Custom, Excise & Service Tax Tribunal
Hindustan Moulds And Dies Private Ltd vs Coimbatore on 25 March, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 40621 of 2017
(Arising out of Order-in-Appeal No. CMB-CEX-000-APP-282-16 dated
19.12.2016 passed by the Commissioner of Central Excise & Service Tax
(Appeals-I), Coimbatore)
M/s. Hindustan Moulds and Dies Pvt Ltd, Unit II ...Appellant
S.F.No.90-3, Athipalayam Road,
Chinnavedampatti, Ganapathy P.O.
Coimbatore - 641 006.
Versus
Commissioner of GST and Central Excise ..Respondent
6/7 A.T.D. Street, Race course Road, Coimbatore - 641 018.
APPEARANCE:
Shri M. Saravanan, Consultant for the Appellant Shri M. Selvakumar, Authorised Representative for the Respondent CORAM:
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V, MEMBER (JUDICIAL) FINAL ORDER No.40388/2025 DATE OF HEARING: 02.01.2025 DATE OF DECISION: 25.03.2025 Per Ajayan T.V.
The appeal has been preferred by the appellant assailing the impugned Order-in-Appeal No. CMB-CEX-000-APP-282-16 dated 19.12.2016 (OIA), whereby the appellate authority had upheld the impugned Order in Original (OIO) No.2/2016 (AC-II Dvn) dated 25.02.2016 of the adjudicating authority demanding excise duty amounting to Rs.3,11,712/- (Cenvat Rs.3,02,632/-; Edu-Cess 2 E/40621/2017 Rs.6,053/- and SHE. Cess Rs. 3,027/-) during the period 2010-11 to 2013-14 (upto December 2013) along with applicable interest and imposing equivalent penalty under Rule 25 of Central Excise Rules, 2002 (CER) read with Section 11AC of Central Excise Act, 1944 ( CEA).
2. The facts in brief are that the appellant is engaged in manufacture of parts of Motor Vehicle & Speedometer, parts of Power-Driven Pumps, parts of Textile Machinery & parts of Press Tools. During the course of verification of the accounts of the appellant, it was found that apart from sale of their own manufactured products, they also sold goods which were manufactured by them on Job-work basis. In respect of such sales materials have been supplied by the principals and after completion of the works the same are sold to the principals by charging only labour bills. With the introduction of Rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (CEV Rules), the job work valuation has to be done as prescribed thereunder. The present case falls under the third category of the Rule ibid as the goods received from the job workers are further used in the manufacture of parts of motor vehicles, pumps, machineries etc and valuation has to be done as per Rule 6 of CEV Rules. Further, it was also found that neither the appellant nor the principals have followed the procedures prescribed for availing exemption under Notification No. 214/86 CE dated 25.03.1986. In as much as the principals have not filed 3 E/40621/2017 the necessary declaration/undertaking with the jurisdictional AC/DC of the job-worker, and having not followed this procedure, the goods manufactured by the assessee have to be treated as manufactured products and the duty has to be discharged by the assessee on the value adding material cost. Hence, a Show Cause Notice No.47/2014 dated 19.09.2014 was issued to the appellant. After due process of law, the adjudicating authority vide impugned OIO, has confirmed the duty demand of Rs.3,11,712/ along with interest and imposed penalty under Rule 25 of Central Excise Rules, 2002 read with Section 11AC ibid. Aggrieved by the said OIO, the appellant preferred an appeal before the appellate authority. However, the appellate authority, vide the impugned OIA upheld the OIO of the adjudicating authority. Aggrieved by the said OIA, the appellant has preferred this appeal and is before this Tribunal.
3. Ld. Consultant Shri M. Saravanan appeared and argued for the appellant. The Ld. Consultant submits that:
i. the appellants are manufacturers of Parts of Motor Vehicles Speedometer Parts, Parts of Power Driven Pumps and Parts of Textile Machinery and Parts of Press Tool. In addition to this the appellant was also doing job work viz. machining, bending, cutting and presses, etc. to various Central Excise Registered manufacturers.
ii. that in reply to the show cause notice, as evident from the OIO, the appellant had submitted that the job work activity 4 E/40621/2017 of machining, bending, cutting and pressing etc., carried out by them does not amount to manufacture and there is no duty liability on them. The job worked goods are only in semi finished stage only and the same cannot be used as such. On receipt of semi-finished goods, it is subjected to further processes and assembled with the final product of the Principal Manufacturers and cleared on payment of duty. They are collecting only labour charges for carrying out the above process as the material belong to them. Hence, there is no duty liability on them.
