ORDER
J.H. Joglekar, Member (T)
1. This application was argued by Shri Gautam Doshi the ld. Chartered Accountant for the appellants and Shri Deepak Kumar the ld. SDR for the Revenue.
2. The applicants secured a licence for manufacture of automobile parts. Applicants were receiving Seamless Tubes on payment of duty from their parent factory at Ahmednagar to their factory at Pune. These tubes were sent by them to other job workers under Rule 57F(4) of the Central Excise Rules, 1944. After manufacturing the parts and after being packed these finished goods were brought back to the applicants factory from the job worker premises and were cleared on payment of duty, after taking benefit of the credit of the duty paid on the inputs. The show cause notice alleged that the applicants had no manufacturing facility at all and that they could not be termed as manufactures. As such the benefit was wrongly taken of the modvat facility. It was claimed that the every step that was prescribed for manufacturer had been taken by the applicants, that all the proper procedures were followed, and therefore, the claim made in the show cause notice was wrong. The Commissioner in his finding observed that this procedure was adopted by the applicants to get work done from the job workers, who were themselves not entitled to claim Modvat facility, on account of their working under the Notification offering benefits to small scale units. He observed that the applicants were in fact traders and that the declaration made by them being manufacturers was false. He disallowed Modvat credit amounting to Rs. 43,38,731/-, imposed a penalty of Rs. 25 lakhs confiscated the building but permitted its redemption on payment of fine of Rs. 5.00 lakhs. The assessees have filed an appeal and the present application against tins order.
3. Shri Gautam Doshi submits that in a later order dated 16-7-1999 the same Commissioner had held, for an earlier period, that the demand was not sustainable. We observe that the fact that the demand was not confirmed on limitation, does not go to the assessees help on points on merit. We have considered the stand taken by the ld. Commissioner. The issue here is whether the manufacturer is entitled to that phrase and term even in the absence of any physical manufacture being under taking on his own account. The Central Excise Act and the Rules provide for assistance to a manufacturer by other manufacturers by enabling goods to be sent out for conducting of certain operations to other manufacturer. When this system is extended to the ultimate limits, the situation may arise and that is where the physical activity of manufacture is performed entirely by the other manufacturers. In this situation whether the manufacturer who does not physically deal with the goods can be called to be a manufacturer would have to be examined. However, it is agreed that in the present case the duty was paid on the inputs and that the duty was paid on the final products. Therefore prima facie their does not appear to be any loss to revenue.
4. At this stage we have taken into account the submission of Shri Deepak Kumar that where the goods are manufactured by job workers who are not entitled to the modvat scheme there is loss of revenue. Although this argument may be correct in a limited area, in the end analysis there may not be a loss.
5. We therefore grant waiver of the pre-condition to deposit the credit denied and the penalty imposed and stay its recovery during the pendency of the appeals. We permit the assessees to continue to use the building on their filing an undertaking with the Jurisdictional Commissioner to the effect that during the pendency of this appeal they shall not sell, lease or otherwise dispose of the building or any part thereof without seeing the prior permission of the said Commissioner.