2023 (9) TMI 57 - AT - Central Excise

Tribunal rules in favor of Appellants over excise duty liability dispute

The Tribunal ruled in favor of the Appellants in a case concerning the classification of the manufacturer under the Central Excise Act, 1944. It held that ... CENVAT Credit - removal of inputs as such to job-worker - job-workers were actual manufacturers - Supplier of raw material not registered with Department - classification of goods under CETH 87089900 or not - suppression of facts or not - extended period of limitation - HELD THAT:- In the case OPG Metals Pvt Ltd. [2015 (11) TMI 1036 - CESTAT CHENNAI] and Moon Chemicals [2007 (6) TMI 324 - CESTAT, CHENNAI], the suppliers of raw materials were registered with Central Excise department and they were following Notification 214/86 and Rule 4(5)(a) of the Central Excise Rules, 2002 to send the raw materials to the job worker. Hence, it was held that the liability of duty , if any, would arise only on the raw material supplier, when the conditions of Notification 214/86 are followed - However, in the present case on hand the supplier of raw material M/s Bidisha Enterprise was not registered with the department and hence the question of them complying with the conditions of Notification 214/86 would not arise at all. In the case of Vandana Dyeing Pvt. Ltd [2014 (8) TMI 441 - CESTAT MUMBAI] also, the goods were moved by following the procedure prescribed under Rule 4(5)(a) of the Central Excise Rules, 2002 to the job worker. Accordingly, it was held that the duty liability was on the supplier of the raw materials - thus, the job worker M/s Jamuna enterprise are the actual ‘manufacturers’. Classification of goods - providing conversion services of MS Rounds, bars etc. and converting the same to sockets, bends etc - to be classified under CETH 87089900 or not - HELD THAT:- Even though the Challans issued by them indicate that the job worker has converted the MS Rounds and Bright Bars into sockets and bends, no evidence has been brought on record to classify the goods as ‘Parts of Motor Vehicles’ under the Chapter Heading 87089900. The classification has been arrived at without ascertaining the actual processes under taken by the Appellant. It was only presumed that the finished goods are ‘Motor Vehicle Parts’. There is no findings in the impugned order on what basis this classification was arrived at by the Adjudicating Authority - the evidence available on record does not support the classification arrived at in the impugned order. Hence, the duty demanded from the Appellant under the Chapter heading 87089900, as ‘parts of motor vehicles’ are not sustainable. Extended period of limitation - Suppression of facts or not - HELD THAT:- Extended period of limitation under section 11A(1) of the Act can be invoked only if suppression, wilful misstatement occurs due to deliberate evasion of duty on part of the assessee. It is clear that such act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to avoid payment of duty - It is not a case where the Appellant has collected central excise duty from the customers and not paid the same to the government. They were under the bonafide belief that the processes undertaken by them did not amount to manufacture and accordingly cleared the goods to the raw material supplier on collection of ‘job charges’ only. Thus there is no evidence available on record to establish that the Appellant has suppressed the information of manufacture of dutiable goods with an intention to evade payment of duty. Thus, the department has not brought in any evidence to establish that the Appellant has suppressed the facts with an intention to evade payment of duty. Thus, the demand of duty by invoking extended period is not sustainable in this case. Accordingly, the demand is liable to be set aside on the ground of limitation. Penalty imposed on the other Appellant Shri Biswajit Saha under Rule 26(1) of the Central Excise Rules, 2002 - HELD THAT:- It is observed that he has sent the raw materials for job work and received the finished goods under Challans. There is no evidence available on record to conclude that he has in any way abetted the job worker to clear the goods without payment of duty. In the absence of any such evidence, penalty is not imposable on him under Rule 26(1) of the Central Excise Rules, 2002. Accordingly, the penalty imposed on the Appellant Shri. Biswajit Saha under Rule 26(1) of the Central Excise Rules, is not sustainable. Appeal allowed. Issues Involved:1. Whether the supplier of raw materials or the job worker is considered the manufacturer under Section 2(f) of the Central Excise Act, 1944.2. Applicability of extended period of limitation for issuing the demand notice.3. Validity of the classification of goods under CETH 87089900.4. Imposition of penalty on the proprietor of the raw material supplier.Summary:1. Manufacturer Classification:The Tribunal examined whether the supplier of raw materials (M/s. Bidisha Enterprise) or the job worker (Appellant) is considered the manufacturer under Section 2(f) of the Central Excise Act, 1944. The Appellant argued that they were merely job workers and that the duty liability should be on M/s. Bidisha Enterprise. However, the Tribunal held that since M/s. Bidisha Enterprise was not registered with the Central Excise department and did not follow the procedure set out in Notification 214/86-CE, the duty liability falls on the job worker, who carried out the actual manufacturing process. The Tribunal referenced the case of AFL PVT LTD. Vs Commissioner of Central Excise, Mumbai-II, which held that the job worker is the actual manufacturer.2. Extended Period of Limitation:The Tribunal addressed the issue of whether the extended period of limitation was applicable. The Appellant contended that they were under a bona fide belief that their activities did not amount to manufacture and thus did not intentionally evade duty. The Tribunal found merit in this argument, citing the Supreme Court's decision in Uniworth Textiles Ltd. Versus Commissioner of Central Excise, Raipur, which emphasized that the extended period requires deliberate default. The Tribunal concluded that the department failed to provide evidence of suppression with intent to evade duty, making the invocation of the extended period unsustainable.3. Classification of Goods:The Tribunal reviewed the classification of the goods under CETH 87089900 as 'parts of motor vehicles.' The Appellant argued that the classification was based on surmise without proper investigation. The Tribunal agreed, noting that no evidence was presented to support the classification. Consequently, the Tribunal held that the classification and the resulting duty demand were not sustainable.4. Penalty on Proprietor:The Tribunal considered the imposition of a penalty on Shri Biswajit Saha, the proprietor of M/s. Bidisha Enterprise, under Rule 26(1) of the Central Excise Rules, 2002. The Tribunal found no evidence that Shri Biswajit Saha abetted the job worker in clearing goods without payment of duty. Therefore, the penalty was deemed unsustainable.Conclusion:The Tribunal set aside the impugned order, allowing the appeals filed by the Appellants, and ruled that the job worker was not liable for the excise duty, the extended period of limitation was inapplicable, the classification of goods was incorrect, and the penalty on the proprietor was not justified.