1. All the three appeals are being decided by a common order as they are all directed against the same impugned order of the Commissioner of Central Excise, Calcutta vide which he has confirmed the demand of duty of Rs. 1,18,19,996.00 against the main appellant' company, M/s.
Interscape and has also imposed a personal penalty of Rs. 12.00 lakhs upon them on the alleged ground that they had manufactured and cleared furniture items without payment of duty of Excise. Apart from that, the furniture items which have already been cleared to the premises of M/s.
ITC Ltd. and M/s. ABN AMRO Bank, have been confiscated with an option to them to get the same redeemed on payment of redemption fine.
2A(i). The main appellant company, M/s. Interscape are engaged in the manufacture of various items of furniture of a type used in offices, hotels, workshops etc. for which purposes, they entered into contracts with M/s. ITC Ltd. and M/s. ABN AMRO Bank. Vide show cause notice dated 6.6.1996 issued to the said appellant's company along with the other two appellants alleging evasion of duty by M/s. Interscape on the ground that the various furniture items manufactured and removed by them to the premises of M/s. ITC Ltd. and M/s. ABN AMRO Bank, were cleared without payment of duty during the periods--1992-93 to 1995-96.
It was alleged in the Notice that the said appellant's company, M/s.
Interscape did not obtain any Central Excise Registration or file the Classification List or Price List of the goods and did not follow other statutory procedural requirements of Central Excise law. Accordingly, the Notice proposed to confirm the demand of duty against M/s.
Interscape along with the proposed confiscation of the goods manufactured by them and imposition of penalties.
2A(ii). During the course of adjudication before the Commissioner, the appellant company, M/s. Interscape took a stand that they were not actually engaged in the manufacture of furniture, but passed out the work to independent contractors who should be considered as manufacturers. They also submitted that the items manufactured by them were not goods inasmuch as they were not movable and hence marketable.
Some of the goods were classifiable under Heading 44.10 instead of 94.02, as proposed in the Notice. They also submitted that the Management/Professional Fees charged by them from their clients cannot be included in the assessable value of the excisable goods. They also contended that the goods manufactured by them are nothing but handicrafts and as such, exempt from payment of duty by Notification No. 76/86 dated 10.2.1986. The demand was also contested to be barred by limitation.
2B. The other appellants also placed their arguments before the adjudicating authority against the proposed penal action under the provisions of Rule 209A or Rule 210 of the Central Excise Rules, 1944 in terms of the show cause notice dated 6.6.1996.
2C. On adjudication, the Commissioner passed the impugned order confirming demands of duties against the main appellant company, M/s.
Interscape and imposing penalty upon it, alongwith the confiscation of the goods. However, no penalties were imposed upon M/s. ITC Ltd. and M/s. ABN AMRO Bank. They were, however, aggrieved with that portion of the order vide which, the furniture allegedly cleared by M/s.
Interscape without payment of duty, has been confiscated with an option to redeem the same on payment of redemption fine.
3. Shri Rajeev Wagley, learned Chartered Accountant has appeared for the appellant company, M/s. Interscape and raised a number of pleas and contentions. We would be discussing the pleas raised by the appellants one by one in the preceding paragraphs: 3A. It is strongly contended by the learned CA for appellant company, M/s. Interscape that they cannot be held to be the manufacturer of the furniture items in question, inasmuch as the actual work was carried out by independent job workers who had their own labour force. He submitted that no doubt, the contract was entered into by the appellant company with its customers, but they had in turn given the work to sub-contractors and even if there is no written agreement between the appellant company and its sub-contractors, the appellant company cannot be held to be the manufacturer and their sub-contractors cannot be held to the hired labours.
3B. Shri N.C. Roychowdhury, learned Senior Advocate along with Shri Prantosh Mookherjee, learned Advocate for the Revenue, on the other hand, drew our attention to the findings of the adjudicating authority as regards the actual manufacturer of the furniture items in question, and submitted that it has been discussed in detail by the adjudicating authority that the appellant company worked through the hired labour, in which case it was the appellants who should be considered as the manufacturer and the hired labour cannot be considered as the manufacturer in terms of Section 2(f) of the Central Excise Act, 1944.
Shri Roychowdhury, learned Sr. Advocate also submitted that the case law relied upon by the learned Advocate for the appellant company, is distinguishable on facts and as such, is not applicable. There is nothing on record to show that the appellant's company has given further contract to the sub-contractors who actually carried out the work independently. As such, he prayed for rejecting the said plea of the appellants.
3C. We have considered the submissions made by both sides on this point. It is seen that the main contract was entered into by the appellants with their customers for the manufacture of furniture items.
