Raju DECISION
Raju, Member (T)
1. This Appeal has been filed by M/S Orion Steel Corporation and Suryakant C Patel against confirmation of demand of Central excise, Interest and Imposition of Penalty.
2. Learned Counsel for the appellant submits that the appellant company is engaged in manufacture of welding electrodes on job work basis. He pointed out that these electrodes carried the brand name ("Sun Arc") which belonged to the appellant. He submits that the case of the department is that the electrodes manufactured by M/S Orion Wire Manufacturing Company bear the brand name of the appellant's company, Clearance of such welding electrodes have to be included in the aggregate clearances of the appellant for the purpose of Notification No. 8/2003 -CE. The demand of duty has been calculated in the above manner by including the value of clearance of the goods manufactured by M/S Orion Wire Manufacturing Company in the total clearances of the appellant.
2.1. Learned Counsel pointed out that the appellant had sent raw materials to M/S Orion Wire Manufacturing Company for manufacturing welding electrodes on job work basis and the electrodes manufactured by Orion Wire Manufacturing Company were cleared on payment of Central Excise duty from the premises of M/s. Orion Wire Manufacturing Company. He pointed out that there is no dispute that M/s. Orion Wire Manufacturing Company is not a dummy Company. It is not in dispute that M/s. Orion Wire Manufacturing Company is actually manufacturing these electrodes as all the facilities for such manufacture.
2.2. Learned Counsel argued that in this background, it is apparent that allegation of department that the aggregate clearances should include the clearances made by M/s. Orion Wire Manufacturing Company that is without any basis. Learned Counsel relied on the decision of tribunal in the case of ARIHANT UDHYOG-MANU/CM/0387/2018 : 2018 (363) ELT 924 wherein, the tribunal held that duty liability would always arise on the end of job worker as job worker is manufacturer even when the work is done on job work basis. He argued that if the decision held that the person who gives the contract to the job worker for undertaking job work cannot be liable to pay duty even if SSI Exemption is not admissible. While holding so the tribunal in the case of THERMAX BABCOCK & WILCOX- MANU/CM/0947/2017 : 2018 (364) ELT 945. Learned Counsel pointed out that similar observation has been made by the tribunal in the case of M/S HITACHI MANUFACTURING COMPANY-MANU/CK/0105/2017 : 2017 (358) ELT 1136 and also in the case of M/S REDICURA PHARMACEUTICALS PVT. LTD-MANU/CE/0580/2015 : 2015 326 ELT 379. Similar view has also been expressed by tribunal in the case of M/S SUPREME TANK PVT. LTD. and M/S PRIME INDUS. VALVES MANUFACTURING COMPANY reported in 2014 (314) ELT 725 and 2008 (221) ELT 255 respectively. Learned Counsel argued that in all these cases of common thread advances by the value of goods manufactured by the job workers cannot be included in the value of goods cleared by the principle for the purpose of SSI Exemption.
2.3. Learned Counsel pointed out that the issue is barred by limitation as appellant has filed declaration in the year 1999 and investigation is conducted 4 Years before this case was also draft by Revenue. Learned Counsel pointed out that on 01.06.2003 summons were issued to M/S Orion Wire Manufacturing Company seeking details of job Contract with M/S Orion Steel Corporation, Bharuch and the costing of all products manufactured on behalf of M/s. Orion Steel Corporation with supporting document like sales/purchase invoices for the year 2002-03, 2003-04. Learned Counsel pointed out that the instant Show Cause Notice was issued on 30.06.2010. Learned Counsel pointed out that revenue was aware of the entire arrangement between the appellant and M/S Orion Wire Manufacturing Company way back in 2003 and, therefore, extended period of limitation cannot be invoked in this case. Learned counsel pointed out that the impugned order in para 16.8 relied on this very declaration which was filed on 07.07.1999 to uphold the extended period of limitation. He argued that when the declaration was filed on 07.07.1999 declaring the entire arrangement between the appellant and M/S Orion Wire Manufacturing Company and, therefore, there cannot be any allegation of suppression or misdeclaration.