iii. However, both the adjudicating authority and appellate authority had failed to address the above submissions and the objections raised by the appellant in response to the notice and in the grounds of appeal before the appellate authority was not rebutted by both the lower authorities ie adjudicating authority as well as appellate authority. Further there is no word about the classification of goods. iv. that the learned appellate authority simply held that the adjudicating authority had held that it is manufacturing of parts of Motor Vehicle & speedometer parts, Parts of PD pumps, parts of textile machinery etc. When the appellant has raised a specific ground that the activity doesn't amount to manufacture, appellate authority ought to have rendered his independent findings. In this case there is no evidence brought on record by the department to say that the job work activity amounts to manufacture. It is a settled law 5 E/40621/2017 that the onus is on the department to demand duty on the ground that the activity amounts to manufacture, which was not discharged in this case.
v. that without addressing the main issue ,i.e., whether job work activity carried out by the appellant amounts to manufacture or not, both the authorities simply held that provisions of Rule 10(A) read with Rule of Central Excise Valuation (Determination of Price of Excisable Goods) Rules. 2000 will apply and valuation has to be in accordance with this Rule 6 vi. that, the activity of cutting, bending, pressing etc doesn't amount manufacture as held by the Hon'ble Madras High Court in the case of Tamil Nadu Generation & Distribution Corporation Ltd Vs C.C.E., Salem 2019 (370) ELT 61 (Mad). That in Namdhari Industrial Traders Vs Commr of Cex & ST Ludhiana-2016 (340) 241 appellant was engaged in cutting and welding of these steel angles, channels apart from getting these items galvanized by job worker Department's case is that all items cleared by the appellants are liable to central excise duly because cutting and welding resulted in new structural product and galvanizing steel items amounts to manufacture. The Hon'ble Tribunal held that it is necessary for the original authority to examine the processes carried out category wise and to give finding on such process resulted in production of totally a new identifiable and 6 E/40621/2017 marketable product falling under specific classification in tariff The original authority has not followed these requirements to arrive at the conclusion of duty liability against the appellants and set aside the demand. The Hon'ble Tribunal in the case of Collector of Cex Vs Maize Products Ltd-1990 (49) ELT 544 held that every process does not amount to manufacture implies a change but every change in the raw material is not manufacture. There must be such a transformation of a product (raw material) that a new and different article must emerge having a distinct name, character or use Mere change in the physical form, shape or substance of a commodity does not amount to manufacture.
vii. That the adjudicating authority has confirmed the demand for the only reason that the principal manufacturer has not followed the procedures prescribed for availing the exemption under Notification No.214/86 CE dated 25.03.1986 as they have not filed necessary declaration/undertaking with the Jurisdictional Assistant Commissioner/Deputy Commissioner of the job worker which is to be substantially complied with for availing the benefit of exemption under this Notification. The appellate authority has reiterated the finding of the adjudicating authority. Reliance is placed on the following decisions wherein it was held that non filing of declaration by the 7 E/40621/2017 principal manufacturer cannot be a reason for denying the benefit of notification no 214/86 CE to the Job worker.
a) Moon Chemicals Vs. Commissioner of Central Excise. Thiruvananthapuram-2007(215) ELT 434 (Tn. Chennai)
b) Salem Weld Mesh Vs. Commissioner of Central Excise, Salem 2007 (218) ELT 405 (Tri.Chennai)
c) Tufail Ahmed Vs. Collector of Central Excise-1992 (62) ELT 745 (Tribunal LB)
d) Delhi Paper Products Co. Vs. Collector of C Ex., New Delhi-2000 (125) ELT 661 (Tribunal) This decision of the Hon'ble Tribunal was upheld by the Supreme Court and reported in 2001 (127) ELT A 107 SC
(e) Commr of C.Ex, Jaipur-II Vs Ranjan Polyster Ltd -2016 (344) 257 viii. that, non filing of declaration is only a procedural issue for which substantial benefit cannot be denied as held by the Apex Court in the Mangalore Chemicals and Fertilizers Ltd Vs deputy commissioner 1991 (55) ELT 437 (SC). ix. that, in the absence of any suppression with an intent to evade payment of duty extended period cannot be invoked and also equal penalty cannot be imposed on them. The appellate authority has not rendered any reason for upholding the imposition of equal penalty. Hence the impugned order is a non speaking order. x. that, without prejudice, in the alternate, it is submitted that they have paid the disputed duty amount of 8 E/40621/2017 Rs.3,11,712/- with interest of Rs.2,00,072/- and 25% penalty of Rs.77,928/- [Total Rs.5,89,712/-] vide challan No. 05470500000211 dated 23.03.2016 within 30 days from the date of receipt of the order-in-original dated 25.02.2016. Hence the penalty if any it can be only 25% as Section 11AC(1) (c) of the Central Excise Act 1994.