The appellants have relied upon the bills raised by the job workers in support of their plea that it was the job worker to whom the contract was sub-contracted and it is they who should be considered as manufacturers. The said plea of the appellants has been rejected by the Commissioner by observing as follows: 4.2. I do not agree with the main noticee's contention regarding the manufacturing of furniture items at customers' sites by their appointed Contractors. As far as manufacturing of furniture items at factory or customers' premises on job work basis is concerned, it is the contract between the main noticee, M/s. Interscape and the customer to manufacture the furniture items as per the specifications quoted in the quotation wherein the details regarding the particulars of the furniture items, quantity, rate per piece and quantity of quoted items etc. are elaborated in a specific manner. I have seen the contracts between M/s. Interscape and their customers.
As an example, I will discuss the contracts dt. 28th July, 1992 and 1st April, 1993 between the main noticee of M/s. Interscape and M/s.
Park Hotel both of which is self-explanatory in this regard. M/s.
Interscape carried out the work following the terms and adhering to the conditions as laid down in these two contracts. In these two contracts, nowhere it is mentioned that the actual work will be carried out by the contractors appointed by M/s. Interscape. Even the payment of work contract is directly made by the customer to M/s. Interscape as per the contracted terms and conditions. I also find that M/s. Interscape, depending upon the terms of the order, manufacture furniture items with their own materials and also in some cases, with the materials supplied by their clients. In the later case, the furniture items have been manufactured by them on labour charge basis. It is, therefore, abundantly clear that the labour job manufacturing activity was done by M/s. Interscape and not by the appointed contractors. It is, therefore, clear that the work of furniture items is carried out by M/s. Interscape and hence, M/s. Interscape cannot be absolved from the liability of payment of Central Excise duty on the basis of the plea of the labour job done by his appointed contractors. On scrutiny of the records, it is seen that M/s. Interscape is directly concerned for the labour job done at site, and hence, it cannot be said that they merely acted as consultants. Further, in this regard, M/s. Interscape's own submission at Paragraph 101 of their reply dt. 30.7.1996 to the SCN is quite revealing which I quote below: 101: We are basically engaged in the carpentry work through hired labour with whom every one comes across in day-to-day life....
On going through the above reasoning of the learned adjudicating authority, we do not find any infirmity in the same. The appellants have not been able to produce any contract entered into by them with their so-called independent contractors. Completion of the job was the sole responsibility of the appellants and the responsibility for organising the movement of the materials was also of the appellants.
The wastage etc. was also accountable in the appellants' account. It was the appellant company who was to satisfy their clients, as regards the quality of the work. The loss or profit was to be earned by the appellant's the labour only did the work allotted to them, which was under the supervision and control of the appellants inasmuch as they were the one who were responsible for the design, quality of work, material used and the time frame, completion of the manufacture of furniture etc. In these circumstances, we do not find any reason to conclude that the appellant had further entered into a sub-contract and should not be considered as manufacturer. It is a case ivhere the appellants had engaged a number of workers including the carpenters etc. to manufacture various furniture items under their own supervision and control and it is they who are fully covered by the definition of manufacture as contained in Section 2(f) of the Central Excise Act, 1944.
3C(i). At this stage, we may also refer to the answer given by Shri Vinoo Naik, Proprietor of the appellant company, to Question No. 9, wherein he had stated--"...before and after receiving the work order in respect of all the above-mentioned work.... I had inspected the sites, where I was to undertake the manufacture of wooden furniture items (emphasis provided) and deliver to my clients after completing the jobs for their use. Accordingly, the raw materials such as wood, plywood, flush doors, laminate, veneer, fevicol, hardware etc. and required labour were brought by me to the respective sites and the manufacture activity of all the wooden furniture items were undertaken at those sites..." Shri Vinoo Naik had further stated-- "...All the raw materials required for the said purpose were provided by me from my own finance from local market. The work of manufacturing of wooden furniture item was undertaken at the respective sites as per design and specification given to me by the respective Architects of individual clients...." Further in answer to the said Question No. 9, Shri Naik revealed-- "...Regarding the engagement of labours by me at respective sites as above for manufacturing of wooden furniture items, the system adopted was the same as I do in my factory at Bombay as already stated in my reply to question No. 2. Supervision of the work in progress in respective site was done by me from time to time. In this context, I may like to state that out of all the wooden furniture items manufactured at sites, some are in loose condition such as tables, sofa, side-tables etc. and some are in fixed condition such as counters, reception centres, partition, panelling etc. In case of fixed furniture, I purchased wood & plywood from the market which are cut to give proper shape as per design, in addition, wood is panelled and then these are fixed to the wall & floor as per requirements with the wooden plugs and screw. I further state that, all the work done as above at various sites were under my control. As soon as the work is done the Architects of the individual clients inspected the same and after an okay by the said Architect, the wooden furniture items, so manufactured, were handed over to the clients for use.
