2015 (10) TMI 1543 - AT - Central Excise

Tribunal waives excise duty & penalty, emphasizes distinction between job work & sales transactions

The Tribunal granted relief to the appellants by waiving the entire demand of excise duty and penalty until the appeal's disposal. The Tribunal found ... Duty demand - Clubbing of turnover of the Job workers - dispute regarding Valuation - dummy units or not - Invocation of extended period of limitation - Held that:- Prima facie the adjudicating authority in his findings held that eleven units are nothing but job workers of the appellants merely on the grounds that these were controlled by the appellants by way of supply of raw materials and arrange for supply of raw materials etc. We also find that there is no dispute on the fact that each of the unit are independently registered with the central excise and nowhere in the adjudication order it was brought out that they are inter related. Appellant's unit cleared match sticks after paying excise duty on sale to other units and they in turn manufacture final product under the brand name 'Chavi' and discharged excise duty. If the department disputed the price at which excise duty paid by the eleven units the demand should have been made on the eleven units, who are already registered with the Department. Duty cannot be demanded on the appellants for trading of goods. Prima facie, we find there is contradictions in the allegations. It has not been clearly brought out in the order whether the appellants are the principal manufacturer and whether eleven units are only job workers. It is seen from the records that neither the appellants nor eleven units have opted any job work procedure. Whereas the adjudicating authority has defined them as job workers and availed duty on the price at which the match boxes are sold by the appellants, which is contrary to Rule 10A of Central Excise Valuation Rules. By relying the Tribunal order in the case of Diamond Cements Ltd. (2012 (6) TMI 73 - CESTAT, NEW DELHI) and other citations, we find that the appellants have made out a prima facie case for waiver of pre-deposit. - Stay granted. Issues:1. Demand of excise duty on match boxes purchased and cleared.2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.3. Allegation that eleven units are job workers.4. Dispute regarding the nature of transactions and application of Valuation Rules.Analysis:1. The adjudicating authority demanded excise duty amounting to Rs. 1,25,98,269 on match boxes purchased and cleared for the period from 01.04.2007 to 30.09.2012, invoking the extended period under Section 11 A(2) of the Central Excise Act, 1944. Additionally, a penalty was imposed under Section 11AC of the same Act. The appellant, a matchstick manufacturer, contended that the duty was paid and cleared to various parties, including independent match manufacturing companies. The authority, however, treated these companies as job workers of the appellant, leading to the demand for excise duty. The appellant argued that the transactions were independent sales and not job work, citing relevant case laws to support their position.2. The appellant's advocate argued that the nature of the transactions was not that of job work, and the Valuation Rules were not applicable in this scenario. The appellant emphasized that the units involved were independent entities registered with central excise and not related to the appellant. The adjudicating authority's conclusion that the units were job workers controlled by the appellant was disputed. The Tribunal found contradictions in the allegations and observed that the authority did not clarify whether the appellant was the principal manufacturer or if the units were merely job workers. Relying on precedent cases, the Tribunal held that the appellant made a prima facie case for waiver of pre-deposit, leading to the waiver of the entire demand and penalty until the appeal's disposal.3. The respondent, on the other hand, supported the authority's findings and argued that the duty was rightly demanded from the appellants due to their control over the supply of raw materials and credit arrangements with other units. The respondent referenced a decision by the High Court of Gujarat to support their stance. However, after considering both sides, the Tribunal found that the authority's basis for treating the eleven units as job workers was insufficient. The units were independently registered, and the transactions appeared to be sales rather than job work. The Tribunal highlighted the lack of clarity in the authority's order regarding the roles of the appellants and the units, ultimately leading to the waiver of the pre-deposit and penalty.4. The Tribunal's decision focused on the crucial distinction between job work and independent sales transactions, emphasizing the importance of correctly categorizing the nature of the activities to determine the applicability of excise duty and penalties. By analyzing the facts, legal arguments, and relevant case laws, the Tribunal clarified the issues raised and granted relief to the appellants based on the lack of clarity and inconsistencies in the adjudicating authority's findings.