TMI Blog1991 (4) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... ving an option for redemption against fine of Rs. 1,00,000/-; and also appropriating Rs. 25,000/- towards value of 3108 kgs. of moulding powder seized and confiscated. 2. Briefly, the facts are that the appellants manufacture LLDPE water tanks falling under sub-heading 3926 of the Central Excise Tariff Act, 1985, for the manufacture of which, they get certain intermediate products manufactured/processed by outside agencies, the details of which are as under : (i) In one case the starting material was plastic granules which were purchased by the appellants from open market and were imported from foreign countries. These granules were then sent to the following parties for getting them pulverised/converted into powder form : (a) M/s. Grindwell Plastic Pvt. Ltd., Halol; (b) M/s. Atom Plast, Bombay; and (c) M/s. Industrial Resins Plastics, Udhna. (ii) In the other case, the starting material was carbon black purchased by the appellants from the open market and were sent to the following parties for manufacture of master batches: (a) M/s. Silver Plastic, Bulsar. (b) M/s. Hiral Plastics, Vapi. (iii) The LDPE granules powder fall under S.H. 3901.10 and the master batc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in a statement on 1-12-1987 said that they are engaged in colouring of LLDPE granules on job work basis for the appellants, M/s. Grindwell Plastics for which the raw-materials were supplied by the two parties. He also said that they do not undertake job work of any other unit except the above two. In a statement on 7-3-1988, Sh. P.S. Shah, Chief Accountant of the appellant firm, said, inter alia, that the units from whom they got the job work done in preparing plastic granules into powder and master batches, have been hired for their own manufacturing activity on labour basis. After further investigation, proceedings were instituted against the appellants and the job work in units by a show cause notice issued on 29-5-1988 in which duty was demanded in respect of: (a) 57966.00 kgs. of LLDPE powder valued at Rs. 21,92,467.10 P processed and received from M/s. Grindwell Plastic Pvt. Ltd. duty involved Rs. 6,57,740.10 P and the period being August to November, 1987. (b) 30380.500 kgs. of LLDPE powder valued at Rs. 11,61,735.77 P processed by and received from M/s. Industrial Resins and Plastics - involving duty of Rs. 3,48,520.74 P and period being 27-1-1987 to 15-9-1987. (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l into the manufactured product unless the person is proved to be a mere dummy for the raw-material supplier. Here also, the Guru Instruments case was considered. Apart from this, the Ld. Counsel also referred to the decision of the Tribunal in Techma Engineering Enterprise, Calcutta v. Collector of Central Excise, Calcutta - 1987 (27) E.L.T. 460 (Tribunal) and in Meteor Satellite Ltd. Telstar Electronics, Ahmedabad v. Collector of Central Excise, Baroda -1985 (22) E.L.T. 271 (Tribunal) on the same lines. He submitted that there was a large number of other decisions which had been listed by him on the same lines. Therefore, merely because the appellants, herein, supply the raw-materials to the units which convert them and return the intermediate products on job work basis, will not make the appellants the manufacturer for the purpose of demand duty on the goods. He also relied upon the Notification 119/75 wherein the job workers using raw-materials supplied by the manufacturers were exempt from duty. The Ld. Counsel, further, argued that the job working units cannot be considered to be mere hired labour for the appellants for which he relied upon Techma Engineering Enterprise cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aster batches. The issue would revolve upon the nature of relationship between the appellants and the units which did job work for them. The two units, M/s. Silver Plastics and M/s. Hiral Plastics were the ones to whom the appellants sent carbon black and LLDPE granules for manufacture of master batches. The evidence on record clearly indicates that these two units were in the nature of hired labour undertaking manufacturing operations only for the appellants. Sh. K.R. Shah, Proprietor, Hiral Plastics, in his statement had said that they do not undertake job work for any other unit. In fact, M/s. Hiral Plastics and M/s. Silver Plastics in their reply dated 30-5-1988 to the show cause notice had said that as they had no other work in their factory, they had started extrusion work of the appellants on labour charges and that the raw-materials were received from the appellants in the appellants own vehicles and after processing the goods were carried back in the like manner and the processing in their factory was carried out under the supervisory staff of the appellants. Therefore, the Collector s finding that these two units were merely hired labour during the operations for