4. Ld. AR Shri M. Selvakumar appeared for the Respondent and reiterated the findings of the Adjudicating Authority.
5. Heard both sides and perused the appeal records as well as the case laws submitted as relied upon.
6. We notice that the appellate authority has upheld the impugned order in original and the adjudicating authority has in the impugned OIO at para 4, noted the written submissions of the appellant, along with the case laws relied upon, inter- alia, as under:
" After receiving raw materials or semi finished goods from their customers through excise challans or delivery challans, they are doing certain operations like machining, bending, cutting and presses, etc only through their machines. After completion of process, they have returned the processed goods to the respective customers. The processed goods are only in the semi-finished stage and the same cannot be marketed as such. On receipt of semi-finished goods, the 9 E/40621/2017 customer subjected them into further process and assembled in their final product and cleared on payment of duty. They are collecting only labour charges for carrying out the above process since they have not added their materials. There is no sales activities involved. Hence they need not pay excise duty as they are doing job work only to their customers."
7. It is a cardinal principle of adjudication that the adjudicating authority has a bounden duty to address the contentions raised in the reply to show cause notice and pass an order either accepting the contentions or reject them, while stating reasons for the decision so taken. Indisputably the aforesaid contentions of the appellant, raised before both, the adjudicating authority and the appellate authority, has not elicited any rebuttal from both of them. Without specifically rebutting the contentions, merely the fact that the appellant is engaged in manufacturing parts of Motor Vehicle & Speedometer, parts of Power-Driven Pumps, parts of Textile Machinery & parts of Press Tools cannot lead to any automatic assumption that the job worked goods are also such parts as the onus is on the Revenue to prove that the appellant has indeed manufactured dutiable goods. Rather, we note that the Adjudicating Authority as well as the appellate authority, while rendering a finding stating that the present case falls under the third category of Rule 10A of the CEV Rules, tacitly concede that the goods received from the job workers (i.e. the 10 E/40621/2017 appellant) are further used in the manufacture of parts of motor vehicles, pumps, machineries etc., thus lending credence to the appellant's aforesaid rebuttal of the allegations in the show cause notice, namely, that the processed goods are only in the semi-finished stage and the same cannot be marketed as such and that on receipt of semi- finished goods, the customer subjected them into further process and assembled in their final product and cleared on payment of duty. We note that the Honourable High Court of Bombay in the case of Annapurna Engineering Corpn v ACCE, Div-I Nagpur, 2011 (22) STR 577 (Bom) has held that failure to pass a reasoned order resulted in miscarriage of justice. While we would have ordinarily remitted the matter back for denovo adjudication, given the efflux of time of nearly a decade and the quantum of revenue involved, we think that this is a fit case where the indolence of the adjudicating and appellate authorities ought not to result in protracting the litigation for the appellant for no fault of the appellant and instead the benefit ought to enure to the appellant. We find that a coordinate bench of this Tribunal in its decision in Southern Plywoods v CCE (Appeals), Cochin, 2009 (243) ELT 693 (Tri-Bang), have found that non consideration of all the submissions of the appellant and passing the orders without discussion thereon renders the order liable to be set aside. Accordingly, we hold that the impugned OIA is liable to be set aside on this ground alone.
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E/40621/2017
8. That apart, we find that the principal reason for the lower authorities to deny the benefit of the job-work notification 214/86-CE dated 25.03.1996 and call upon the appellant to pay duty on the goods cleared to the principal manufacturers, treating them as the manufactured goods of the appellant, is for the reason that the Principal manufacturers have failed to provide declarations stipulated in the notification, viz, the declaration of the principal manufacturer to the Assistant Collector of Central Excise having jurisdiction over the factory of the job worker that the said goods will be used in or in relation to the manufacture of the final products. We find that this tribunal in its decision in Moon Chemicals v CCE, Thiruvananthapuram, 2007 (215) ELT 434 (Tri-Chennai) has held in favour of the appellant therein on this issue. The relevant portion of the decision is as under:
" 3....... The Revenue has no case that the work undertaken by the appellants did not fall within the scope of the expression "job work" under Explanation-I to the Notification. Their only case is that the condition laid down in para (2) of the Notification was not complied with by the appellants. The appellants have claimed that the Sodium Silicate Solution returned after job work to their customer was removed by the latter on payment of duty for home consumption from their factory. This claim has not been contested by the Revenue. In the circumstances, the appellants were eligible for the benefit of the Notification subject to the surviving 12 E/40621/2017 condition that the raw material-supplier gave an undertaking to the Asst. Commissioner or Deputy Commissioner of Central Excise having jurisdiction over the appellants' factory to the effect that the goods would be removed (by the raw material-supplier) on payment of duty for home consumption. The demand of duty is consequential to non-fulfillment of this condition. The appellants have resisted the demand of duty on the ground that it was for the raw material-supplier to comply with the said condition. It is their further case that the department could have recovered duty on the subject goods from M/s. Vijay Detergent Products (P) Ltd. on the ground of non-fulfillment of the said condition. We find that the Tribunal's decision in Aggarwal Rolling Mills (supra) supports this case of the appellants. No binding decision to the contrary was cited by the DR.
