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Issues: (i) Whether the clearances of goods manufactured by job workers could be clubbed with the appellant's clearances so as to deny SSI exemption and fasten central excise duty liability on the appellant. (ii) Whether the demand was sustainable for the extended period of limitation.
Issue (i): Whether the clearances of goods manufactured by job workers could be clubbed with the appellant's clearances so as to deny SSI exemption and fasten central excise duty liability on the appellant.
Analysis: The goods were manufactured in the job workers' own premises by independent manufacturers on a principal to principal basis. Mere supply of raw materials by the appellant did not make it the manufacturer for central excise purposes. In the absence of the procedure contemplated for job work under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 read with the relevant job-work notification, the duty liability attached to the manufacturer who carried out the production. No material showed that the job workers were dummy units or financially dependent on the appellant, and ownership of raw materials was held irrelevant to the taxable event of manufacture.
Conclusion: The appellant was not liable to pay central excise duty on goods manufactured and cleared from the job workers' premises, and clubbing of clearances was not justified.
Issue (ii): Whether the demand was sustainable for the extended period of limitation.
Analysis: The appellant had maintained proper books of account, registers and vouchers and had disclosed the relevant transactions. The dispute was interpretational and arose from audit objections. In these circumstances, the ingredients required for invoking the extended period, including suppression of facts with intent to evade duty, were not made out.
Conclusion: Invocation of the extended period of limitation was not sustainable and the demand on that basis failed.
Final Conclusion: The impugned demand, interest and penalty were set aside, and the appeal succeeded with consequential reliefs.
Ratio Decidendi: For central excise, manufacture is the taxable event, and duty liability follows the actual manufacturer; mere supply of raw materials or commercial sale of the end product does not transfer manufacturer status to the principal unless the statutory job-work mechanism is duly invoked. Absent suppression or intent to evade, the extended limitation period cannot be applied.
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