the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rasad Engineering Works case, cited by the appellants, the Tribunal, on evidence, found that the appellants in that case cannot be said to be surrogates of the raw-materials suppliers which cannot be said in the present case before us. As regards the ratio of the Techma Engineering Enterprise case in that case it was laid down that a hired labourer is one who hires himself out to work for and under the control of another for wages, and applying this criterion in the present case, it has been seen that the other units were doing only this for the appellants. It is also noteworthy that the appellants have not put forth any evidence by way of formal contract between the other units and them in order to show that the transaction between them was on principal to principal basis. Therefore, on an overall consideration of the evidence on record, the findings of the Collector in the impugned order are well founded. Duty has correctly been demanded from the appellants. The fact also remains that the appellants were a unit exempted from Central Excise Licensing Control and the transactions relating to the sending of the raw-material and the receipt of the intermediate excisable products us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the appellants and the manufacturing units (Job Workers) had by recourse to fraud, wilful mis-statement and suppression of facts and with deliberate and wilful intention to evade payment of duty illicitly manufactured and removed the goods viz. moulding powder falling under Chapter 3901.10 totally valued at Rs. 33,54,196.87 during the period from 7-1-1987 to Nov., 1987 and master butch falling under Chapter/Sub-heading 3901.90 totally valued at Rs. 3,26,814.00 has been done without obtaining any Central Excise Licence for manufacture thereof and without following any Central Excise Procedure and without payment of Central Excise duty leviable thereon. It has also been alleged that the appellants had manufactured 6108 kgs. of moulding powder valued at Rs. 201564 illicitly removed without obtaining Central Excise licence in form L4 as required which was seized from their factory premises and the factory premises of M/s. Grindwell Plastic Pvt. Ltd., Baroda on 25-11-1987 and 23-11-1987. The appellants have, therefore, been charged for contraventions under various Acts and Rules. The learned Collector has confirmed the demand by applying the ratio of H. Guru Instruments Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o work for and under the control of another for charges. In this connection, the concerned job workers were not only independent but were engaged in their own manufacturing activities and moreover the said job workers were carrying out the job work with their own plant and machinery with their own labour and in their own factory. The production was carried out by the said job workers according to their production schedule, budget and plant capacity. They have contended that simply because the said job workers manufactured the goods for the appellants out of raw materials supplied by them, such job workers could not be said to have hired themselves out. They have submitted that the ratio of Shree Agencies case relied on by the Tribunal in the case of M/s. H. Guru Instruments Pvt. Ltd. (supra) is not applicable to the facts and circumstances of this case as it was held by Hon ble Supreme Court in Shree Agencies that the job workers were dummy manufacturers. In this case there was no allegation from the department that the job workers were dummy manufacturers or concerns set up by the appellants as a camouflage arrangement or relationship of agency between the appellants and the job w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Printers (supra) case. In the case of M/s. H. Guru Instruments Pvt. Ltd. (supra) the appellants supplied raw materials to M/s. I.E.C. and the latter manufactured synthetic and industrial instruments as per specifications of the appellants. The instruments so manufactured bore a brand name and ISI mark of the appellants, and they were also marketed by the appellants just as similar instruments manufactured in their own large scale factory. In the facts and circumstances of the case, it was held that the status of M/s. I.E.C. was no better than that of hired labour as they received only job charges. 