TaxTMI 
TaxTMI 
1990 (3) TMI 88
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....ications. After sliting is done, the slitted rolls, also known as strips, are further required to be cut into small pieces of required dimensions and designs depending upon requirements of the customers. The pieces which thus come into existence as a result of this process are known as electrical laminations. They were, at the relevant time, chargeable to excise duty under tariff item No. 28A of the First Schedule to the Central Excises and Salt Act, 1944. 3. Apex Electricals were formerly purchasing C.R.G.O. sheets or ready-made laminations from the market. As it did not possess any facility either for slitting or for cutting the said sheets, it used to get both the jobs performed by others on job work basis when it purchased C.R.G.O. sheets from the market. In 1979 it got an import licence and imported C.R.G.O. sheets. In respect of the C.R.G.O. sheets imported by it in the year 1979-80, it had got the slitting work done at Bombay. It had entered into agreements with the following six parties for getting the slitted sheets cut into smaller sizes : 1. M/s. Prolite Engineering Company, 2. M/s. Ashish Stampings, 3. M/s. Sangma Engineering Works, 4. M/s. Mayur Engineer....
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....g of interim relief and, therefore, while granting the interim relief, this Court permitted the respondent to go on with the adjudication proceedings. No show cause notices were issued to the other six processors. On 27-11-1984, the Collector of Customs and Central Excise, Vadodara, passed an order directing Apex Electricals to pay the duty of Excise at appropriate leviable rate under Tariff Item 28A, on electrical laminations manufactured by the aforesaid six processors for Apex Electricals, on the basis that they had really manufactured those laminations for and on behalf of Apex Electricals and thus Apex Electricals manufactured and illicitly removed those goods. He also imposed a penalty of Rs. 15 lacs on Apex Electricals. Aggrieved by that order, Apex Electricals has filed Special Civil Application No. 1083 of 1985. 5. What is contended on behalf of the petitioners in all these petitions is that the view taken by the respondents that Apex Electricals is really a loan licensee, and that the six processors, who were manufacturing electrical laminations, as ordered by Apex Electricals, were manufacturing the same for and on behalf of Apex Electricals is erroneous as it is base....
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....of these petitions, no other ground was urged on behalf of the respondents for taking the view which the respondents, including the Collector, have taken in this case. In reply affidavit filed in Special Civil Application No. 1083 of 1983 what was implied in the order passed by the Collector has been specifically stated by saying that the said processors were dummies of Apex Electricals. 7. The question which arises for consideration is whether the view taken by the respondents that Apex Electricals was the real manufacturer of the electrical laminations manufactured by the processors, for Apex Electricals, in the year 1979-80 and thereafter, can be said to be proper and legal. It is now well settled that if, as a result of any process carried out by the processor on job work basis, a new commercial commodity comes into existence, then that process amounts to manufacture under the Act, and in such a case the processor/job worker will become liable to payment of excise duty on the goods manufactured by him. In such cases ownership of the goods is not relevant for deciding who is the real manufacturer. In these cases, it is not in dispute that the process employed by the six proce....
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....Corporation Limited and B.M.P. and Equipments Company. These averments are also not denied by the respondents, there is no finding recorded by the Collector that these six processors were doing the work for Apex Electricals only and for no other party. 9. It is in this context that we have to consider whether for the reasons stated by the Collector in his adjudication order, the six processors can be properly described as dummies and Apex Electricals can be said to be the real manufacturer. The answer to this question can be found by looking to the true nature of the transactions between the parties. In order to find out the true nature of the transactions, the circumstances narrated above would be quite relevant and they ought to have been considered by the excise authorities. A perusal of the adjudication order passed by the Collector discloses that these relevant circumstances were not considered by him. As against those relevant and more important circumstances, the Collector relied upon the circumstances which we have stated earlier in this judgment while pointing out what were the reasons for the excise authorities to come to the conclusion that Apex Electricals was the re....
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.... do the job. All of them had filed their declarations in the prescribed form and the prescribed form did not require them to give other particulars or to disclose the names of the companies for whom they were to do the job work. 11. The next circumstances relied upon by the respondent, viz., that those processors had purchased machineries between October, 1979 and January, 1980 would not justify the inference that they had done so for and on behalf of Apex Electricals. As pointed out above, those processors had purchased required machineries independently, without any financial help from Apex Electricals. If on a reasonable anticipation that they would be able to obtain orders from Apex Electricals they had purchased the machineries during that period, it cannot be said that they had done so at the instance of or with the help of Apex Electricals. Around an established industry, small units are usually set up to meet with the requirements of the established industry, and for that reason and also for the reason that they cater to the needs of the established industry, it cannot be said that they are not independent entities or manufacturers. 12. Next circumstance relied upon b....
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.... difficult to appreciate how that circumstance would have been utilised against the petitioners. The Collector's order does not make it clear as to whether it was the smallness of the rate which induced him to come to the conclusion that that circumstance also indicated that the six processors really manufactured electrical laminations for and on behalf of Apex Electricals or the circumstances that the rate was the same had induced him to take that view. There was no material with the respondents to show that for doing such job other manufacturers were paid higher rates. 14. Therefore, it will have to be held that all the circumstances which have been relied upon by the respondents are neither individually nor collectively sufficient to come to the conclusion that the said six processors were dummies of Apex Electricals and in reality they were manufacturing electrical laminations for and on its behalf. If there had been any material to show that Apex Electricals was connected financially or otherwise with any of those six processors, or that it had a say in the management of those processors, or that it was rendering financial or technical help to those processors for doing the....
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.... belonging to it to certain other oil mills and get oil manufactured there on payment of manufacturing charges. Those other oil mills were quite independent of the petitioner oil mills. The vegetable oil manufactured by those other oil mills out of the oil-seeds supplied by it was allowed to be removed by the excise authority without payment of any excise duty since the total quantity of oil produced by each oil mill was within the exemption limit. Subsequently, the excise authorities took the view that the vegetable non-essential oil manufactured by the petitioner was also liable to excise duty in respect of the oil manufactured by those oil mills out of the oil-seeds supplied by the petitioner. The petitioner had, therefore, after pursuing his alternative remedy filed the petition in Allahabad High Court. After referring to the definition of word "manufacture" as contained in Section 2(f).of the Act, the Allahabad High Court observed as under : "Two things have to be noticed in this definition. The first is that a person who manufactures excisable goods through hired labour is the manufacturer of those goods. The second is that a person who manufactures excisable goods on his ....
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....the petitioners that the show cause notice dated 20-1-1982 issued to Apex Electricals was time-barred and without jurisdiction. According to him, the six processors had disclosed all the relevant facts to the Excise authorities in their applications made for seeking exemption. In March 1980 statements of the partners or owners of those processors were recorded by the Excise authorities. On 17-3-1980 statements of the Managing Director of Apex Electricals was also recorded. After gathering all the relevant facts, the concerned officer had granted exemption on 7-3-1980. Therefore, the show cause notice issued to Apex Electricals and the action taken pursuant thereto on the basis that relevant and material facts were suppressed by Apex Electricals and those six processors cannot be said to be legal. As pointed out above, the only fact which was not disclosed by those six processors was that they were going to manufacture lamination for Apex Electricals. They were neither required to disclose the same nor questioned about it before their statements were actually recorded by the Excise authorities. Therefore, the Department was not justified in proceeding on the basis that there was sup....