4. In the result, the impugned order is set aside and this appeal is allowed." (emphasis supplied).
9. A similar view is seen stated in the decision of this Tribunal in Salem Weld Mesh v CCE, Salem, 2007 (218) ELT 405 (Tri-Chennai), wherein it was held that " In the circumstances, it would be grossly unjust to deny the benefit of the Notification to the appellants on the ground of non-production of poultry farmer's undertaking to the proper officer having jurisdiction over the appellant's factory. Exemption from payment of duty, granted by the Central Government under the above Notification, is a substantive benefit which shall not be denied on the ground of non- 13
E/40621/2017 fulfilment of a minor procedural condition. Procedure, after all, is only an aid to justice."
10. Admittedly, in this case also it is not the case of the Revenue that the goods cleared by the appellant are further not utilised by the principal manufacturers in their manufacture, rather it has been found that the goods received from the job worker (i.e. the appellant) are further used in the manufacture of parts of motor vehicles, pumps, machineries etc. The denial is solely on the ground that on enquiry with the jurisdictional ranges of the Principals it is found that the Principal manufacturers have not filed declarations under the said notification 214/86 CE ibid. Therefore, in light of the ratio of the aforesaid decisions, we find that the lower authorities ought to have extended the benefit of the notification to the appellant.
11. We also find that the appellate authority has upheld the invoking of extended period of limitation as a natural corollary of non payment of duty and incorrect adoption of valuation which came to the knowledge of the department only through scrutiny by Audit. The said finding, to our mind is not in consonance with the requirement of statute. In the absence of any positive evidence let in by the department of wilful suppression of facts or misstatement with intent to evade payment of duty, the invocation of extended period is untenable, more so when the appellant were under the 14 E/40621/2017 bonafide belief that their activity does not amount to manufacture as they were only clearing semi-finished goods manufactured out of the raw materials supplied to them by the principal manufacturer and clearing the same to the principal manufacturer. The decisions relied upon by the appellant cited supra to contend that the activities undertaken by them do not amount to manufacture lend credence to the appellants' claim of bonafide belief that their activity does not amount to manufacture. It is seen that this Tribunal in its decision in Savira Industries v CCE, Chennai II, 2016(331) ELT 504 (Tri-Chennai) has held as under :
" 11. The ratio of the Hon'ble High Court order is squarely applicable to the present case as the appellants carried out drillng/threading, welding, and bending of steel tubes/sheets on job work basis and received only labour charges and this confirms that they were under bona fide belief due to several Tribunal decisions held in favour of the appellants. Therefore, it is established that the non-levy of duty was not due to any wilful suppression or with any intention to evade payment of duty.
12. The Hon'ble Supreme Court in the case of Uniworth Textile Ltd. v. CCE (supra) clearly ruled that mere nonpayment of duty is not equivalent to collusion or wilful suppression of facts and in order to invoke extended period specific and explicit allegation must be proved by the Revenue. In the present case, the adjudicating authority has not brought out any such allegation of suppression of facts.".15
E/40621/2017 Therefore, we find that even otherwise the demand is substantially also barred by limitation.
12. In view of our discussions above and adhering to the ratio of the aforecited decisions, we hold that the impugned order in appeal upholding the impugned order in original confirming the demand of duty along with appropriate interest as well as imposing penalty cannot sustain and is liable to be set aside. Ordered accordingly.
13. The Appeal is allowed, with consequential relief in law, if any.
(Order pronounced in open court on 25.03.2025) sd/- sd/-
(AJAYAN T.V.) (VASA SESHAGIRI RAO) Member (Judicial) Member (Technical) psd