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Kakateeya Fabs (P) Ltd, Simplex Infrastructures Ltd Versus CCE Bhopal

2017 (9) TMI 13 - CESTAT NEW DELHI

Sub-contract - the main appellant paid service tax on the work executed by them as a sub-contractor to the second appellant - fabrication of CW liners, pipes and bends, in terms of work order dated 15.07.2009 - whether the main appellant is required to pay Central Excise Duty on manufacture of pipes? - Held that: - On careful consideration of various provisions of the said work order, we find that the main appellant cannot be considered as a labour contractor, simply providing labourers for cert .....

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However, the quantification of duty demand as well as the correctness of finding regarding confiscation and consequent redemption fine has to be re-examined by the original authority. - Penalty u/r 26 of CE Rules, 2002 - Held that: - we note that the second appellant is a limited company. In various decisions, the tribunal has held that penalty under Rule 26 can be imposed only on individuals and not on companies - the order has been passed exparte and the appellant had claimed that due oppo .....

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mber (Technical) Present for the Appellant: S/Shri Rajesh Kumar, TR Harsh Makhija Present for the Respondent: Ms Suchitra Sharma, JCR ORDER Per: B. Ravichandran These two appeals are against common impugned order dated 31.12.2013 of Commissioner of Central Excise, Bhopal. The main appellant is M/s Kakateeya Fabs (P) Ltd. The second appellant filed appeal against imposition of penalty under Rule 26 of Central Excise Rules, 2002. 2. The brief facts of the case are that the main appellant got a wor .....

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hereafter installed/laid-down the said pipes using cement etc. It is said that the main appellant paid service tax on the work executed by them as a sub-contractor to the second appellant. The dispute in the present case is relating to central excise duty liability of the main appellant with reference to the manufacture of pipes. The Revenue entertained a view that the pipes manufactured by the main appellant will fall under the CETH 730539, under the main heading of other tubes and pipes and st .....

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tion 11AC of the Central Excise Act, 1944 read with Rule 25 of the CE Rules. He ordered confiscation of pipes and bends valued at ₹ 1,98,35,760/- and gave option to redeem the same on payment of fine of Rs.one crore. He imposed a penalty of ₹ 30 lakhs on the second appellant under Rule 26. 3. The ld. Counsel for the appellant contested the findings of the original authority on various grounds. The main points raised by him can be summarised as below: - a) The main appellant has worke .....

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ld be applicable, considering the amendment carried-out vide notification No.41/2011-CE dated 18.11.2011 as retrospective. e) All operation, if carried-out in the factory of NTPC benefit of notification No.67/1995, is available. f) The valuation adopted to arrive at duty liability is not correct. ₹ 16,506/-, which is a rate charged by M/s Simplex to NTPC, cannot be considered for tax liability of the main appellant. The said rate includes fabrication, erection and transportation whereas th .....

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aid steel items. Further, Service Tax paid on fabrication work should be adjusted against duty demand, if any. (h) Demand for extended period and penalty imposed are not sustainable. It is a Revenue neutral situation. The appellant bonafidely believed about non-applicability of central excise duty on the fabrication of pipes. (i) The main appellant relied on various case laws in support of the above submissions. 4. The second appellant contested the imposition of penalty on them under Rule 26. I .....

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arth and connected into a pipeline. Regarding limitation, the ld. AR submitted that the main appellant were discharging duty on similar activity undertaken at Vishakhapatnam. They are aware of the central excise duty provisions applicable. They have resorted to payment of service tax only to help the main contractor to avail CENVAT credit which may not be available if they paid excise duty on pipes as the pipes were consumed in civil work resulting in immovable property. 6. We have heard both th .....

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the said work order, we find that the main appellant cannot be considered as a labour contractor, simply providing labourers for certain work. It is clear that they have undertaken various fabrication work in terms of work order in their own account using the material supplied by the main contractor. We note that the original authority exhaustively examined this issue with the help of ratio laid-down in various decided cases. We are in agreement with the findings as recorded by the original auth .....

