HINDUSTAN ZINC LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE appellants are engaged in the manufacture of zinc (Chapter 79 of the CETA Schedule), which is manufactured by an electrolytic process using aluminium cathodes and lead anodes. By show cause notice dated 16 -6 -94 issued to them, the department raised a demand of duty on lead anodes manufactured in their factory through job workers and captively used during the period June, 1989 to February, 1994. This notice, inter alia, alleged that the job workers were only hired labour and the appellants were the real manufacturers of the lead anodes. The demand of duty was contested by the party on numerous grounds. The adjudicating authority passed Order -in -Original dated 31 -3 -1997 confirming the demand against the assessee and imposing a penalty on them. Against this order of the Commissioner, the appellants filed the captioned appeal and this Tribunal allowed it as per Final Order dated 10 -5 -99 holding that no manufacture was involved in the process of conversion of lead ingots into anodes. The department took the Tribunal's order in appeal to the Hon'ble Supreme Court . Three issues arose before the Court, (a) whether the above process amounted to manufacture and whether the product (lead anode) was marketable, (b) Whether M/s. Hindustan Zinc Ltd. were the manufacturers of the product, (c) Whether the extended period of limitation under Section 11A(1) of the Central Excise Act was liable to be invoked for demanding duty in the facts of the case. The issues (a) and (c) were answered in the affirmative and issue (b) was remanded to the Tribunal. Hence the matter before us.

(2.) HEARD both sides. Ld. Counsel for the appellants submitted that the subject process was carried out by the job workers by employing their own capital goods and man power in terms of the work orders placed on them. The profit and loss in the entire activity was of the job workers. It was the job workers' liability to obtain the necessary certificate from the Andhra Pradesh Government for Sale tax purposes and to pay the tax. The relationship between the appellants and their job workers was on a principal to principal basis and was not like that of employer and employee or master and servant. In the circumstances, according to ld. Counsel, it was not open to the department to treat the job workers merely as 'hired labour' as understood from the Supreme Court's judgment in CCE v. MM. Khambhatwala . In this connection, Id. Counsel also relied on the Tribunal's decision in Motor Industries Company Ltd. v. CCE, 1999 (111) E.L.T. 163] affirmed by the Apex Court vide 1999 (111) E.L.T. A195. Ld. Counsel further submitted that the appellants could not be said to have manufactured the product by mere reason of the fact that the manufacture took place in their premises and it was out of the raw materials supplied by them. In this connection, reliance was placed on the following decisions of the Tribunal :

(3.) LD . SDR pointed out that the appellants had admittedly paid duty on the same item manufactured in the same manner in their sister unit at Debari. It was further submitted that their Vizag Unit (appellant -unit) had displayed lead anodes also in their classification lists along with a claim for exemption under Notification No. 217/86 (whereunder goods manufactured and captively consumed in the manufacture of final product which was chargeable to duty of Excise was exempt from payment of duty). For these reasons, according to ld. SDR, the appellants were estopped from pleading that they had not manufactured lead anodes during the period of dispute. With reference to the terms of the Contract (Work order), ld. SDR argued that the appellants were to be considered to have manufactured the subject goods inasmuch as (i) they had supplied all the raw materials for the purpose, (ii) they had supplied the electricity required for the purpose, (iii) the job work was carried out in their own factory and under their own supervision, and (iv) the ownership, control and custody of the goods were always with them. According to her, on these facts, the case law cited by ld.Counsel could be distinguished.