HINDUSTAN ZINC LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) APPEAL No. E/75/2006 -EX(DB) is against the Order -in -Original dated 29 -9 -2005 passed by the Commissioner in respect of 20 show cause notices by which he has confirmed duty demands totalling of Rs. 2,66,03,536/ - against the appellant for the period from 1 -5 -1988 to 28 -2 -1995 and besides this, has imposed penalty of Rs. 25 lakhs under Rule 173Q(1) of the Central Excise Rules, 1944. Appeal No. E/94/2006 -EX is against the Order -in -Original, dated 29 -9 -1995 passed by the Commissioner in respect of show cause notice, dated 6 -8 -1988 by which he has confirmed the duty demand of Rs. 33,30,432/ - against the appellant for the period 1 -3 -1986 to 30 -4 -1988. Appeal No. E/2648 and 2649/2007 -EX are against the order -in -appeal No. 448 -449(HKJ) C.E./JPR -II, dated 16 -7 -2007 passed by the Commissioner of Central Excise (Appeals) by which he has upheld the duty demands of Rs. 6,89,868/ - for the period from 1 -7 -1990 to 30 -11 -1990 and duty demand of Rs. 9,24,630/ - for the period from March, 1993 to June, 1993 and May, 1994 with penalty of Rs. 2 lakh on the appellant. The facts leading to filing of these appeals are, in brief, as under: -

(2.) SHRI B.L. Narsimhan, Advocate, ld. Counsel for the appellant, pleaded that the appellant's contracts with their job workers were on principal to principal basis, that the job workers had brought their own machinery and equipments and had employed their own labourers, that just because the job workers had fabricated electrodes out of the raw materials supplied by the appellant and as per designs given by the appellant and under their supervision, the job workers cannot be treated as hired labour of the appellant, that the findings of the Commissioner and the Commissioner (Appeals) that the job workers engaged by the appellant were hired labourers is incorrect, that identical contracts had been entered into by the appellant's unit at Visakhapattanam with some job workers for fabrication of lead and zinc electrodes on job work basis and in respect of those contracts, the Chennai Bench of the Tribunal vide judgment reported in : 2005 (188) E.L.T. 331 (Tri. -Ch.), after going through the contracts, held that since the job workers employed their own capital goods and their own work force to manufacture the electrodes, just because the job work was done in the premises of the Hindustan Zinc Ltd. out of the raw materials supplied by them, it cannot be inferred that the job workers were hired labourers, that the ratio of this judgment of the Tribunal is squarely applicable to the facts of this case, that in this judgment, the Chennai Bench of the Tribunal, after observing that only the one who merely provides labour and collects his wages for the same would be hired labour, has held that the contract between the Visakhapattanam Unit of the Hindustan Zinc Ltd. and their job workers, clearly spelt out a principal to principal relation, that the ratio of this judgment is squarely application to the facts of this case, and that in view of the above submissions, the impugned order is not correct.

(3.) WE have considered the submissions from both the sides and perused the records. The appellant had got the zinc and lead electrodes fabricated through job workers in their own premises out of the raw materials and design supplied by them. Though the job worker had brought their own machinery and appliances and their own workers, the job had been done in the appellant's premises and under the appellant's supervision. It is seen that in terms of the appellant's contract with their job workers, the job workers were to pay the minimum wages to the skilled and unskilled labourers as per the Government's orders and were to comply with the Government's regulations in this regard. In case of injury to any worker in any accident, it is the job workers, who would be liable to pay compensation to the worker and if any compensation is paid by the appellant, the same would be recoverable from the job workers. In terms of the conditions of the contract, the job workers were to ensure the safety of the labour employed by them as provided under the Factories Act. The Commissioner on the basis of the above clauses of the Contract and also the provision in the contract, requiring the job workers to work round the clock, has inferred that the job workers are merely hired labourers of the appellant. In our view, this conclusion of the Commissioner is totally wrong, as from the above clauses of the contract, it cannot be inferred that the job workers were merely hired labourers of the appellant. Moreover, it is not disputed by the department, that in respect of the identical contracts of the appellant's Visakhapattanam unit with its job workers for identical work, the Chennai Bench of the Tribunal vide judgment reported in : 2005 (188) E.L.T. 331 has held that the job workers' role was much more than mere receiving wages for labour involved in manufacture of Lead and Aluminium Electrodes and, therefore, the job workers cannot be said to be mere hired labourers. Applying the ratio of the Chennai Bench judgment to the facts of this case, we hold that it is the job workers who have to be treated as the manufacturers and, therefore, the duty on Aluminium and lead electrodes got manufactured by them on job work basis cannot be demanded from the appellant by treating them as manufacturers. The impugned orders are set aside. The appeals are allowed.