Appellants win duty evasion case as Tribunal shifts liability to raw material supplier /86

MOON CHEMICALS Versus COMMISSIONER OF C. EX., THIRUVANANTHAPURAM

MOON CHEMICALS Versus COMMISSIONER OF C. EX., THIRUVANANTHAPURAM - 2007 (215) E.L.T. 434 (Tri. - Chennai) Issues:
1. Duty evasion through clandestine removal of goods without payment.
2. Compliance with Notification No. 214/86 for job work contracts.
3. Liability of duty payment on job work products.

Analysis:
1. The case involved the appellants being accused of clandestinely clearing a specific quantity of Sodium Silicate without paying duty, as discovered during investigations by a Central Excise officer. The department issued a show-cause notice demanding duty payment, interest, and penalties under relevant sections of the Central Excise Act. The party contested the notice, but the adjudicating authority upheld the duty demand and imposed penalties, which were affirmed by the Commissioner (Appeals). The appeal was made against the Commissioner's order.

2. During the hearing, the appellants argued that the second set of invoices were raised for labor charges under a job work contract with M/s. Vijay Detergent Products. They contended that the labor charges collected were distinct from the price of Sodium Silicate, and the department had not proven any evasion beyond the labor charges. The appellants invoked Notification No. 214/86, stating that the raw material-supplier should pay duty on the job work product for home consumption, and any liability should fall on the supplier, not them. They also challenged the evidentiary value of private registers and statements in proving clandestine removal of goods.

3. The Tribunal analyzed the compliance with Notification No. 214/86, which exempted goods from duty when used in job work for final products subject to conditions. The appellants' job work for M/s. Vijay Detergent Products fell within the scope of job work under the Notification. The key issue was the non-fulfillment of a condition requiring the raw material-supplier to undertake duty payment for home consumption. The Tribunal held that the demand for duty was a consequence of this non-compliance, which the raw material-supplier should have fulfilled. Relying on precedent and lack of contrary decisions, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeal.