Tribunal rules in favor of Techma Engineering on central excise duty exemption

TECHMA ENGINEERING ENTERPRISE, CALCUTTA Versus COLLECTOR OF CENTRAL EXCISE, CALCUTTA

TECHMA ENGINEERING ENTERPRISE, CALCUTTA Versus COLLECTOR OF CENTRAL EXCISE, CALCUTTA - 1987 (27) E.L.T. 460 (Tribunal). Issues Involved: Liability for central excise duty, applicability of Notification No. 111/78-C.E., definition of "manufacturer," relevance of the Shree Agency case, and the role of independent manufacturers.

Detailed Analysis:

1. Liability for Central Excise Duty:
The Collector of Central Excise, Calcutta, issued an order requiring M/s. Techma Engineering Enterprise to file a declaration in terms of Notification No. 111/78-C.E. The central excise officers had seized bolts and nuts from the company's premises, suspecting non-payment of duty. The department claimed that the company supplied raw materials to various manufacturers who produced bolts and nuts on their behalf, thus making M/s. Techma liable for the duty amounting to Rs. 66,869.35 and potential confiscation of goods and penalties under Rule 173Q.

2. Applicability of Notification No. 111/78-C.E.:
The company argued that they were not the manufacturers of the bolts and nuts; rather, independent manufacturers produced these goods using raw materials supplied by M/s. Techma. Therefore, the duty liability should rest on the actual manufacturers. The Collector, however, held that M/s. Techma Engineering was the manufacturer since they got the goods manufactured on their behalf and thus were liable to file the declaration under Notification No. 111/78-C.E.

3. Definition of "Manufacturer":
The core issue was whether M/s. Techma Engineering could be considered the manufacturer of the bolts and nuts. The company contended that merely supplying raw materials and receiving finished goods did not make them manufacturers. They claimed to be dealers rather than manufacturers, thus not subject to central excise duties. The Collector rejected this argument, relying on the Supreme Court judgment in the Shree Agency case, which dealt with the concept of manufacturing on behalf of another entity.

4. Relevance of the Shree Agency Case:
The Collector's reliance on the Shree Agency case was challenged by M/s. Techma Engineering. The Shree Agency case involved a scenario where the outworkers were dummies, and the Supreme Court found that Shree Agency was engaging in production to evade excise duty. The Tribunal found this case inapplicable to M/s. Techma's situation, as there was no evidence that the independent manufacturers were mere surrogates or tools of M/s. Techma Engineering. The Tribunal noted that the Shree Agency case was specific to its facts and context, which did not align with M/s. Techma's operations.

5. Role of Independent Manufacturers:
The Tribunal agreed with M/s. Techma Engineering's argument that the independent manufacturers could not be considered hired laborers. These manufacturers operated independently, and the bolts and nuts were not cleared on behalf of M/s. Techma Engineering but were simply cleared by the manufacturers. The Tribunal emphasized that the prohibition on removal of excisable goods under Rule 9 applied to the premises where the goods were actually produced, which in this case were the premises of the independent manufacturers, not M/s. Techma Engineering.

Conclusion:
The Tribunal concluded that M/s. Techma Engineering Enterprises was not required to fulfill the requirements of Notification No. 111/78-C.E. The independent manufacturers were responsible for the duty liability, and the Collector's order was deemed incorrect. The Tribunal's decision was based on the distinction between the actual manufacturers and the entity supplying raw materials, and the inapplicability of the Shree Agency case to M/s. Techma's circumstances.