Custom, Excise & Service Tax Tribunal
M/S. Bata India Ltd vs Commissioner Of Central Excise, Patna on 11 June, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.EDM-498/05
(Arising out of Order-in-Original No.13-MP/Commissioner/2005 dated 16.08.2005 passed by the Commissioner of Central Excise, Patna.)
FOR APPROVAL AND SIGNATURE
HON'BLE SHRI S.S. KANG, VICE PRESIDENT
HON'BLE DR. CHITTARANJAN SATAPATHY, TECHNICAL MEMBER
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
M/s. Bata India Ltd.
Applicant (s)/Appellant (s)
Vs.
Commissioner of Central Excise, Patna
Respondent (s)
Appearance:
Shri J.P. Khaitan, Sr. Advocate & Mrs. Sanyukta Gupta, Advocate for the Appellant (s) Shri J.A. Khan, Authorised Representative(SDR) for the Respondent (s) CORAM:
Hon'ble Shri S.S.Kang, Vice President Hon'ble Dr. Chittaranjan Satapathy, Technical Member Date of Hearing:- 11.06.2009 Date of Pronouncement :- 11.06.2009 ORDER NO............................................................................
Per Dr. Chittaranjan Satapathy.
1. Heard both sides.
2. Shri J.P. Khaitan, learned Sr. Advocate appearing on behalf of the Appellants states that the Appellants sent some raw materials and inputs without taking Modvat/CENVAT Credit thereon to their job-workers for further processing. After further processing some of the intermediate goods were received back in their factory which were used for manufacturing exempted footwear. The remaining inter-mediate goods were used by the job-workers for manufacturing exempted footwear which have been cleared from the premises of the job-workers directly. The period for which the impugned demand has been raised against the Appellants is from May, 1999 to 15.09.2002. Shri Khaitan clarifies that some intermediates were also used by the appellants and the job-workers for manufacturing dutiable footwear, but there is no demand in respect of such inter-mediates in the present proceeding.
3. Shri Khaitan submits that the Department, on the one hand, alleges that the Appellants were sending the material and receiving the intermediates to and from the job-workers under Notification No.214/86-CE dated 25.03.1986 and hence it is demanding duty from the Appellants, the total demand being about Rs.2.57 crores. He further states that, on the other hand, the Department is alleging that the Appellants are the real manufacturers in respect of the intermediates though the same were produced by the job-workers. He states that no such allegation was made in the show cause notice that the Appellants are the real manufacturers for the intermediates and hence the Appellants had no chance to submit any clarification in their defence in this regard.
4. As regards the applicability of Notification No.214/86-CE dated 25.03.1986, he clarifies that since the Appellants were not taking any credit on the inputs and materials sent by them to the job-workers and since the finished goods in question were not dutiable, the Appellants were not required to follow the procedure under the Notification No.214/86-CE nor they have given any undertaking required under the said Notification to pay the duty on the finished goods. He also states that the present case is similar to two other cases relating to Kolkata-V and Bangalore-II jurisdiction which were decided in favour of the appellants by a common Order vide Bata (I) Ltd. vs. CCE - 2008 (225) ELT 529 (Tri.-Kolkata) applying the ratio of the Tribunal's earlier decision in the case of Hindusthan Engineering & Industries Ltd. vs. CCE - 2008 (225) ELT 252 (Tri.- Kolkata) and pleads that the present case may also be similarly decided setting aside the demand and penalty.
5. He also argues on behalf of the Appellants that the intermediate goods in question are unfinished goods and these were neither marketed nor marketable and hence there can be no duty liability on such intermediate goods. Shri Khaitan further submits that major part of the demand amounting to about Rs.1.98 crores relates to intermediate goods used in the premises of the job-workers for manufacturing exempted footwear and such intermediates are in any case exempt under Notification No.10/96-CE dated 23.07.1996.
6. Shri J.A. Khan, learned Departmental Representative (SDR) appearing on behalf of the Department supports the impugned order and states that the Appellants cannot deny that they were not working under Notification No.214/86-CE. In this connection he cites two letters dated February 1, 1999 and September 17, 2003 which were written by the Appellant company to the concerned Superintendent of Central Excise. He, however, fairly states that other than these two documents there is no other separate undertaking available with the Department to show that the Appellants had undertaken to pay the duty on the goods manufactured by the job-workers. He also submits that the Appellants had supplied the inputs and raw materials free of cost and paid only job charges to the job-workers and received back the intermediate goods in some cases and in the other cases the exempted footwear manufactured by the job-workers were also sold to persons as indicated by the Appellants. Hence, according to him, the adjudicating Commissioner has rightly held the Appellants to be the real manufacturers in respect of the intermediate goods and therefore, they are liable to pay Central Excise duty on such intermediate goods. He also states that the job-workers were working under strict supervision and control of the Appellants and the items were made strictly according to the specifications given by the Appellants. He also distinguishes the earlier case of the Appellants reported in 2008 (225) ELT 539 stating that in those cases there was no evidence of the Appellants giving a letter that they were working under Notification No.214/86, whereas in the present case there are two letters mentioned above.
7. After hearing both sides and perusal of case records and the cited decisions, we find that there is no allegation in the show cause notice to the effect that the Appellants were the actual manufacturers of the intermediate goods. Hence, as rightly pointed out by the learned Senior Advocate, the Appellants had no opportunity to defend themselves against such allegations. Moreover, we find that the Department's stand that the Appellants were the real manufacturers is contrary to the claim made that they were working under Notification No.214/86 inasmuch as Notification No.214/86 pre-supposes that the job-workers are the real manufactures and the principals should undertake to pay the duty on their behalf so that the duty liability on the job-workers is exempted.
8. Even though the letters dated February 1, 1999 and September 17, 2003 referred to Notification No.214/86, we do not find there is any reference to any undertaking given by the Appellants for discharging the duty liability on behalf of the job-workers. Moreover, as we held earlier in the Appellants' own case, Notification No.214/86 applies to a case where the finished goods are dutiable and the procedure under the Notification No.214/86 merely shifts the burden of paying duty from the job-worker to the principals. In this case, we are dealing with final goods which are exempted footwear and hence are not dutiable making the Notification No.214/86 inapplicable. Besides, as confirmed by the learned Departmental Representative (SDR) the Department is not in possession of any undertaking given by the Appellants in terms of Notification No.214/86. Further, the claim of the Appellants that the job-workers were in any case exempted under Notification No.10/96 in respect of intermediates used in their premises for manufacturing exempted footwear is not without merit. However, since there is no duty demand against the job-workers who are the manufacturers of the intermediates we see no reason to go into this question and as also into the question as to whether the intermediates were at all manufactured goods with reference to the question of their marketability. As regards the demand against the Appellants are concerned, we follow the ratio of the earlier decisions of the Tribunal cited above in the case of Hindusthan Engineering & Industries Ltd. and in the Appellants' own case and hold that the Appellants have no liability under Notification No.214/86, as they have not given any undertaking to discharge the duty liability on behalf of the job-workers and that since they are not the manufacturers for the intermediate goods, the duty liability on the same cannot be latched on to them. Consequently, the duty demand and penalty on the Appellants cannot be sustained. Hence, the impugned order is set aside and the Appeal is allowed.
(Pronounced and dictated in the open court.) sd/ sd/ (S.S.KANG) (CHITTARANJAN SATAPATHY) VICE PRESIDENT TECHNICAL MEMBER sm 6 Appeal No.EDM-498/05