TMI Blog2003 (12) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... de liable for payment of duty in respect of excisable goods falling under Chapter 61 & 62 of CET and manufactured on job work basis - a person cannot be deemed not to be a manufacturer of goods (though liable to pay duty) and yet be a manufacturer (of the same goods) for availing the benefit of SSI exemption. - - - A.A.R. No. 1 of 2003 - Dated:- 31-12-2003 - APPLICANT REPRESENTED BY: Shri Gautam Doshi, Chartered Accountant. COMMISSIONERS REPRESENTED BY: Shri Nikhil Chandra, Dy.Commissioner, Central Excise Commissionerate Bangalore-II Shri S.N.Prasad, Jt. Commissioner, Central Excise Customs, Commissionerate-Valsad RULING (By R. K. Chakrabarti) Zodiac Clothing Company Ltd. Worli Mumbai a public company registered under the Companies Act, 1956 is the applicant seeking four rulings from the Authority. The applicant has filed an application on 20th November,2002 under section 23C of the Central Excise Act, 1944. It proposes to set up a Joint Venture in India with Asia Tangible Investments Pvt. Ltd., Singapore a Private Company registered under the laws of Singapore . The Joint Venture company will take over the existing units of Zodiac Clothing Company Ltd. And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint Venture company would not be a manufacturer of goods manufactured by Metropolitan Trading Company on job work basis for the Joint Venture company and sold by the Joint Venture company. (c) Whether the Joint Venture company would be liable to pay duty on goods manufactured by Metropolitan Trading Company and would do so by directing Metropolitan Trading Company to pay duty and would therefore, be entitled to exemption under notification No.8/2002, dated 1.3.2002. (d) And, as a corollary, whether the Joint Venture company can continue to enjoy procedural concessions including exemption from registration and export procedure available under Board's Circular No.212/46/96-CX dated 20.05.1996 read with Notification No.36/2001-CE (NT) dated 26.06.2001. 4. The applicant, Zodiac Clothing Company Ltd. Has filed adequate documentary evidence to establish the genuineness of the non-resident Co. viz Asia Tangible Investments Pvt. Ltd. A copy of certificate of incorporation of private company issued by Registrar of Companies and Businesses, Singapore, has been filed. A copy of the draft MOU which would lead to the Joint Venture agreement has also been filed. A copy of a letter date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant emphasized that since they had already entered into negotiations for setting up the Joint Venture they have gone much beyond the stage of "expressions of interests". The representatives from the Commissionerates S/Sri Nikhil Chandra and S.N.Prasad did not express any reservation about admissibility of the applicant including with reference to the first proviso to section 23D(2) of the Central Excise Act, 1944. 7. The scheme of issue of Advance Rulings in respect of specified central excise and customs issues for setting up a Joint Venture between a non-resident and a resident (as in this case) is a facilitation measure introduced in the 1999 budget with the specific purpose of lending certainty to the futu5re duty liabilities of a proposed Joint Venture. Under Chapter III A of the Central Excise Act the expressions "advance ruling" and "applicant" read as under:- "advance ruling" means the determination, by the authority of a question of law or fact specified in the applicant regarding the liability to pay duty in relation to an act6ivity proposed to be undertaken, by the applicant:" "applicant" means a non-resident setting up a joint venture in India in collaboration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries vs. CCE {1995(75)ELT 21 (SC)} (iv) Britannia Biscuit Co. Ltd. Vs. CCE {1997(89)ELT 22 (SC)} (v) Apex Electricals Pvt. Ltd. Vs. UOI {1992(61)ELT 413 (Guj.)} According to the applicant the question as to who is the owner of the goods is not relevant in this case since the relation is that of a principal to principal and the premises, labour, machineries employed are of the job worker, the independent job worker is the manufacturer. On the same logic, the Joint Venture company would be the manufacturer. On the same logic, the Joint Venture company would be the manufacturer of goods in their export units. It is immaterial that the goods may be manufactured in the job worker's premises with the brand name owned by Joint Venture company, according to the applicant. 11.The applicant has made the further following submissions:- The Zodiac Clothing Company Ltd. Is engaged in manufacture of readymade garments falling under Chapter 61/62 of CET. The major part of production of Zodiac Clothing Company Ltd. From three factories are exported and the value of domestic clearances is less than Rs.1 Crore. Therefore for local clearances Zodiac Clothing Company Ltd. Now enjo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany is the real manufacturer and this is evident from the "deeming fiction" which has been created by use of the expression "as if" in rule 4(3). The Joint Venture company is the manufacturer only to treat the person who gets the goods manufactured on job work basis as a deeming fiction . Only for the purpose of rule 4(1) and 4(3), the Joint Venture company is the manufacturer. It is settled law that deeming fiction created under the Act would be applicable only for the purpose for which is is created and not for any other purpose. This view has been confirmed in the decision of the Tribunal in the case of Usha Martin Industries Ltd. Vs. CCE(1999)(85 ECR 505):- "Legal fiction relating to "deemed export" incorporated in the Import Policy 1985-88 has to be applied for the purpose for which it is created and has no application to Central Excise Act. Therefore, goods supplied to ONGC by a 100% EOU are goods" allowed to be sold in India", and therefore, are not eligible for the benefit of exemption notification 125/84." This view was re-iterated in the case relating to Vadilal Embroidery Unit Vs. CCE (2001)(13)ELT-193(Tribunal). To allow a non-manufacturer to avail of the exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l excise registration. 