Custom, Excise & Service Tax Tribunal
Raymond Limited vs Bhopal on 5 September, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/3343/2004
[Arising out of Order-in-Appeal No: GWL/655/2004 dated 30/09/2004 passed by the Commissioner of Central Excise (Appeals), Gwalior.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Raymond Limited
Appellant
Vs
Commissioner of Central Excise
Bhopal
Respondent
Appearance:
Shri Prasad Paranjape, Advocate for the appellant Dr. B.S. Meena, Addl. Commissioner (AR) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) Date of hearing: 05/09/2013 Date of decision: 27/09/2013 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeal is directed against Order-in-Appeal No: GWL/655/2004 dated 30/09/2004 passed by the Commissioner of Central Excise (Appeals), Gwalior
2. The appellant, M/s. Raymond Ltd., are manufacturers of excisable goods falling under Chapters 51, 55 and 58 of the First Schedule to the Central Excise Tariff Act, 1985. During the visit of the officers to the appellant-factory, it was discovered that the appellant had got fabricated racks and trolleys falling under Central Excise Heading No. 9403 from fabricators within their own factory premises out of the raw materials supplied by the appellant and based on their own drawings and specifications. It was further found that the appellant had also supplied consumables such as welding rods, cutting gas etc., required for such fabrication work. These facts were corroborated by the Dy. Manager (Commercial) of the appellant-firm and the representative of the fabricators in their statements recorded under Section 14 of the Central Excise Act, 1944. The appellant, however, did not file any classification or price declaration as envisaged under Rules 173B and 173C of the Central Excise Rules, 1944 nor did they file any statutory returns in respect of the said activity. Therefore, a show cause notice dated 08/03/2001 for recovery of duty amounting to ` 18,43,877/- was issued along with interest thereon. The notice was adjudicated upon and the duty demands were confirmed along with interest and also by imposing equivalent amount of penalty under Section 11AC. The appellant preferred an appeal before the lower appellate authority. They submitted that the demand is time-barred inasmuch as the show cause notices were issued after a lapse of more than six months. Secondly, it was argued that since the trolleys and racks were consumed within the factory production, they are eligible for the benefit of duty exemption under Notification No. 67/95-CE dated 16/03/1995. These contentions of the appellant were rejected by the lower appellate authority, who dismissed the appeal. Hence, the appellant is before us.
3. The learned counsel for the appellant submits that they had engaged fabricators to undertake fabrication work within their factory. These fabricators are independent entities and the impugned goods have been manufactured by the fabricators and, therefore, the fabricators are the manufacturers of the impugned goods and the appellants are not the manufacturers and, therefore, the duty demands on the appellant is not sustainable in law. The fabricators have undertaken the work by engaging their on labour and the appellant had no control over the labour. In view of the above, it is clear that the fabricators are manufacturers on their own account.
3.1. Secondly, it is contended that the appellants are eligible for benefit of exemption under Notification No. 67/95-CE dated 16/03/1995 which provides for duty exemption on inputs used within the factory of production in or in relation to the manufacture of the final products. Racks and trolleys fall under Heading 9403 and they fall within the category of inputs as defined in the said Notification. Similarly, the appellant also manufactures goods falling under Chapters 51 and 58 and the said Chapters are notified as final products in the said Notification. Therefore, the benefit of duty exemption is available to the appellant. Reliance is placed on the decision of the honble apex Court in the case of Collector of Central Excise, Baroda vs. M.M. Khambhatwala 1996 (84) ELT 161 (SC) wherein it was held that, if goods are produced out of the raw materials supplied by others, who paid wages, then the persons actually undertaking the manufacturing activity should be deemed as manufacturer and not the raw material supplier. Similarly, in the case of Diamond Cements Ltd. vs. Commissioner of Central Excise, Bhopal 2012 (283) ELT 226, it was held that if the job-worker has undertaken manufacture out of the raw materials supplied by others, the job-worker is the manufacturer and not the raw materials supplier. Similarly, in the case of Voltas Limited vs. Commissioner of Central Excise, Guntur 2002 (144) ELT 108 (Tri.-Del.) wherein fabrication was done outside by the job-worker, it was held that the job-worker is the manufacturer and not the raw material supplier. Accordingly, it is prayed that the impugned demands are not sustainable.
4. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, contends that in the present case, the appellant has supplied not only raw materials but also all consumables and the goods have been manufactured in the appellants own premises. The fabricators have supplied only labour and the goods were manufactured as per the drawings and instructions of the appellant and, therefore, the appellant is liable to pay excise duty on the racks and trolleys fabricated by the fabricators. Reliance is also placed on the decision of the Tribunal in the case of Maruti Udyog Ltd. vs. Collector of Central Excise, New Delhi 2001 (134) ELT 188 (Tri.Del.) wherein it was held that when fabrication work is undertaken by the job-workers out of the raw materials supplied by a person in its factory, the fabricators are only hired labour and not independent manufacturers.
4.1. As regards the benefit of Notification claimed under Notification No. 67/95-CE, it is urged that the appellant also manufactures goods falling under Chapter 55 in addition to goods falling under Chapter 51. Since Chapter 55 is not notified as final products in the said Notification, the appellant will not be eligible for the benefit of the said exemption and, therefore, the appellant is liable to pay excise duty.
5. We have carefully considered the submissions made by both the sides.
5.1. As regards the contention of the appellant that they are not the manufacturers of the racks and trolleys but the fabricators are the manufacturers, this contention is not correct. We have perused some of the work-orders given to the fabricators. From the work-orders, it is evident that the appellant has supplied all the raw materials and consumables for the fabrication of the racks and trolleys. They have also provided drawings and specifications and the work was carried out in appellants own factory premises as per the instructions issued by the appellant. Therefore, the argument of the appellant that the appellant is not the manufacturer is devoid of merits. In the case of M.M. Khambhatwalas case, cited supra, there the goods were manufactured not in the premises of the raw materials supplier but at the house-holds where the ladies produced the articles out of raw materials supplied by M/s. M.M.Khambhatwala. There was no supervision over the manufacturing activity by the raw materials supplier. In that context, it was held that the house-hold ladies have to be treated as manufacturers and they cannot be considered as hired labourers. However, those are not the facts obtaining in the present case. In the present case, not only the raw materials and consumables were supplied by the appellant but the fabrication was carried out as per the instructions of the appellant in his premises. Thus, there was control over the activities of the fabricators by the appellant. Similarly, in the case of Voltas Ltd. (cited supra), the fabrication work of the air conditioning system was undertaken at the site of the building/civil structure and the structures so fabricated were part of the building and hence immovable goods. Since the goods fabricated were non-excisable, the demands were set aside. These are not the facts obtaining in the present case. The appellant have manufactured racks and trolleys classifiable under Heading 9403 of the Central Excise Tariff. Further, the raw materials and consumables were supplied by the appellant and the goods are manufactured under the supervision and control of the appellant. Thus, the facts are clearly distinguishable and hence it has to be held that the appellant is the manufacturer and not the fabricators.
5.2. An identical issue came up before this Tribunal in the case of Maruti Udyog Ltd. wherein Maruti Udyog Ltd. got fabrication of trolleys, bins and pallets in their factory premises by certain fabricators. Further, Maruti Udyog Ltd. supplied raw materials and consumables. In that context, this Tribunal held as follows:
Fabrication of the items in dispute was not only carried out by the three different job workers within the factory premises of the appellants, but also on their shop floor itself. The appellants supplied all the raw materials for fabrication/ repair/modification as well as the samples like welding electrodes, gas, paint, primer, thinner etc. They were also to make available to the fabricator, the slot milling machine and the Keyway Milling machine without any charges. The Terms and Conditions of the various work orders clearly spell out a master and servant relationship between the appellants on one hand and the fabricators on the other, as not only did the appellants have the right to tell the fabricators what to do, but also how to do it. In other words, the work was to be carried out under the total control and supervision of the appellants. Hence the three fabricators have rightly been held to be hired labour of the appellants herein and not independent manufacturers. 5.3. Similarly, in the case of Shree Agency vs. S.K. Bhattacharjee 1977(1) ELT J168 (SC), a constitution bench of the Supreme Court considered a similar issue. The facts relevant to the case were as follows: The appellant therein supplied textile yarns to power loom units and got the cloth manufactured (woven) on payment of job-charges but the dealings were camouflaged to appear as transactions of sale of yarn by the appellant to power loom units and purchase of cloth from them. The question arose as to who is the manufacturer and the honble apex Court held that power loom units were only hired labour and the supplier of yarn has to be treated as manufacturer. Similarly, in Shree Agency vs. Assistant Collector, Central Excise, Kolhapur 2000 (124) ELT 24 (Bom.), the Hon'ble Bombay High Court held that the definition of manufacturer does not refer to the ownership of the factory where the goods are manufactured. It covers anyone who employs hired labour in the production and manufacture of goods. The expression who manufactures, or engages in their production or manufacture on his own account would also apply to a person who hires the labour and the person who hires the labour has to be treated as the manufacturer. In the present case, the trolleys and racks have been fabricated on account of the appellant. They have supplied the raw materials, consumables, fuels, etc. required for the manufacture and the fabrication work has been undertaken in the appellants own factory. The fabricators merely supplied labour for undertaking the fabrication work. Therefore, it has to be held that the appellants are the manufacturers of the impugned goods and not the fabricators. Accordingly, we reject the contention of the appellant that they are not the manufacturers of racks and trolleys but the fabricators who actually undertook the fabrication work are the manufacturers.
