By TIOL News Service

MUMBAI, MAR 28, 2017: THE appellant is engaged in the activity of converting steel raw material into semi-finished valves.

Detailing the activities carried out by the appellant, the Director further informed that the semi-finished valves were sent to the principal manufacturer of valve in Kanpur where the finished valves are produced.

Since the appellants were not registered under Central Excise, a show-cause notice demanding duty on this activity was issued and which was confirmed along with equivalent penalty and interest and the goods seized during the search were confiscated and offered for redemption on payment of fine of Rs.2.5 lakhs.

Having failed in their appeal before the Commissioner(A), the appellant is before the CESTAT.

This appeal was filed in the year 2005.

Noting that none had appeared for the appellant on the earlier two occasions, the appeal was taken up for decision in January this year.

From the appeal memorandum, the Bench observed that the appeal had been filed on the ground that the appellants were doing job-work for the principal manufacturer M/s Auto Parts Inc., Kanpur and the said unit was paying duty on the final products manufactured by them and thus, there was no revenue loss to the Government as the principal manufacturer was paying duty. It is also argued in the appeal that they are entitled to benefit of Notification No. 214/86 and there is no requirement of any procedural formality under the said notification.

The AR supported the order of the lower authorities.

After considering the rival submissions, the CESTAT inter alia observed –

+ The principal requirement for availing Notification No. 214/86 is that the principal manufacturer for whom a person is doing the job-work gives the undertaking to discharge the duty liability on the finished goods processed by the person, if the conditions of the notification are not met. In absence of this undertaking, the benefit of Notification … cannot be granted.

+ These undertakings are not merely procedural undertaking but substantive undertaking insofar as by virtue of this undertaking, the principal manufacturer takes the responsibility of duty liability in case it arose. Thus, in the instant case, the benefit of these notifications cannot be extended to the appellant as the said undertakings have not been given by the appellant.

+ The activity consists of first cutting the raw material into small slugs by removing surface defects followed by process of extrusion to bring it to required shape followed by hardening the same in oil followed by tampering and then cutting to the required length followed by straightening and grinding on a lathe. These processes result in a substantial advance stage of manufacture of valves. The argument that there is no activity of manufacture, has no merit, therefore, cannot be upheld.

Holding that there is no merit in the appeal filed by the appellant,the same was dismissed.

(See 2017-TIOL-1022-CESTAT-MUM)