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MS Plates. The resultant products i.e. Pipes & Bends fall under Sub heading 7305 39 90 of the first schedule to the Central Excise Tariff Act, 1985 (5 of 1986). The CW Liners & Pipes so fabricated from mild steel by welding process, which fall under Sub heading 7305 39 with eight digit classification as 7305 39 90, thus, satisfy the requisite two fold conditions as laid down by Hon ble Supreme Court in the case of Orissa Bridge & Construction Corpn. Ltd. Vs CCE, Bhubaneshwsar (2011( .....

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ify and use (prior to such product being assimilated in a structure which would render them, as a part of immovable property), emerges and then the said goods are taken to their erection site within NTPC Vindhyachal premises. This fact has been admitted by the party, themselves, vide their letter dated 01.07.2013. Hence, ratio of the decisions cited by the party cannot be applied to the present case which speaks about a totally different situation. In the present case, before being taken to the .....

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ission, the party has also contested that they are not the actual manufacturer on the grounds that the Purchase order dt 15.07.2009, addresses them as Contractor ; that M/s Simplex had supplied them plates (received from NTPC) and after completion of fabrication by them (M/s KFPL), they had taken to the same to their erection site with NTPC, Vindhyachal premises; that they are not involved in removing the items from the fabricated areas; that they have not issued any delivery challan to M/s Simp .....

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ble Tribunal has held: This brings us to the second question to be decided in this matter that is who is the manufacturer? Manufacturer is the one who actually undertakes the manufacturing activity. According to the appellants they had, after getting Letter of Intent from M/s DVC had entered into another contract with M/s Rainbow Engineering Works and awarded job for fabrication, erection, testing and commissioning of CW piping-system for DVC Bokaro Site. He has also drawn our attention to the .....

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ered as hired labour of the appellants. It is settled law that a supplier of raw material does not become manufacturer by merely supplying raw material or getting goods manufactured according to his drawings or specifications. The Apex Court in may cases such as Ujagar Prints and Khambhatwala has held that the job workers are the manufacturer of the goods. The letters relied upon by the learned SDR do not make the appellants as manufacturer of the goods in question. These letters were addressed .....

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em as to treat them as manufacturer under the provisions of law. We, therefore, held that the appellants cannot be considered as manufacturer of the C.W. in question. In view of this finding we do not find it necessary to go into other questions such a demand being beyond the period of 5 years, demand being hit by time limit and quantification being not property done. We allow the appeal filed by the appellants. In view of the said ruling, M/s KFPL s contention has no force and they are the actu .....

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imilar activity at Vishakhapatnam. Further, their claim that the department is aware of their activity is not correct. They are registered for payment of service tax for the work of erection and commission of the pipelines. Payment of service tax in terms of provision of Finance Act, 1994 by itself will not absolve them from central excise duty liability for manufacture of any excisable items which might have been used in completion of the service rendered by them. We are in agreement with the f .....

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f their authorized representative. Department came to know this fact only when on gathering intelligence, an investigation in the matter was initiated. They failed to maintain daily stock register for manufacture and clearance of the excisable goods. They cleared the said excisable goods without issuance of invoice and without payment of appropriate Central Excise duty. They also did not file statutory monthly ER-1 returns. Thus, the party has suppressed the facts of manufacture & clearances .....

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mption in terms of notification No.67/1995 for capital goods manufactured in a factory and used within the factory of production as well as of excisable goods manufactured in a factory and used within the factory of production in or in relation to manufacture of final products. The said exemption has no application as the main appellant is not using the capital goods in the factory of manufacture. It appears that the manufacture is in the factory premises of NTPC. However, no clear position abou .....

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is not tenable in the present case. The main appellant received, free of cost, the main raw material and as such have not paid any central excise duty on such input. Hence, the question of availing credit is not for consideration in the present proceedings. 12. We note that the main appellant contested the method of arriving at the value for central excise duty purposes. We find force in their submission. The original authority should have considered the facts, that all the steel Inputs supplied .....

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detail before quantification of duty liability by the original authority. 13. One more important aspect contested by the main appellant is with reference to confiscation of detained goods and imposition of redemption fine for releasing the same. The main appellant categorically stated that the question of confiscation does not arise as there was no seizure of the goods. In fact, the main appellants questioned the valuation of detained goods as recorded in para 6.11 of the impugned order. It is c .....

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