13. The contention of the applicant that in terms of the decision of the Hon'ble Supreme Court in the case relating to Ujagar Prints Vs. UOI (1988) (38) ELT 535 (SC) Metropolitan Trading Company would be the actual manufacturer in this case in the normal course is acceptable. The relation between the Joint Venture company and Metropolitan Trading Company are on principal to principal basis. Labour, machineries as well as the premises for manufacture of the goods are also of Metropolitan Trading Company, the job worker. The actual manufacture of the goods gets completed in the premises of Metropolitan Trading Company. It is really immaterial that the ownership of the raw materials and the final goods is vested with the Joint Venture company. The decisions in the cases relating to Britannia Biscuit Company Ltd. as well as Apex Electricals (P) Ltd., support the contention of the applicant that in terms of the draft job work agreement Metropolitan Trading Company will be the actual manufacturer. However, the Authority considers that the issue, who should actually discharge the duty liability can be decided by the Government. Under section 37(2) (ib) of the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treat any imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequence and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it-. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of the state of affairs'. 16. In the matter of American Home Products Corporation Vs. MAC Laboratories (P) Ltd. and another 1986(I) Supreme Court Cases 465, the issue involved was interpretation of a deeming fiction created under the Trademarks Act, 1940. The Hon'ble Supreme Court observed that the purpose for which the fiction had been enacted was set out in section 48(2) and to confine it only to a part of section 46 would be to substantially cut down operation of the legal fiction. Hon'ble Supreme Court held:- "The purpose for which the said fiction has been enacted are set out in Section 48(2). These purposes are the purposes of Section 46 or for any other purpose of which such use in material under the 1958 Act or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Schedule, the expression "manufacturer" shall include a person who is liable to pay the duty of excise leviable on such goods under sub-rule (3) of the rule 4 of the Central Excise Rules, 2002." Evidently, since it is a beneficial provision ( in as much as it extends confessional rates of excise duty to SSI units), there is little reason for a merchant manufacturer not to avail of the benefit of the same, much less to deny its applicability to himself. Once it is accepted that the merchant manufacturer is eligible to avail the benefit of SSI notification (subject, of course, to his fulfilling the other conditions contained in the said notification) it cannot be gainsaid that the person who gets the goods falling under Chapter 61 or 62 of the Central Excise Tariff, 1985 manufactured on his account on job-work basis, is the manufacturer of such excisable goods. 20. Applicability of the concession under notification No. 8/2002-CE, dated 1/.3.2002 is based on the aggregate value of clearances for home consumption by a manufacturer subject to conditions referred to in paragraph 2 (iii), (iv), (v), (vi) and (vii) of the notification. Thus the notification and the benefit under i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation would defeat the very objective of the law to make the merchant manufacturer liable on his own account and also on behalf of jobworkers to payment of excise duty on excisable goods falling under Chapter 61 or 62 of CET. 22. Having considered the submissions made by the Revenue and the Applicant the fourth question i.e. whether the Joint Venture company can continue to enjoy procedural concessions including exemption from registration and export procedure vide Board's Circular No. 212/46/96-CX dated 20.05.1996 read with notification No. 36/2001-CE (NT) dated 26.6.2001 raised in the application is rejected as not an admissible question under section 23C of the Act. Other references are answered as under:- Whether the Joint Venture company Would be manufacturer of goods manufactured by the export units only, The joint Venture company would be the manufacturer of excisable goods manufactured by its export units and would also be manufacturer of goods manufactured on their account on job work basis by Metropolitan Trading Company Whether the Joint Venture company would not be a manufacturer of goods manufacture by Metropolitan Trading Company on job work ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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