2.4. Learned Counsel further argued that job worker are independent manufactures and the same view has been upheld by the tribunal in the case of THERMAX BABCOCK & WILCOX LTD-MANU/CM/0947/2017 : 2018 (364) ELT 945. (Tri-LB). Thus the appellant held a bona fide view that independent job worker are manufacturers in their own right, and therefore, the value of clearance of independent job worker cannot be clubbed with the value of the clearances of principle Manufacturer for the purpose of Notification 8/2003-CE.
3. Learned Departmental representative pointed out that these sales from the job worker premises are done on behalf of the appellant. He pointed out that the VAT of those sales is paid by the appellant the sales are reported in Profit and Loss Account of the appellant. He argued that there is no purchase of welding rod by the appellant from the job worker and there are no trading sales as well as by the job worker to the appellant. He argued that in this circumstances it is apparent that the appellant is the manufacturer he further argued that there are common employees between the appellant and the job worker and there are common partners as well.
3.1. Learned Departmental representative relied of the decision of the Hon'ble High Court of Karnataka in the case of the M/S. LAMINA INTERNATIONAL- 2009 (239) ELT 232 he particular relied on Para 11 of the said decision which is reads as under:
"11. Considering the word 'manufacturer' as defined under Section 2(f) of the Act, as it includes any person engages in their production or manufacture on his own account, we have to hold that the manufacturer M/s. Lamina Suspension Products Limited is manufacturing the goods on behalf of the M/s. Lamina International and the assessee is having a full control and supervision over the activities of M/s. Lamina Suspension Products Limited. Therefore, on facts we are of the opinion that the products manufactured by the M/s. Lamina Suspension Products Limited cannot be treated as product manufactured by a third person. Considering the definition cause of Section 2(f), we are of the opinion that the question of law framed in this appeal has to be answered in favour of the assessee. In addition to that our views are also supported by the Judgment of Delhi High Court reported in 1997(19) RLT 479 and also the Judgment of the Supreme Court in the case of Commissioner of Sales Tax, U.P. v. Dr. Sukh Deo reported in MANU/SC/0395/1968 : AIR 1969 SC 499. There their Lordships while considering the word 'manufacturer' observed that the expression "manufacture" has in ordinary acceptation a wide connotation: it means making of articles, or material commercially different from the basic components, by physical labour or mechanical process; and a manufacturer is a person by whom or trader whose direction and control the articles or materials are made."
3.2. Learned Authorized Representative also pointed out that the facts were not reported in the return filed by appellant. He relied on the following decision of tribunal in the case of:
1. Sanjay Bahadur Vs. CCE, Belapur-2009 (240) ELT 282(Tri-Mum)
2. Audi Automobiles Vs. CCE, Indore -2010 (249) ELT 124 (Tri-Del)
3. Parle Bisleri Pvt. Ltd. Vs. CCE, Ahmedabad -MANU/SC/1065/2010 : 2011 (263) ELT 15 (SC)
4. We have gone through rival submissions. We find that facts of the case are that where the appellant is the owner of the brand name " Sun Arc". They are getting electrodes manufactured by the M/s. Orion Wire Manufacturing Company on job work basis by supplying materials to them. The electrodes manufactured by the job worker are cleared from the job worker premises directly. Raw materials for the manufacture of the electrodes are supplied by the appellant. The duty on the electrodes is paid by the job worker on the price at which the goods are sold by the appellant to the buyers. The Value Added Tax is paid by the appellant. Retail invoices are also issued by the appellant in respect of this clearance from the Job premises. The revenue is seeking to club the clearance made from the job worker premises into the clearances of the appellant for calculating the benefit of SSI Exemption available to the appellant. Notification No. 8/2003-CE grants duty exemption to clearance made by small scale units. This notification provides exemption to first clearances upto an aggregate value not exceeding Rs. 100 lakhs made on or after 1st day of the April of any financial year. This exemption is subject to the condition that the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers does not exceed (rupees four hundred lakhs) in the preceding financial year. The notification further prescribed as follows.
