By TIOL News Service

MUMBAI, DEC 03, 2013: THE appellants are manufacturers of excisable goods falling under Chapters 51, 55 and 58 .On a visit to the appellant's factory, the CE officers discovered that the appellant had got racks and trolleys [SH 9403]fabricated within their own factory premises out of the raw materials supplied by the appellant and based on their own drawings and specifications. It was further found that the appellant had also supplied consumables such as welding rods, cutting gas etc., required for such fabrication work.

These facts were corroborated by the Dy. Manager (Commercial) of the appellant-firm and the representative of the fabricators in their statements recorded under Section 14 of the CEA, 1944. The appellant, however, did not file any classification or price declaration as envisaged under the CER, 1944 nor did they file any statutory returns in respect of the said activity.

Therefore, a SCN dated 08/03/2001 for recovery of Central Excise duty amounting to Rs.18,43,877/- was issued.

The appellant argued on the point of limitation and also submitted that since the trolleys and racks were consumed within the factory production, they are eligible for the benefit of duty exemption under Notification No. 67/95-CE dated 16/03/1995.

None of these submissions found favour with the lower authorities and, therefore, the appellant filed an appeal before the CESTAT in the year 2004.

The appellant submitted that they had engaged fabricators to undertake fabrication work within their factory and since these fabricators are independent entities, they are to be treated as manufacturers and hence duty demand on the appellants is not sustainable in law. Reliance is placed on a plethora of judgments in this regard. So also, the appellants are eligible for benefit of exemption under Notification No. 67/95-CE dated 16/03/1995 as the ‘Racks and trolleys' fall under Heading 9403 and are covered within the category of ‘inputs' for manufacture of final products falling under Chapters 51 and 58 .

The Revenue representative submitted that since the fabricators have supplied only labour and the goods were manufactured out of the raw materials/consumables provided by the appellant and as per the drawings and instructions of the appellant, therefore, the appellant is liable to pay excise duty on the racks and trolleys fabricated by the fabricators. Reliance is placed on the decision of the Tribunal in the case of MarutiUdyog Ltd. vs. Collector of Central Excise, New Delhi - (2002-TIOL-450-CESTAT-DEL-SB) wherein it was held that when fabrication work is undertaken by the job-worker out of raw materials supplied by a person in his factory, the fabricators are only hired labour and not independent manufacturers. In the matter of their claim for exemption under notification 67/95-CE, it is submitted that apart from the goods of chapter 51 & 58, the appellant also manufactures goods falling under chapter 55 and which stands in the excluded list of ‘final products' to the notification and hence the benefit is not available and the appellant is liable to pay excise duty.

The Bench while negating the claim of the appellant that they are not the manufacturers of the Racks and Trolleys distinguished the case laws relied upon by them and drew support from the Tribunal decision in MarutiUdyog Ltd. (supra) cited by the Revenue representative wherein it is held that the fabricators are only hired labour and not independent manufacturers. Inasmuch as the demand had been correctly raised against the appellant by the lower authority, the Bench observed.

However, in the matter of their claim for the benefit of Notification 67/95-CE, the Bench did not agree with the submission made by the Revenue representative by observing thus -

“5.4 …The racks and trolleys manufactured by the appellant is held to be classifiable under Heading 9403 of the Central Excise Tariff which is one of the inputs specified in the said Notification. It is also a fact that the appellants are manufacturing goods falling under Chapter 51, 55 and 58 of the Central Excise Tariff. In the said Notification only Chapter 55 is excluded but goods falling under Chapters 51 and 58 are notified final products. It is not the case of the Revenue that the racks and trolleys which the appellant got manufactured in the factory were used exclusively for the manufacture of products falling under Chapter 55 nor any evidence has been adduced by the Revenue in this regard. Therefore, if racks and trolleys were used in or in relation to the manufacture of goods falling under Chapter 51 and 58, the appellant would be eligible for the benefit of the aforesaid Notification. Therefore, denial of benefit of exemption under Notification 67/95-CE by the lower appellate authority is not sustainable in law.”

In fine, the order was set aside and the appeal was allowed.

(See 2013-TIOL-1796-CESTAT-MUM)