Customs, Excise and Gold Tribunal - Delhi
Surindra Engg. Co. Ltd. vs Commissioner Of C. Ex. on 8 May, 2003
Equivalent citations: 2003(89)ECC673, 2003(156)ELT811(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In these two appeals arising out of a common Order, the issue involved is whether excisable goods in question have been manufactured by M/s. Surindra Engineering Co. Ltd.
2. Shri K.K. Anand, learned Advocate, submitted that M/s. Surindra Engineering Co. Ltd. Appellant No. 1, manufacture M.S. Pipes; that they entered into a contract with Punjab State Electricity Board (PSEB) for construction of circulating water system; that the drawings and designs were supplied by PSEB and they further entered into contract with M/s. H.B. Construction Co. regarding supply of conduits for the construction of circulating water system; that the scope of contract was fabrication and erection of circulating water pipes including marking, Rolling, Cutting and Jointing of plates including Jointing, Welding, Shifting of Pipes to erection site, laying of pipes, Alignment, Fitting, Hydro-testing and Radiography repair of pipes as per the specifications and drawings given by the site incharge; that all the materials like M.S. Sheets/Plates etc. were to be provided by them; that all the tools and tackles would be arranged by M/s. H.B. Construction; that the Commissioner under the impugned Order has confirmed the demand of Central Excise duty and imposed equivalent penalty on Shri H.S. Ahluwalia, Director of the Appellant No. 1, on the ground that they had entered into a contract with PSEB and there is no mention of M/s. H.B. Corporation as sub-contractor; that the transaction between M/s. H.B. Corporation and the Appellants are not on principal to principal basis as M/s. H.B. Construction had no independent entity with PSEB; all the transaction and fabrication work at site were carried out by the Appellants to the entire satisfaction of PSEB within stipulated time; that the Appellants were main contractors of PSEB as they were to provide entire system to PSEB as per drawings and designs and M/s. H.B. Construction were hired labour of the Appellants and they were working under the direct and close supervision of the Appellants.
3. The learned Advocate, further, submitted that the entire work was entrusted to independent contractors M/s. H.B. Construction Co. who arranged all the required equipments for fabricating, circulating water system; that they were only raw material suppliers and it is settled law that the raw material supplier cannot be treated as manufacturer; that M/s. H.B. Construction Co. are independent contractors and the transaction is on principal to principal basis; that in fact M/s. H.B. Construction are specialised contractors who are specialised in installation work; that Shri Pawan Kumar, Manager (Finance) of Appellant No. 1, in his statement dated 7-12-2002 has clearly deposed that the entire work of fabrication of M.S. Pressure Pipes was executed by M/s. H.B. Construction, sub-contractor; that mere fact that their Works Manager used to supervise the work at site will not make the Appellant as manufacturer. The learned Advocate also mentioned that Shri Harbhajan Singh of M/s. H.B. Construction Co. has very categorically stated, in his statement, that the fabrication of pipes and other related work was performed by his construction company only. Finally, learned Advocate relied upon the decision in the case of J.S.T. Engineer Services v. CCE, Jamshedpur, 2001 (133) E.L.T. 350 (T) wherein it has been held that the supplier of raw material does not become manufacturer by merely supplying raw material or getting goods manufactured according to his drawings and specifications; that merely because the appellant had a Site Incharge, it is by itself not sufficient to hold that the Appellants are manufacturers. Reliance has also been placed on the decision in the case of SRF Limited v. CCE, Madras, [2001 (136) E.L.T. 210 (T) = 2001 (46) RLT 153] and Dempo Engineering Services v. CCE & CUS., Goa, [2000 (117) E.L.T. 328 (T) = 2001 (44) RLT 105 (T)] in which also the admitted position was that the fabrication was done by the sub-contractor. The Tribunal held that in terms of the decision of the Supreme Court in Ujjagar Prints' case, 1989 (39) E.L.T, 493 (SC), the sub-contractors would be held liable for tax, if at all duty is leviable.
4. The learned Advocate also mentioned that the demand pertains to the period from 1-12-95 to 31-1-97 and as such penalty under Section 11AC of the Central Excise Act cannot be imposed for the entire period; that most of the period is before insertion of Section 11AC in the Central Excise Act. He relied upon the decision in the case of Elgi Equipments Limited, 2001 (128) E.L.T. 52 (SC) . Finally he submitted that no penalty is imposable on the Appellant No. 2 who is Director in the Appellant No. 1; that there is no evidence on record to show that he knew or had reason to believe that the goods are liable for confiscation under the Central Excise Act or Rules.