13. In the case of M/s. Prasad Engg. Works it was held that The very fact that the appellants manufactured the goods on the raw materials supplied by the various customers and according to their specifications would not ipso facto either make the appellants the agents of the raw material suppliers or their nominees. The ratio of the Division Bench ruling of the Madras High Court referred to supra and the other decisions relied upon by the learned Counsel for the appellants would clearly bear out that it is the appellants who are manufacturers of the goods in question and not the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d machinery from long before the said agreement. Even after the said agreement they were carrying out the work of printing of cigarette slides on behalf of other customers. Except to the extent that the printing of cigarette slides for ITC was to be done by the appellants to the specifications and printing details laid down, M/s. ITC, with a right of rejection in the ITC for substandard material, M/s. ITC had no right of control and supervision over the actual day today work of the appellants. The supply of the board, ink and slide bromides, as well as the first set of cutting and creasing rollers and printing gluts, by the ITC was for the reason that the work to be done by the appellants on that material was to manufacture a product suitable for the ITC only. Hence the supply of these materials would not amount to ITC having control over the manufacturing activities of the appellants. The clause for return of the cutting and creasing rollers and printing gluts to ITC (on the expiry of the agreement) was evidently for the reason that except for the work to be done under the said agreement these items would not be useful to the appellants. Evidently M/s. ITC were anxious to see that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Hon ble Andhra Pradesh High Court and Allahabad High Court in the case of M/s. Andhra Rerolling Works, Hyderabad v. Union of India [1979 (4) E.L.T. J-600] (1981 ECR 129 D-A.P.) and Gangadhar Ramchandra v. Collector of Central Excise, UP (1979 E.L.T. J-597) respectively and the decision of this Tribunal also in the case of Collector of Central Excise, Madras v. Modoplast (P) Ltd. [1985 (21) E.L.T. 187] (Tribunal), we set aside the order of the authority below and allow the appeal. 18A. In the case of Tata Engineering Locomotive Co. Ltd. v. U.O.I. (supra), Patna High Court has held that Company having right to supervise the fabrication process so as to satisfy about quality of material used and to guarantee manufactured product according to specifications of its customers, it has been held that body builders manufactures on its own account and not for and on behalf of appellant in that case. It was held that the appellant was not manufacturer of body built on chassis by the body builders as envisaged by Section 2(f) of the Act. 19. In the case of M/s. Meteor Satellite Ltd. v. Collector of Central Excise, 1985 (22) E.L.T. 271 (Tribunal), the Tribunal has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working of the manufacturing concern, hence such a company will not be considered to be a manufacturer within the definition of the term given in Sec. 2(f) of the Act. A person placing orders or manufacturing of articles would only be a buyer and thus cannot be the manufacturer. Simply because the goods manufactured in accordance with the requirements of the buyer, complying with his standard, the same would not make him a manufacturer inasmuch as such a person does not engage himself either in manufacture or production of goods on his own account. He does not incur any financial involvement needed for manufacturing or producing the goods and also does not have any control or supervision over the manufacturing process. Manufacturing company was not a dummy company nor a buyer placing orders for its manufacturing could be considered to be a manufacturer. It is only if those who own a factory are a dummy concern or a camouflage for the buyer of goods produced, that the latter can be considered to be a manufacturer. 21. In the case of Sagar Corporation, Hyderabad v. Collector of Central Excise, Hyderabad (supra), it has been held at para 6 as follows : - Admittedly, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Bijnor where he was only a partner when compared to the factory at Meerut where he was the sole proprietor. Therefore, for the purpose of the firm at Meerut, he would be a distinct person from what the petitioner qua manufacturer of sugar was at Bijnor. Therefore, the production of sugar at Bijnor and Meerut mills could not be clubbed together for grant of rebate under the aforesaid notification. 2. Jagjivan Das Co. (supra) wherein, the Tribunal was considering effect of circumstances such as use of common premises and common use of some machinery etc., telephone telegraphic address, conveyance of partners, etc. in connection with Section 2(f) of the Act and the Tribunal has held as under : - Giving of a common telephone as address by the three firms which consist of relations, when telephones are difficult to get in bigger cities, use of table space by one firm in the shop-cum-office of another, which is a common practice in commercial towers; use of a common telegraphic address, which is used by a number of shops in the same complex, location of three factories in the same compound within the knowledge of the Excise authorities, commonness of partners; occasional use o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause notice or a finding to that effect. These aspects of the case persuade us to hold that these two units are distinct legal entities. 