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2017 (9) TMI 13

ted 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 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 uphold the findings of the original authority regarding the duty liability of the main appellant with reference to manufacture of pipes and bends. - Time limitation - Held that: - the main appellant has undertaken manufacture of excisable goods and are liable to pay duty. The demand for an extended period is sustainable. 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 indivi .....

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ted resulting in the impugned order. The original authority confirmed central excise duty liability of ₹ 1,91,61,777/- on the main appellant and Imposed equal amount of penalty in terms of section 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 worked as a labour contractor in terms of the work order and cannot be considered as a manufacturer of excisable goods. b) The product fabricated by the main appellant are unfinished pipes which become complete and functional in the operation of erection and they actually become immovable property upon erection in the required site. c) The pipes are not marketable products as they are made to specific requirement for the NTPC project. d) Exemption under notification no.3/2005 CE dated 24.02.2005 should .....

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as the pipes were consumed in civil work resulting in immovable property. 6. We have heard both the sides and perused appeal records. First, we consider the liability of the main appellant for central excise duty on their activity of fabrication of CW liners, pipes and bends, in terms of work order dated 15.07.2009. We have perused the said work order. We note that the main appellant have to make arrangement to receive material from the stores of second appellant or NTPC. Thereafter, they have to undertake the work as listed in the contract. 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 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 authority. The same is re-produced below: 6.3.5-Careful examination of the manufacturing activities as det .....

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sion, 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 Simplex when they were transporting the pipes to erection site because they (M/s KFPL) are only piece rate contractor to M/s Simplex and not manufacturers of pipes; that they were carrying out the work as per the instruction of engineer of M/s Simplex that they are providing service of fabricating and erecting CW liners and pipes and they are only piece rate contractors. It is observed that the issue has already been settled in J.S.T. Engineering Services Vs CCE, Jamshedpur case (supra) in which Hon 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. Ac .....

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rk order and the discussion recorded by the original authority and we are in agreement with the same. As such, we uphold the findings of the original authority regarding the duty liability of the main appellant with reference to manufacture of pipes and bends. 9. Regarding the question of time-bar, we note that the appellants have discharged central excise duty liability while being undertaken similar 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 findings of the original authority as below: 6.6.1. As regards the invoking of extended period or issue of limitation, it is noticed that M/s KFPL did not apply for the Central Excise registration to the jurisdictional Central Excise authority i.e. Superintendent, Central Excise, Range-Waidhan, for the .....

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it 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 by NTPC through SIL were not used in the fabrication/manufacture of steel pipes or bends. The appellant claimed various other items like saddles, structures, plates, etc. were also made out from steel items. It is not clear whether all these items are separately considered as manufactured excisable items by the original authority. We have seen the calculation of duty liability as enclosed to the show cause notice. It is apparent that the claims of the main appellant have not been considered in 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 .....

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