ORDER
P.K. Desai, Member (J)
1. This appeal is directed against the Order-in-Original Collr. No. 75/92, dated 15-5-1993 of the Collector of Central Excise, Aurangabad confirming the demand for Rs. 59,703/- against the Appellants and imposing personal penalty of Rs. 5,000/- on them. Penalty of Rs. 2000/- is also imposed on M/s. Shrinivas Industries but they do not appear to have filed any appeal.
2. It was noticed by the Department that during 1987-88, the Appellants had fabricated trusses, purlins etc. and had used them in erection of their factory sheds, but had not paid any Excise duty on the items fabricated by them. Enquiry was made and vide letter dated 7-5-1991, the Appellants stated that they had got the said items fabricated on contract basis from job-workers M/s. Shrinivas Industries. The Appellants however, admitted that they had supplied the necessary material to the said job-workers and had removed the same from the factory of job-workers in their own Trucks and had paid job charges to M/s. Shrinivas Industries, but there was no written contract. Mr. C.H. Gangadhar, Proprietor of M/s. Shrinivas Industries also in his statement accepted the said position and admitted to have neither been registered as SSI Unit nor to have paid any Excise duty.
3. Show Cause Notice was therefore issued where the Appellants pleaded to have been not the manufacturers and also pleaded that the activity undertaken on the open market purchases did not amount to manufacture and also pleaded M/s. Shrinivas Industries to be their job-workers. The learned Adjudicating Authority however came to the conclusion that M/s. Shrinivas Industries were mere hired labourers of the appellants and the activity undertaken tantamount to manufacture and hence confirmed the demand against the appellant. Penalty on the appellants was imposed vide Rule 173Q of the Central Excise Rules, 1944 whereas penalty of Rs. 2,000/- was imposed on M/s. Shrinivas Industries under Rule 209A of the Rules.
4. Mr. P.S. Kalve, the learned Consultant has submitted that the adjudicating authority has erred in construing the role of M/s. Shrinivas Industries as that of the hired labourers and has referred to Tribunal decision in Techma Engineering Enterprise v. Collector of Central Excise -1987 (27) E.L.T. 460 (Tribunal). Pleading that the activity undertaken by M/s. Shrinivas Industries also would not tantamount to manufacture, the learned Consultant has referred to another decision of the Tribunal in Standard Industrial Engineering Co. v. Collector of Central Excise -1988 (38) E.L.T. 196 (Tribunal), In his submission, thus on both the counts, the order of the authority below deserves to be set aside.
5. Mr. Krishnamurthy has however pleaded that there is no dispute that the material was supplied by the appellants and M/s. Shrinivas Industries only charged their labour charges and as such they would fall within the category of hired labourers. He has further pleaded that by processing, different product, known distinctly in the market come into existence and hence the said item have to be categorised as manufactured attracting duty liability.
6. Considering submissions, there is no challenge to the factual position to the extent that raw material was being purchased in the name of the appellants and was being sent directly to M/s. Shrinivas Industries and M/s. Shrinivas Industries were being paid only the job-charges and even transport of such material after completion of processing there, was being done in the trucks of the appellants. It is also not under challenge that no written contract was executed for this purpose between the appellants and M/s. Shrinivas Industries.
7. The first point to be considered is whether M/s. Shrinivas Industries could fall within the category of hired labourer. The important criteria to ascertain the role of a party as hired labourers, is to examine whether there exists a relationship of master and servant between them, which implies that the labourer is under control and supervision of the party who hires them. Same is the view held by the Tribunal in Re : Techma Engineering Enterprise (supra) referred to by the Ld. Consultant. Several other decisions also confirm the same view.
8. In the instant case, M/s. Shrinivas Industries had their factory at Nizamabad, where they received the material on behalf of the appellants, did the processing thereon as per the design/instructions received from the appellants and received specified remuneration. They are not proved to have been working under the control and supervision of the Appellant. The essential element of being branded as hired labourers is thus missing and the conclusion drawn by the authority below therefore does not appear to be flowing from any evidence on record. Merely because, the raw material is supplied by the appellant, the same would not make M/s. Shrinivas Industries as hired labourers particularly when they had their own factory/machinery on which they undertook the processing work. Absence of any written contract also would not alter the position.
9. The plea that M/s. Shrinivas Industries were the job-workers therefore has to be accepted. In the result, the said finding of the authority below cannot be sustained and has to be set aside. Consequently the duty demand raised on the Appellants branding them as the manufacturers also cannot be sustained and has to be set aside.
10. Plea is also taken that even otherwise, the process would not tantamount to ‘manufacture’. The allegation is that the appellants bought A.C. Sheets, M.S. Plates, Pipes and joints and M.S. Garder and got the fabrication. What M/s. Shrinivas Industries have manufactured is purlins, trusses etc. from the material and as has been held by the Tribunal in Standard Industrial Engineering Co. (supra) the same does not amount to manufacturing activity attracting any Excise duty.
11. Thus on that count also the demand cannot be sustained.
12. Under the circumstances the order passed by the authority below cannot be sustained and both the demand raised and penalty imposed have to be set aside.
13. The order of the authority below is therefore set aside and appeal is allowed. Consequential relief, if any to follow.