ORDER
V.K. Agrawal, Member (T)
1. In this appeal filed by M/s. Birla Corpn. Ltd. the issue involved is as to whether the machine parts were manufactured by them or by their job workers.
2. Shri Sanjay Grover, ld. Advocate, submitted that the appellants manufactured rough castings for various parties which were cleared on payment of duty to various job workers who then used to carry out further processes to convert the rough castings into machined castings as required by the Customs; that the adjudicating authority had demanded the duty on the machined castings from the appellants on the ground that after the machined castings were received back, they were giving heat treatment to the same and supplying to the customers after packing and also that their Engineers were supervising the entire work in the job workers’ premises. The ld. Advocate further submitted that the statements of the job workers clearly show that they were independent contractors and not hired labours of the Appellant; that one job worker M/s. Nitin Engineering’s Works has even the registered SSI unit; that each and every job worker has been long established, some since 1982 and 1990 etc.; that M/s. Universal Motors, one of the job workers, had handled only two jobs of machining for the appellants; that each and every job workers deposed that they used to do similar job work for the various customers; that none of the job worker was found to be dummy as each had their own workshop; a number of persons has been employed by them and each had requisite machinery such as lathe machinery, shaper machines and welding and drilling machines; that in respect of some of their customers namely M/s. Hindalco and Modi Cement the orders were placed directly on the job worker for collecting rough castings from the appellants and to send the same to the customers after machining directly; that quotations were given by job workers in advance for the rates of work to be done and these rates were intimated by the appellants to the Customers for approval and only after the approval, the castings were sent. The ld. Advocate also emphasized that in none of the statements recorded or records seized there is no-mention that after machining by the job workers, the parts were returned to the factory for heat treatment or packing; that the entire finding is thus misconceived, imaginary, assumptory and contrary to record; that further payments have been made directly by the customers to the job workers. He relied upon the decision in the case of Paramount Centrispun Castings Ltd. v. CCE, Nagpur – 1995 (77) E.L.T. 705 (Tribunal) wherein it was held that the subsequent machining carried out at the premises of the sub-contractors or job worker resulting in an activity amounting to further manufacture would have to be deemed as having been carried out by the job worker as an independent manufacturer and liable for payment of duty, if any, attached on goods, would be that of the job workers; that the ratio of this decision squarely applies to the facts of the present matter as in the said case the castings were machined by the sub contractor at their work place before they were delivered to the customers. The ld. Counsel pointed out that in the Paramount Centrispun case the appellants were collecting payments for the machining carried out by the sub contractors whereas; in their case the payment is made to the job worker by their customers directly. Reliance was also placed on the decision in the case of Northern Steel Pvt. Ltd. v. CCE, Ahmedabad – 2000 (115) E.L.T. 391 (Tribunal). Ld. Advocate finally submitted that as the period involved is from March, 1991 to March, 1993, neither the penalty under Section 11AC of the Central Excise Act can be imposed nor interest under Section 11AB can be demanded in view of the Supreme Court decision in the case of CCE v. Elgi Equipments Ltd., 2001 (128) E.L.T. 52 (S.C) wherein the Supreme Court has held that Section 11AC is prospective in operation and illegality committed prior to insertion of 11AC cannot be the subject matter of penalty under Section 11AC.
3. Opposing the prayer, Shri Ashok Kumar, ld. DR reiterated the finding as contained in the impugned order and drew our specific (attraction) to Para 6 of the impugned order wherein the Commissioner has given his finding to the effect that with an intent to evade the payment of duty, the Appellant adopted the modus operandi of sending rough castings to the job workers for further machining, had their intention been honest, they would have resorted to the provisions of Rule 57F under which they were required to send the rough castings to the job worker for machining and subsequent return.
4. We have considered the submissions of both the sides. It has not been disputed by the Revenue that the machining process were undertaken by the job worker whom the rough castings were sent after payment of appropriate duty. The appellants have been treated to be manufacturer of machined castings on the ground that the machining activities were done by the job workers under the overall supervision of the appellants and job workers are paid only the job charges which makes them hired labour of the appellants. The Commissioner has also given his finding that the orders placed on the appellants were for machined casting and from this conclusions has been drawn that they were getting the machined goods packed after further processing namely heat treatment for ultimate supply to the customers. A perusal of the statements of the job workers does not lead to the conclusion as reached by the adjudicating authority. No evidence has been brought on record to show that further processing of machined castings was done by the appellants. Similarly, no evidence is on record to show that the castings after having been machined were received back by the appellants and these were despatched to their customers from their factory. It is settled law that the raw material supplier is not the manufacturer and persons who brings into existence a new product are the manufacturer – Ujagar Prints v. Union of India, 1988 (38) E.L.T. 535 and CCE v. MM. Khambhatwala, 1996 (84) E.L.T. 161 (S.C.). Even if the goods are received back and despatched by the appellants, this will not make them the manufacturer unless and until it is proved, by bringing evidence on record that the machined castings were not fully manufactured at the job workers premises and further processing were being carried out by the appellants. In absence of any such material brought on record, Revenue has not succeeded in proving that the appellants were the manufacturer. Accordingly, the impugned order is set aside and the appeal is allowed.