5.4. As regards, the second contention of the assessee with respect to the eligibility to benefit of Notification No. 67/95-CE dated 16/03/1995, the said Notification reads as follows:
Capital goods and inputs captively consumed within the factory of production In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts -
(i) capital goods as defined in rule 57Q of the Central Excise Rules, 1944 manufactured in a factory and used within the factory of production;
(ii) goods specified in column (2) of the Table hereto annexed (hereinafter referred to as inputs) manufactured in a factory and used within the factory of production in or in relation to manufacture of final products specified in column (3) of the said Table;
from the whole of the duty of excise leviable thereon which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) :
Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products (other than those cleared either to a unit in a Free Trade Zone or to a 100% Export Oriented Undertaking or to a unit in an Electronic Hardware Technology Park or to a unit in a Software Technology Parks), which are exempt from the whole of duty of excise leviable thereon or are chargeable to Nil rate of duty.
Explanation. - For the purposes of this notification inputs does not include -
(i) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products;
(ii) packaging materials or containers, the cost of which is not included in the assessable value of the final products under section 4 of the Central Excises and Salt Act, 1944 (1 of 1944).
TABLE S. No. Description of inputs Description of final products (1) (2) (3)
1. All goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely, -
(i) goods classifiable under any heading of Chapter 24 of the Schedule to the said Act;
(ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule to the said Act;
(iii) goods classifiable under sub-heading Nos. 2710.11, 2710.12, 2710.13 or 2710.19 (except Natural gasoline liquid) of the Schedule to the said Act;
(iv) high speed diesel oil classifiable under heading No. 27.10 of the Schedule to the said Act.
All goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely, -
(i) goods classifiable under any heading of Chapter 24 of the Schedule to the said Act;
(ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule to the said Act;
(iii) woven fabrics classifiable under Chapter 52 or Chapter 54 or Chapter 55 of the Schedule to the said Act.
The racks and trolleys manufactured by the appellant is held to be classifiable under Heading 9403 of the Central Excise Tariff which is one of the inputs specified in the said Notification. It is also a fact that the appellants are manufacturing goods falling under Chapters 51, 55 and 58 of the Central Excise Tariff. In the said Notification only Chapter 55 is excluded but goods falling under Chapters 51 and 58 are notified final products. It is not the case of the Revenue that the racks and trolleys which the appellant got manufactured in the factory were used exclusively for the manufacture of products falling under Chapter 55 nor any evidence has been adduced by the Revenue in this regard. Therefore, if racks and trolleys were used in or in relation to the manufacture of goods falling under Chapters 51 and 58, the appellant would be eligible for the benefit of the aforesaid Notification. Therefore, denial of benefit of exemption under Notification 67/95-CE by the lower appellate authority is not sustainable in law.
6. In view of the above, the appellant is eligible for the benefit of Notification 67/95-CE. Thus, the appeal succeeds and is accordingly allowed.
(Pronounced in Court on 27/09/2013) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 2