11. The main ground on which the authorities below have come to the conclusion that the clearances should be clubbed is on the basis that one of the partners was described as Karta of joint family. This factor, according to the Department will have no material bearing and that the two units should be considered as the same manufacturer for the purpose of clubbing the clearances. In this connection, we have to state that an ordinary partnership is composed of distinct individuals who enter into a contract to carry on business either for a limited or during their pleasure. Section 5 of the Partnership Act lays emphasis that the relationship of partnership arises from contract and not from status. It is, therefore, obvious that partnership arises only from an agreement and is not created by status or obtained by birth. If a Karta or a Managing Member of the joint family or any other adult enters into a partnership with outsiders, the other members of the family do not ipso facto become partners. But only such of the member who has in fact enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions were not on principal to principal basis. The appellants are a limited concern incorporated under Companies Act while M/s. Grindwell Plastic Pvt. Ltd. and M/s. Industrial Resins and Plastics are incorporated as Private Limited Companies under the Companies Act and M/s. Silver Plastic and M/s. Hiral Plastics are independent units. The Department has not brought out any nexus between these concerns and units set up with fraudulent intent to evade duty. In view of this, the appellants contention that all are independent units and carrying out independent manufacturing activity has to be upheld. The consistent rulings of the Tribunal and Courts as noted above are fully applicable to the facts of this case. The ratio of H. Guru Instruments case is not applicable to the facts and circumstances of this case and the learned Collector was not justified in applying the ratio of it. The Collector has also failed to notice subtle distinction drawn by the Tribunal and Courts in the above rulings on the aspect in issue. In view of the matter, the appeal has to be allowed by accepting the appellants contention. 25. The impugned order is set aside and ordered accordingly. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants and the transactions were not on a principal to principal basis. He has held that the ratio of H. Guru Instruments (supra) is not applicable to the facts of this case. The learned Member (J) has discussed the entire case law on the subject. 29. The learned Counsel for the appellants, Shri Willingdon Christian submitted that the Collector has rested his conclusion on four factual grounds: (i) that the job workers were employed by the appellants as hired labour; (ii) the dealings between the appellants and the job workers were not on a principal to principal basis; (iii) ownership of the goods remained with the appellants; and (iv) the decision of the Tribunal in H. Guru Instruments covers the case against the appellants. The learned Counsel assails all the four findings. 30. On the other hand the learned SDR seeks to support the findings of the adjudicating authority and contends that the fact that Grindwell Plastics were doing job work exclusively for the appellants establishes that Grindwell is acting only as hired labour for the appellants. Therefore, he submits that the citations of the learned Counsel regarding independent contractors are not releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re on his behalf. In the case of Standard Motors Products (I) Ltd., Madras v. Collector of Central Excise, Madras reported in 1986 (24) E.L.T. 155 (Tribunal) the Tribunal has taken the view that a manufacturer cannot be said to be one for and on behalf of the other merely because he has received raw material for such manufacture. In the case of Shakti Udyog, Jallandhar v. Collector of Central Excise, Chandigarh reported in 1986 (25) E.L.T. 423 (Tribunal), the Tribunal has held as follows: Ownership does not make a man a manufacturer any more than giving a piece of cloth to be made into a shirt turns one into a tailor. These two activities must not be mistaken as they are separate even when they coverage on the same person. Owning and manufacturing are distinct roles . 33. In view of the case law discussed above, the Collector s finding on ownership is also set aside. 34. Having held that the relationship between the appellants and the job workers is not one of hired labour, I hold that the decision in H. Guru Instruments (supra) will not apply to the facts and circumstances of this case. 35. Hence, I concur with the view of the learned Member (J). 36. The point of differen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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