Custom, Excise & Service Tax Tribunal
M/S. Jai Maa Appliances (P) Ltd vs C.C.E Chandigarh on 12 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. E/48/2009 -Ex[DB]
[Arising out of Order-In-Appeal No. 163-164/CE/CHD/08 dated: 03.10.2008 passed by Chandigarh Commissionerate]
Excise Appeal No. E/451/2010 -Ex[DB]
[Arising out of Order-In-Original No. 64/CE/CHD-1/09 dated: 06.11.2009 passed by Chandigarh Commissionerate]
For approval and signature:
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Hon'ble Mr. S.K. Mohanty, 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?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s. Jai Maa Appliances (P) Ltd. ...Appellant
SELtd.
Vs.
C.C.E Chandigarh Respondent
Appearance:
Mr. Rajesh Kumar, Advocate for the Appellants Mr. MS Negi, DR for the Respondent CORAM:
Hon'ble Mr. Rakesh Kumar, Member (Technical) Hon'ble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing.12.03.2015 FINAL ORDER NO. 50822/50823 /2015-Ex(Br) Per Rakesh Kumar (for the Bench):
Both the appellant M/s Jai Maa Appliances (P) Ltd. (hereinafter referred to as JMAPL) and M/s Shivam Enterprises (hereinafter referred to as SE) have manufacturing units at Ponta Sahib, State in Himachal Pradesh. The units are located in the areas specified under notification no. 50/03-CE. The factories of both the appellants are adjoining the factory of principal manufacturer M/s Khaitan Electricals Ltd.(hereinafter referred to as KEL) who during the period of dispute, that is, during period from 2004 to 2008 were manufacturing electrical fans. KEL were sending the stators winding wires and top and bottom covers to JMAPL for certain job works. JMAPL were winding the wire on the stator and thereafter were putting varnish on the wires wound on the stators. In respect of top and bottom covers, the same were subjected to some machining. Top and bottom covers after being machined and the stators with copper wire wound on the same and varnished were being returned back by JMAPL to KEL. In case of M/s Shivam Enterprises, they were receiving from KEL the stamping rotors and electrical grade aluminum and also dies and they were making cast, machined and painted rotors, which were being sent back to the principal manufacturer KEL. The Department was of the view that the activity of JMAPL and SE amounts to manufacture as the items manufactured by them are fully finished parts of the electrical fans. It is on this basis that by two separate orders, duty demands were confirmed against JMAPL and SE along with interest and penalty of equal amount were imposed under section 11AC. The orders in this regard were passed by the Commissioner of Central Excise Chandigarh. Against these orders of the Commissioner, these appeals have been filed.
2. Heard both the sides.
3. Sh. Rajesh Kumar, Advocate, the Ld. Counsel for the appellant pleaded, that the items which emerge from the factory of the appellants are not fully finished parts of the fans, that in case of JMAPL they receive the stators, winding wires and top and bottom covers and after winding the wire on the stators and varnishing the same, the stator is sent back to KEL and similarly the top and bottom covers after being machined are sent back to KEL, that thereafter, the stators and top and bottom covers are subjected to further processes such as grinding, spindle pressing, testing etc., before being used for the manufacture of final product, that in view of this, the items which emerged from the factory of JMAPL cannot be called fully finished parts of fans and, hence, the same are not marketable, that in case of SE, they receive the stamping rotors, electrical grade aluminum metal and dies and they fabricate cast and machined rotors which are intermediate product and it is these cast and machined rotors which are sent back to KEL where the same are subjected to further process before being used as part of electrical fans, that in case of SE also, the items which are sent back to KEL cannot be said to fully finished parts of the fans, and hence, the same are not marketable, that when in both the cases the goods being sent back by the job workers to KEL are not marketable, no central excise duty would be chargeable, that in any case, even if the Department holds that the goods made by the appellants are marketable and, hence, excisable, they would be eligible for full duty exemption under notification no. 50/03-CE as in this regard as early as in the year 2004, there was a correspondence with regard to the availment of duty exemption under this notification. He, therefore, pleaded that the impugned orders are not sustainable.
