Job Worked Coach Pillars Not Marketable and Liability Lies on Raw Material Supplier: CESTAT Sets Aside Excise Duty Demand [Read Order]
CESTAT set aside the duty demand, ruling that the job worked coach pillars were not marketable goods and that the excise liability only lays with the raw material supplier, not the job worker.
The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal filed by Polmor Steels Pvt. Ltd., holding that the door pillars and side pillars manufactured on job work were not marketable goods, and the duty liability rested on the raw material supplier, not the job worker.
The dispute arose after the department alleged that Bombardier had supplied stainless steel sheets to the appellant under job-work challans for manufacture of coach pillars used in Delhi Metro coaches, and that the appellant had cleared these goods without payment of duty despite the process amounting to manufacture.
The adjudicating authority confirmed the duty demand on the ground that the process undertaken by the appellant resulted in excisable goods and that Bombardier had not disclosed the process of job work to the department with a view to evading duty.
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The appellant submitted that the door and side pillars manufactured by them were not finished goods capable of being bought and sold and had no independent marketability, as they were produced strictly to the drawings and specifications of Bombardier and were further used in manufacture of railway coaches.
The appellant contended that raw material and the processed goods both belonged to Bombardier, and the appellant only received job-work charges. They relied on the fact that the goods falling under tariff heading 86079910 were not listed in the First or Second Schedule to the Central Excise Tariff Act, 1985 and therefore could not be treated as excisable goods.
The appellant further argued that even if the process amounts to manufacture, the job worker is not liable to duty under Notification 214/86 when the raw material supplier has furnished the requisite undertaking.
The department contended that coach pillars were well-known commercial commodities and that after the 2008 amendment to Section 2(d) Central Excise Act
1944, the requirement of proving marketability stood diluted by deeming fiction. It was therefore argued that the duty demand was legally sustainable and recoverable under Section 11A along with interest and penalty.
The Bench comprising A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member) examined the statutory definition of “excisable goods” and noted that the coach pillars manufactured on job work were not capable of being bought and sold and thus had no marketability. They were integrally manufactured to the specific design of the coach and were never sold in the market.
The Tribunal noted that the appellant only received job-work charges and no sale consideration and relied on earlier decisions in Alomeco India Extrustion Ltd., Vs Commissioner of Central Excise, Hyderabad (2010) and Kanohar Electricals Ltd., 2005, which consistently held that where goods are manufactured under Notification 214/86, the duty liability falls on the raw material supplier, not the job worker, especially when the finished goods are used in further manufacture.
The Tribunal emphasized that Bombardier had furnished the declaration under Notification 214/86, and any violation of that declaration, if at all, could only make the raw material supplier liable, not the job worker.
The Tribunal further held that there was no suppression of facts by the appellant, making the extended period of limitation inapplicable.
Accordingly, the CESTAT set aside the duty demand and penalty.
The Assessee was represented by M.V.S. Prasad, while K. Sreenivasa Reddy appeared for the Revenue.
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