contractor, who acted under the manufacturer's instructions, should not be penalized. The contractor's role was considered supervisory and guidance-based, absolving them of penal liability under the Central Excise Law.

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Issues:
1. Duty liability and penalty imposed jointly on the contractor and the manufacturer.
2. Interpretation of the nature of the activity undertaken by the contractor.
3. Applicability of Circulars of the Board regarding central excise duty on goods.

Analysis:
1. The appellants, a contractor, and M/s. Gujarat Apar Polymers Ltd. (GAPL), the manufacturer, were jointly issued a show cause notice imposing duty liability and penalty on both parties. While GAPL settled its appeal under the KVS Scheme, the contractor appealed the decision. The contractor argued that their role was merely supervisory, providing guidance to GAPL, and the fabrication of tanks was done piece by piece at the site. The tanks were not considered immovable as they were not permanently attached to the earth. The Circular of the Board No. 17/89 was cited to support the position that no duty liability arose on the goods. The contractor contended that they did not manufacture excisable goods.

2. The Joint Director of Revenue (JDR) opposed the contractor's contentions, stating that the goods were both movable and marketable, and the Circulars of the Board were not applicable in this case. The JDR argued that the penalty imposed on the contractor was justified. However, the Tribunal observed that GAPL, as the main manufacturer, had settled the matter by paying the duty element. Considering that the contractor acted on the manufacturer's instructions and the duty liability was assumed by the manufacturer, the Tribunal held that no penal liability should be imposed on the contractor. Consequently, the penalty of Rs. 50,000 imposed on the contractor was set aside, and the contractor's appeal was allowed.

3. In conclusion, the Tribunal found that since the main manufacturer had settled the duty liability, it was not appropriate to hold the contractor guilty of contravening Central Excise Law. The contractor's actions were deemed to be at the behest of the manufacturer, absolving them of penal liability. The Tribunal's decision to set aside the penalty was based on the understanding that the contractor's role was limited to supervision and guidance, and the duty liability was primarily the responsibility of the manufacturer.

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