The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) conversion services of ms rounds, bars and converting the same to sockets, bends based on job work not a manufacturing process.
M/s. Jamuna Enterprise (The Appellant) was engaged by M/s. Bidisha Enterprise for conversion of raw materials such as MS Round, Bright bars etc. for job work, as per the specification provided by them. For the processing work carried out by the Appellant, they were paid labour charges by M/s. Bidisha Enterprise.
An investigation was carried out at the business premises of M/s. Bidisha Enterprise on 15.06.2010 by the Anti Evasion wing of the Central Excise department and it was seen that they were not registered under the Central Excise Act, 1944 until November 2007. M/s. Bidisha Enterprises took the Central Excise registration only in December 2007.
On the basis of the investigation carried out at the premises of M/s. Bidisha Enterprise, the Appellant was issued a show cause notice dated 25.03.2011, demanding central excise duty Rs.64,50,631/-on the goods, namely ‘parts of motor vehicles’, manufactured and cleared to M/s. Bidisha Enterprise during the period 2006-07 and April 2007 to November 2007 by invoking extended period of limitation. The duty was demanded from the Appellant on the ground that since M/s. Bidisha Enterprise was not registered with Central Excise department, it was the duty of the Appellant to pay excise duty on the goods manufactured and cleared by them.
The show cause notice was adjudicated by the Commissioner of Central Excise, Kolkata III Commissionerate, vide OIO dated 28.03.2012 and the demand of duty proposed in the Notice was confirmed along with interest. A penalty of Rs 20,00,000/- was also imposed on Shri. Biswajit Saha (Appellant), Proprietor of M/s.Bidisha Enterprise, under Rule 26(1) of the Central Excise Rules,2002. Aggrieved against the impugned order, the Appellants filed the present appeals.
It was contended that no reason was recorded by the department for not raising any demand of duty on M/s. Bidisha Enterprise. It has been very well accepted and acknowledged in the SCN that the Appellant was working as a job worker of M/s. Bidisha Enterprise and only collecting labour charges for the job work carried out by them.
The demand has been raised on them only on the ground that the conditions of Notification No. 214/86 CE has not been fulfilled by them and thus duty is payable by the job worker.
The Appellant further states that the entire demand of excise duty has been confirmed on the assumption that the process adopted by the Appellant tantamount to ‘manufacture’ under the provisions of Section 2(f) of the Central Excise Act, 1944.
The present issue pertains to the period prior to December 2007, when they have not taken registration and got their goods manufactured through the ‘job worker’. Notification 214/86-CE dated 25.03.1986, provides a mechanism for supplier of raw materials to get their goods manufactured on job work basis without payment of duty. The said exemption is applicable only to goods in respect of which the supplier of the raw material or semi-finished goods had given an undertaking that the said goods would inter alia, be used in or in relation to the manufacture of final products in his factory.
Documentary evidences available on record indicate that the processes undertaken by the Appellant has converted the M.S Rounds, Brights Bars sent by M/s Bidisha Enterprise into some dutiable final products. Accordingly, the processes undertaken by the Appellant amounts to ‘manufacture’ as defined under Section 2(f) of the Central Excise Act, 1944.
The Appellant contended that the they were providing conversion services of MS Rounds, bars etc. and converting the same to sockets, bends etc. The Adjudicating authority has classified the product under CETH 87089900 which deals with “OTHERS” under PARTS AND ACCESSORIES OF THE MOTOR VEHICLES OF HEADINGS 8701 TO 8705.
Even though the Challans issued by them indicate that the job worker has converted the MS Rounds and Bright Bars into sockets and bends, no evidence has been brought on record to classify the goods as ‘Parts of Motor Vehicles’ under the Chapter Heading 87089900. The classification has been arrived at without ascertaining the actual processes under taken by the Appellant. It was only presumed that the finished goods are ‘Motor Vehicle Parts’.
A two member bench comprising of Mr. Ashok Jindal Member (Judicial) and Mr. k. Anpazhakan Member (Technical) held that the evidence available on record does not support the classification arrived at in the impugned order. Hence, the duty demanded from the Appellant under the Chapter heading 87089900, as ‘parts of motor vehicles’ are not sustainable.
Further observed that extended period of limitation under section 11A(1) of the Act can be invoked only if suppression, wilful misstatement occurs due to deliberate evasion of duty on part of the assessee.
Since the department has not brought in any evidence to establish that the Appellant has suppressed the facts with an intention to evade payment of duty, the CESTAT set aside the demand on the ground of limitation.
“In absence of evidence available on record to conclude that the appellant has in any way abetted the job worker to clear the goods without payment of duty, the penalty is not imposable on him under Rule 26(1) of the Central Excise Rules, 2002.”, the Tribunal viewed.
The CESTAT quashed Excuse Duty demand and allowed the appeal.
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