Supply of Transmission Line Accessories and Hardware Fittings Not Manufactured: CESTAT quashes Excise Duty Demand [Read Order]

The Kolkata bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT)quashed the excise duty demand since the supply of transmission line accessories and hardware fittings are not manufactured.

M/s. S.A. Enterprise, the appellant firm, a supplier of transmission line accessories and hardware fittings, used to submit bids when tenders were floated by different power supply corporations across India. The appellant firm also used to deal with various private parties. It was stipulated in the tenders/contracts of the power supply corporations that orders will be placed on the manufacturers.

The appellant used to represent and declare to the power supply corporations that it was a manufacturer and that its premises at 207/7, Belilious Road, Howrah-1 was its factory/place of manufacture. However, the appellant firm had not been registered with the Central Excise authorities. 

The appellant firm had clarified that it had not undertaken the manufacture of any goods sold to the aforesaid power supply corporations, though it had represented itself as a manufacturer to them. The appellant also submitted copies of its purchase records, particulars of the suppliers, copies of records in respect of job workers, particulars of the job workers, particulars of the goods sold etc. and further clarified that it did not have any trade mark or brand name.

The appellant also made over two post-dated cheques for an aggregate sum of Rs. 10.50 lacs. Subsequently, the appellant’s constituted attorney clarified in his statements dated 24.05.2010 and 01.12.2010 that such payment had been made under misconception and to buy peace.

It was argued that the appellant firm was a ‘manufacturer’ and not a trader. On 24.12.2010 a show cause notice was issued to the appellant firm alleging that it had always declared to its customers that it was a manufacturer of transmission line accessories and hardware fittings, but to evade payment of Central Excise duty, the appellant firm had been showing the goods manufactured by it as traded goods.

It was also proposed in the show cause notice that the amount of Rs. 10.50 lacs already paid should be appropriated. Sri Dinesh Rungta, constituted attorney and authorized representative of M/s S. A. Enterprise, was also directed to show cause as to why a personal penalty should not be imposed on him under Rule 26 of the Rules. 

The appellants were represented by Shri J.P. Khaitan, Sr. Adv., assisted by Shri Agnibesh Sengupta and Shri Indranil Banerjee, Advocates. The Department was represented by Shri S. Mukhopadhyay, D.R. 

The Department has raised demands on the sale of materials to private parties and sale of wires, channels, angles etc. for the period on and from February 2011, although, the appellant firm had never held itself out as a manufacturer in respect of such supplies. It must be noted here that, in the earlier two show cause notices dated 24.12.2010 and 24.03.2011 no such demand had been raised.

While passing the Order-in-Original dated 01.05.2018 the Commissioner ought to have appreciated that, whether the private parties to whom the appellant firm had supplied the goods in question further supplied the goods to electricity distribution companies was of no consequence for determining the appellant firm’s liability.

Regarding the penalty, the Appellant contended that since they have not suppressed any information from the department, Notice cannot be issued by invoking an extended period. It was observed that the Appellant has not taken any Central Excise Registration on the ground that the activities undertaken by them did not amount to manufacture.

A two-member bench comprising Mr. Ramesh Nair, Member (Judicial) and Mr C L Mahar, Member (Technical) viewed that “the activities undertaken by the Appellant would not amount to manufacture. Hence the demand for duty in the normal period itself is not sustainable. Accordingly, the question of invoking an extended period for demanding duty does not arise since the activities undertaken by the Appellant do not amount to manufacture.”

To Read the full text of the Order CLICK HERE

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