2018 (2) TMI 1107 - AT - Central Excise

Sub-contract - job-work - case of the department is that even though the job work fabrication and erection of the pipeline was sub-contracted to Shri K.A Jaysinha Reddy M/s.Ganesh Builders was held to be the manufacturer as the ownership of pipes was with Ganesh Builders - Held that - Irrespective of the fact that the Ganesh Builders is the owner of the goods but manufacturing was not carried out by Ganesh Builders and it is admittedly carried out by Shri Reddy. In this fact the demand cannot be raised from Ganesh Builders - If at all any demand is to be made it is from the manufacturer which in the present case is Shri K.A. Jaisinha Reddy for which no SCN was issued to Shri Reddy - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Interpretation of Central Excise Act regarding the liability of duty payment for manufacturing activities carried out by a subcontractor on job work basis.

Analysis:
The case involved the appellant, a company engaged in the manufacture of pre-stressed concrete poles, who subcontracted the manufacturing of MS pipes to another party. The subcontractor carried out the manufacturing activities using raw materials supplied by the appellant. The central issue was whether the duty liability for the manufacturing of pipes should fall on the subcontractor or the appellant as the principal supplier of raw materials.

The appellant argued that since the subcontractor carried out the manufacturing on a job work basis and not under a specific notification, the duty liability should rest with the subcontractor as the actual manufacturer. The appellant relied on a Larger Bench judgment in a similar case to support their position.

On the other hand, the Revenue contended that the duty liability should be imposed on the appellant, as they were the owner of the goods even though the manufacturing was done by the subcontractor.

The Tribunal analyzed the facts and legal provisions involved. They noted that the subcontractor, not the appellant, was responsible for the actual manufacturing of the pipes. Despite the appellant being the owner of the goods, the Tribunal emphasized that the duty liability should be on the party who carried out the manufacturing process. Citing the Larger Bench decision, the Tribunal held that in cases of job work manufacturing, the job worker is considered the actual manufacturer liable for duty payment, not the principal supplier of raw materials.

Based on this interpretation, the Tribunal concluded that the duty demand on the appellant was not justified, and the impugned order imposing duty and penalties was set aside. The Tribunal allowed the appeals, providing consequential reliefs to the appellants.

In conclusion, the judgment clarified the liability for duty payment in cases of subcontracted manufacturing activities, emphasizing that the actual manufacturer, in this case, the subcontractor, is responsible for discharging excise duty, not the principal supplier of raw materials.