1991 (4) TMI 232 - AT - Central Excise

Tribunal rules in favor of appellants, finding independent relationships with job workers. Time-barred duty demand overturned.

The Tribunal, in a majority decision, ruled in favor of the appellants, M/s. Fusion Polymers Ltd., determining that they were not the manufacturers of ... Manufacturer Issues Involved:1. Whether the appellants, M/s. Fusion Polymers Ltd., can be regarded as the manufacturers of moulding powder and master batches.2. Whether the relationship between the appellants and the job workers was that of hired labour or independent entities.3. Whether the demand for duty was time-barred due to alleged suppression of facts.Summary:Issue 1: Manufacturer Status of AppellantsThe primary issue was whether M/s. Fusion Polymers Ltd. could be considered the manufacturers of moulding powder and master batches. The Collector's adjudication held that the appellants were the manufacturers, relying on the decision in H. Guru Instruments (P) Ltd. v. Collector of Central Excise, Calcutta, asserting that the job workers were merely hired labour. However, the appellants argued that supplying raw materials for job work does not make them the manufacturer, as the job workers were independent entities. The Tribunal's majority decision eventually sided with the appellants, noting that there was no evidence to prove that the job workers were dummies or that the transactions were not on a principal-to-principal basis.Issue 2: Nature of Relationship Between Appellants and Job WorkersThe Collector found that the job workers were merely hired labour for the appellants, based on statements from various functionaries and the fact that ownership of raw materials and finished products remained with the appellants. The appellants countered this by citing multiple case laws, including the decision in Techma Engineering Enterprise, which defined hired labour as those working under the direct control of another for wages. The Tribunal's majority opinion concluded that the job workers were independent entities, not hired labour, as there was no control or supervision by the appellants over the job workers' operations.Issue 3: Time-Barred Demand for DutyThe appellants argued that the demand for duty was time-barred, as they had not wilfully withheld information from the Department. The Collector invoked the longer period of demand u/s 11A of the Central Excises & Salt Act, 1944, citing suppression of facts. The Tribunal's majority decision did not explicitly address this issue in the final ruling, focusing instead on the nature of the relationship and the status of the appellants as manufacturers.Conclusion:The Tribunal, by majority decision, set aside the Collector's order, holding that the appellants and the job workers were independent entities having principal-to-principal transactions. Consequently, M/s. Fusion Polymers Ltd. could not be regarded as the manufacturers of the intermediate products for the purpose of demanding duty. The appeal was allowed, and the impugned order was set aside.