4. Sh. M S Negi, the Ld. DR, defended the impugned order by reiterating the findings of the Commissioner and emphasized that in both the cases the goods which are made by the appellant on job work basis are fully finished parts of the fans and the same are used by KEL without any further process, and hence, the same have to be treated as marketable, and hence, excisable goods. With regard to duty exemption under notification no. 50/03-CE Sh. Negi stated that the declaration for availment of this exemption was filed only in year 2008 and hence, benefit of this exemption would be available only from the date of filing of the declaration and not for the period of dispute for which, at no point of time, the appellant had filed the declaration for claiming of the exemption. With regard to correspondence in the year 2004 between JMAPL and the Department with regard to benefit of exemption under notification no. 50/03-CE, he pleaded that this correspondence was not in respect of this claim of JMAPL for exemption under notification no. 50/03-CE as no such declaration had been filed by JMAPL at that time. With regard to limitation, he pleaded that longer limitation period under proviso to section 11A(1) has been correctly invoked. He accordingly, pleaded that there is no infirmity in the impugned orders.
5. We have considered the submissions from both the sides and perused the records. Both the appellants are job workers for KEL and they subject the goods received from KEL to certain processes and, thereafter, return the same to KEL. There is no dispute that both the appellants and also the principal manufacturer KEL are located in the area specified under notification no. 50/03-CE. However, during the period of dispute, only KEL were availing of the exemption under notification no. 50/03-CE and the appellants had not made any specific claim for the exemption under this notification. JMAPL received stators, winding wire and top and bottom covers and while the top and bottom covers were subject to machining, in respect of the stator, the job work winding of the wire and thereafter the varnishing was of the stator was done. The stator with wire wound on it and varnished and the machined top and bottom covers were returned by JMAPL to KEL. The point of dispute is as to whether the items which are being returned by JMAPL to KEL are fully finished goods, which can be directly used as parts of the fans or the same are in semi finished conditions and as such are not marketable. In case of SE, they received stamping rotors, electrical grade aluminum metal and dies and were returning the cast and machined rotors to KEL. Here also the point of dispute is as to whether cast and machined rotor which were being returned by SE are fully finished goods which can be used as parts of fans or whether the same are in the nature of semi finished goods which require further processing.
6. In both the cases the appellants claim is that the items being cleared by them to KEL are not fully finished goods but have to be subjected to further processing like grinding, spindle pressing, testing etc. On going through both the orders, it is seen that no finding has been given by the Commissioner on this point. In our view, the duty would be chargeable on the goods being made by the appellant on job work basis only if, those goods are in fully finished condition and the same are being used by KEL as parts of fans without any further processing. But if, the items being cleared by the appellants are in the nature of semi finished goods which require further processing by KEL for being used as parts of the fans, the same cannot be treated as marketable and hence, excise duty would not be chargeable. For deciding point, this matter would have to be remanded to the original adjudicating authority.
7. As regards, the question of limitation it is seen that so far as SE are concerned, there was correspondence between KEL and the Department with regard to sending of semi finished/ raw material to SE for certain job work and hence, it cannot be said that the Department was not aware of the activity of SE. Similarly, in respect of JMAPL, it is seen that during 2004, there was correspondence between them and the Department with regard to the nature of their activity and whether they are eligible for exemption under notification no. 50/03-CE and from this correspondence also it is clear that the Department was aware about the nature of their activity. In any case, when both JMAPL and SE could have availed the full duty exemption under notification no. 50/03-CE just by filing the declaration and they did not file the declaration for availing of this exemption under belief that there activity does not amount to manufacture, no malafide can be attributed to them. In view of this, even if there is any duty demand confirmed against the appellant, the longer limitation under proviso to section 11A(i) would not be applicable and for the same reason, penalty under section 11AC would not be imposable.
8. In view of the above discussion, we set aside the impugned orders and remand the matter to Commissioner for de novo adjudication. In course of De novo adjudication, the Commissioner must specifically ascertain as to whether the items being cleared by the appellant after completing the job work, can be used as such by KEL as parts of the fans or whether before being used as parts of fans, required to be subjected to some further process by KEL. If the process undertaken by the appellant is held to be resulting in emergence of marketable and hence, excisable goods and duty demand is confirmed, the same, as discussed above, would be demandable only for normal limitation period and no penalty under section 11AC would be imposable. Beside this, the Commissioner would also consider the appellants plea with regard to their eligibility for exemption under notification no. 50/03-CE, keeping in view, the Tribunals judgment in the case of CCE Chandigarh vs Nalagarh Steel Rolling Mills (P) Ltd. reported in 2012 (293) ELT-751(Tri. Del).
(Dictated and pronounced in open court) (Rakesh Kumar) Member (Technical) (S.K. Mohanty) Member(Judicial) Neha Page | 1