5. Countering the arguments, Shri V. Valte, learned SDR, submitted that Shri Sukhwant Singh, Mechanical Engineer, under whose supervision the entire work of fabrication and erection of M.S. Pipes had been done at the site, had deposed in his statement dated 10-8-2000; that for the purpose of execution of work, they had installed 13 roller bending machines of size 2500 mm width and other welding machines at the site; that this statement clearly shows that the machines were supplied by the Appellants for carrying out work of fabrication of M.S. Pipes at site; that as per tender notice one of the conditions for issuance of tender documents was that the tenderer must have in his possession plate bending machines to bend plates up to 12 mm thickness, necessary fabricating and welding tools and testing equipment for fabrication of large diameter steel pipes etc.; that the Appellants had plate bending machine which was sent by them to the site. The learned SDR also referred to the condition on specification of work alloted by PSEB to the Appellants in support of his contention that the Appellants were the main manufacturer of the goods in question. He mentioned that as per para 3.4 all pipes supports reinforcement for fitting, etc, were to be fabricated and erected by the Appellants and contended that this is apparent from the terms of condition that it was the responsibility of the Appellants to fabricate the pipes and erection. He also referred to para 1.8 (viii) of the impugned order in which the Commissioner has mentioned the detailed list of materials including machinery sent by the Appellants from their factory to the site and submitted that it is apparent that fabrication work was got done by the Appellants from their machines and materials; that finally a certificate has also been issued by PSEB only to the Appellants for successful completion of work for construction of M.S. Pipes for circulating water system and they had executed 1.364 MT of fabrication and erection of 2600 mm dia and 1600 dia M.S. Pipes including bends etc. In reply, the learned Advocate submitted that some equipments were to be supplied by them and sub-contractor was responsible for maintenance of these equipments; that they were also to arrange certain other items like rectifier which were produced by them on account of sub-contractor and complete amount was to be deducted in ten equal instalments. The learned Advocate also mentioned that the duty has been demanded on the entire cost of the contract. The learned SDR countered by submitting that the Appellants had not given bifurcation of expenses incurred on different items, therefore, duty has to be demanded on the cost.
6. We have considered the submissions of both the sides. Central Excise duty is levied and collected on the goods manufactured in India and the manufacturer is liable to pay Central Excise duty. Manufacturer is the one who actually undertakes the manufacturing activity. It has been contended by the Appellants that after entering into a contract with PSEB for circulating water system, they had entered into a contract with sub-contractor M/s. H.B. Construction Co. for fabrication and erection of circulating water pipes; that it has not been disputed by the Revenue that the work of fabrication and erection of circulating water pipes was given by the Appellants to M/s. H.B. Construction Co. However, Revenue has contended that relationship between the Appellants and the said company was not on principal to principal basis and was hired labour, The basis for M/s. H.B. Construction Co. as hired labour is that there was no mention of giving the work for fabrication to sub-contractor in the contract entered into between PSEB and the Appellants and the raw materials and machinery have been supplied by the Appellants to sub-contractor whose work was also supervised by the Appellants. These are in our view not sufficient reasons for holding that M/s. H.B. Construction Co. was hired labour of the Appellants' company. It is well settled law that supplier of raw materials does not become manufacturers by merely supplying the raw materials or getting goods manufactured according to his drawings and specifications. It has been held by the Supreme Court in the case of CCE, Baroda v. M.M. Khambhatwala, 1996 (84) E.L.T. 161 (S.C.) that the job workers are the manufacturers of the goods. The fact that the certificate of completion of circulating water system was given by PSEB to the Appellants did not make them manufacturers. The certificate has to be given by PSEB to the Appellants because the contract was entered into with PSEB and not with the sub-contractor. In the case of SRF Limited, the Tribunal has referred to the decision in the case of Binny Ltd. (Engg. Works), Madras, [1998 (99) E.L.T. 681 (T) = 1998 (24) RLT 180] in which case the Tribunal had held that mere supply of raw materials to job worker did not make him hired labour when he was having his own independent unit. The Bench had further observed that "to constitute hired labour, relationship of Master and Servant between those Hired and Hiring is a must, which implies active control and supervision of those hired". In the case of Dempo Engineering Services also sub-contractor was held to be liable to pay duty, if any. In the said matter also the appellants therein had entered into a contract with Goa Shipyard for building factory and structural fabrications. They specifically engaged independent sub-contractor M/s. Indian Commerce and Industries Co. Ltd. The sub-contractor was to be held manufacturer and liable to duty. We therefore hold that the Appellants herein cannot be considered as manufacturer of circulating water pipes and therefore are not liable to discharge the duty liability. We therefore set aside the impugned Order and allow both the appeals.