2026 (3) TMI 429 - AT - Central Excise

Manufacturer liability determined by identity of manufacturer; supplier of inputs not liable where independent contractor manufactures and supplies RMC.

Whether the appellant is the manufacturer of Ready Mix Concrete was resolved by applying the definition of 'manufacture' and the job-work concept: ... Manufacturer liability for excise duty - Contractor engaged to supply, manage and maintain a batching plant and to manufacture and supply Ready of Mix Concrete (RMC) - Job work / principal to principal supply principle - definition of manufacture - concessional rate of duty under notification. Manufacturer liability for excise duty - Job work / principal to principal supply principle - Appellant is not the manufacturer liable to pay central excise duty on Ready Mix Concrete supplied by the contractor. - HELD THAT: - The Tribunal examined the contract between the appellant and the contractor and found that the contractor was responsible to supply Ready Mix Concrete using its own machinery, labour and management; the transaction was on a principal to principal basis. The Court applied the principle that excise liability lies on the manufacturer who undertakes the manufacturing activity and that liability cannot be shifted to the supplier of raw materials or principal unless statutory conditions (such as an undertaking) for shifting liability are satisfied. The Tribunal relied on the decision in CC, Udaipur v. Sonex Marmo Grani Pvt Ltd. [2023 (5) TMI 802 - CESTAT NEW DELHI] to hold that where manufacturing is performed by the contractor/job worker, the principal who supplied raw materials cannot be treated as manufacturer and fastened with excise duty in the absence of the prescribed condition for shifting liability. [Paras 11, 12] The demand, interest and penalty confirmed on the basis that the appellant was the manufacturer were set aside because the appellant was not the manufacturer of the Ready Mix Concrete supplied by the contractor. Final Conclusion: The Tribunal allowed the appeal, holding that the appellant was not the manufacturer of Ready Mix Concrete supplied by the contractor and therefore could not be held liable for the central excise demand, interest and penalty; the impugned order was set aside with consequential reliefs in accordance with law. Issues: Whether the appellant, who contracted out manufacture and supply of Ready Mix Concrete (RMC) to a contractor and supplied raw materials, can be treated as the manufacturer liable to pay central excise duty for the period June 2013 to January 2016.Analysis: The contract shows the contractor was engaged to supply, manage and maintain a batching plant and to manufacture and supply RMC to the appellant. The appellant supplied inputs such as sand, jelly, water and cement while the contractor provided machinery, labour and the manufacturing process. The definition of 'manufacture' under Section 2(f) of the Central Excise Act, 1944 and the job-work concept under Rule 2(n) of the Cenvat Credit Rules, 2004 were applied. Precedent authority establishes that excise liability ordinarily rests on the manufacturer and can be shifted to the supplier of raw materials only if conditions of the relevant exemption or notification (including any undertaking) are strictly complied with. The appellant also relied on Notification No. 1/2011-C.E. dated 01.03.2011 for concessional duty where CENVAT credit has not been availed, but the primary issue resolved is identity of the manufacturer liable for duty.Conclusion: The appellant is not the manufacturer of Ready Mix Concrete and therefore cannot be held liable to pay central excise duty, interest or penalty for the impugned period; the impugned order confirming demand is set aside and the appeal is allowed with consequential relief, if any, in accordance with law.Ratio Decidendi: Where manufacturing activities are performed by an independent contractor supplying finished goods on principal-to-principal basis, excise liability lies on the contractor as manufacturer and cannot be fastened on the supplier of raw materials unless the specific conditions of the exemption/notification (including required undertaking) are strictly fulfilled.