"3A. For the purposes of determining the aggregate value of clearances of all excisable goods for home consumption, mentioned in clause (vii) of paragraph 2 of this notification, the following clearances shall not be taken into account, namely:-
(a). --------------------------------------------------------
(b) clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4,
(c) ----------------------------------------------------------- "
The Notification also prescribed as follows:-
"(B) where the specified goods manufactured by a manufacturer bear a brand name or a trade name, whether registered or not, of another manufacturer or trader, such specified goods shall not, merely by reason of that fact, be deemed to have been manufactured by such other manufacturer or trader;"
4.1. From the above it is apparent that the notification prescribes that for the purpose of claiming exemption of this notification aggregate value of clearances of all excisable good for home consumption by the manufacturer from one or more factories or from a factory by one or more manufacturer does not exceed Rs. Four hundred Lakhs in the preceding financial years. For the purpose of calculating the aggregate value, the value of clearances bearing brand name or trade name of another person, which are ineligible for the brand of this exemption, are not to be included in the aggregate value. The notification further prescribed that where the specified goods manufactured by the manufacturer bear the brand name or trade name, whether registered or not, of another manufacturer or trader, such specified goods shall not, merely by reasons of the fact to be deemed to have been manufactured by such other manufacturer or trader.
4.2. In the instant case revenue is seeking to include the value of the goods cleared by M/s. Orion Wire Manufacturing Company in the aggregate clearances of the appellant on the following arounds:-
1. The goods manufactured by the job worker are manufactured on job work basis.
2. The goods manufactured by the job worker bearing the brand name own by the appellant.
3. The job worker is not the manufacturer of the goods but the appellant manufacturer of these goods.
4.3. We find that the larger bench of Tribunal in case of Thermax Babcock & Wilcox Ltd. has clearly held as follows:-
"7.6 The job worker being the manufacturer of goods is liable to pay duty on goods manufactured by him albeit on job work. The ownership of the goods is immaterial for the purpose of levy of duty and thus any person who has undertaken the activity of manufacture is liable to pay duty. In order to save the job worker from payment of duty the principal manufacturer has to own the liability to pay such duty. It is only by virtue of the Notification No. 214/86-C.E., dated 25-3-1986 that the liability of the job worker to pay duty is transferred to the principal manufacturer who undertakes to pay duty.
7.7 The intention of enactment of Notification (supra) was to shift the liability of payment of duty from job worker to the principal manufacturer under certain conditions as provided in the said notification. There is no blanket machinery provisions in the Central Excise law under which the liability to pay duty is transferred from the job work manufacturer to another person i.e. principal manufacturer. However when the principal manufacturer does not own up the liability to pay duty on finished goods, the provision of Notification No. 214/86- C.E., dated 25-3-1986 does not apply. In that case, it is the ultimate manufacturer i.e. the job worker who has to pay the duty. Following the procedure and conditions of the Notification (supra) only by the principal manufacturer, the job worker would be saved from payment of duty on goods manufactured by him."
From the above it is apparent that the appellant cannot be held to be manufacturer of goods and the job worker is the manufacturer in the facts of this case. The liability to pay duty arises at the end of the job worker and not at the end of the appellant although appellant is the supplier of the raw materials. It is also clearly held in the case of THERMAX BABCOCK & WILCOX LTD. (Supra) that ownership of goods is immaterial for the purpose of fixing duty liability. Moreover, we also find that in the facts of this case none of the provisions of notification 8/2003-CE are attracted which can enable revenue to include the value of clearances of goods manufactured by the job worker in the aggregate value of the clearances of the appellant
4.4. In the above facts and circumstances we find that there is no substance in the argument of the revenue to hold that appellant are the manufacturer and the benefit of the Notification 8/2003-CE can be denied by including the value of clearances of goods manufactured by the job worker in the aggregate clearances of the appellant.
4.5. Revenue has relied on the decision of Hon'ble High Court of Karnataka in the case of M/S. LAMINA INTERNATIONAL (Supra). It is seen that the facts in that case were significantly different. In that case M/S. LAMINA INTERNATIONAL had full control and supervision over the activities of M/S LAMINA SUSPENSION PRODUCTS LIMITED. In the instant case there is no such allegation and therefore, the ratio in the case of M/S. LAMINA INTERNATIONAL cannot be applied in the instant case.
5. Consequently, the appeal of M/s. Orion Steel Corporation is allowed. Since the demand of duty against the main appeal is set aside the appeal of Suryakant C Patel is also allowed. The impugned order is dismissed.
(Pronounced in the open court on 13.01.2021)
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