A reading of the above statement given by Shri Naik, which has not been retracted by him at any stage thereafter, makes the position clear that it was the appellants who were actually the manufacturer engaged in the manufacture of the impugned goods with the hired labour.
3C(ii). Shri Wagley, learned Advocate's reliance on the various case laws of various judicial authorities, is not appropriate inasmuch as the said decisions are distinguishable from the facts of the present case. In the case of Collector of Central Excise, Baroda v. M.M.Khambhatwala Court held that the goods produced by household ladies in their own premises out of the raw materials supplied by the respondents who paid wages on the basis of number of pieces manufactured by them, have to be treated as manufactured by the ladies. Further, it is seen that in that case, there was no supervision over the manufacture of the goods by the respondents. The goods were being manufactured independently by the household ladies out of raw materials supplied by the respondents in that case. It was, in these circumstances, the Honourable Supreme Court has held that mere supply of raw materials cannot convert the raw material supplier into a manufacturer. Similarly, in the case of Seeba Industries v. CCE, Kanpur reported in 1997 (73) ECR 573 (T), the Tribunal held that the actual job-worker is the manufacturer and not the raw material supplier, whereas in the instant case, as admitted by Shri Naik, the raw material was also purchased by him out of the finance arranged by him. We find that the rest of the case laws relied upon by the learned Advocate, are also to the same effect that the raw material supplier is not the manufacturer. There can be no quarrel about the above proposition, provided the dealings between the appellants and the so-called sub-contractors were on principal to principal basis and the appellants were not engaged in supervision or control over the labour so employed by them and as such, each case has to be adjudged from the facts and circumstances present in that particular case. Similarly, we do not feel convinced with the appellants' argument that since the bills raised by them against the labour contractors, were all rate contracts which implies contracts on profit basis and not on wage basis, it is the sub-contractor who has to be considered as the manufacturer. Mere raising of the bills at rate contracts instead of on-daily-wage basis, by itself will not imply that it was the sub-contractor who was the manufacturer especially in view of the fact that it was, in fact, the appellants who were getting the work done from these contractors and their labour under their control and supervision, and it was the appellants who were responsible towards their client for the design, quality and time-frame of the work.: In view of the foregoing, we do not find any merits in the appellants' plea that it is not they who are the manufacturer, and reject the same.
4. Next argument raised by the appellant is that the furniture items have to be considered as handicrafts entitled to exemption Notification No. 76/86-CE dated 10.2.1986. However, learned Advocate has fairly conceded that the Tribunal's decision in the case of CCE, New Delhi v.Louis Shoppe was held to be handicrafts and thus exempt from duty, was reversed by the Honourable Supreme Court on an appeal filed by the Revenue as reported in 75 ELT 571. However, Shri Wagley, learned Advocate for the appellant company has tried to draw support from the observations made by the Honourable Supreme Court laying down certain criteria for satisfying the characteristics of handicrafts, but has not placed anything on record to show that the furniture in question was in fact, handicrafts. Inasmuch as the issue is already decided against the appellants on this score, we do not intend to dwell upon the same in detail and by following the ratio of the Honourable Supreme Court's decision, reject the appellants' plea.
5. The appellants have further argued that the goods in question were made as per the specific designs of their customers and as such, are not marketable. Accordingly, they have contended that the furniture which was made by them, cannot be held to be excisable in the absence of any marketability. We do not find any merits on the above submission of the appellants. Merely because the furniture Items in question have been manufactured by the appellants, as per the design of their customers, the same will not have the effect of transforming the furniture items into unmarketable items. It is the capability of being marketed, which is the criterion. Admittedly, the furniture items manufactured by the appellants, which may be according to the designs of a particular customer, are marketable and hence excisable.
6. The appellants have, further, contended that apart from the movable type of furniture, the appellant company has also executed work for their customers, which has resulted into immovable property, which came into existence only when the same was affixed to the wall or the floor--for example, wardrobe, bar-counter, salad-counter etc. As such, they have contended that since the said items were embedded to wall itself or to the floor, it became immovable by their very nature and no duty should be charged upon the same.
We find that the Commissioner has dealt with the contention of the appellants very elaborately and in para 4.4, has observed as under: 4.4. I cannot agree with M/s. Interscape's contention regarding their argument that the furniture items should not be treated as dutiable as they are not movable and marketable. In the instant case, the furniture items as manufactured by the noticee, M/s.
Interscape are very well movable and marketable as will be evident from the fact that the relevant purchase orders/agreements categorised the items ordered for as 'Fixed Furnitures' and 'Loose Furnitures'. There can be no doubt or dispute that loose furnitures are movable and marketable as such. With regard to 'Fixed Furnitures', I have examined the purchase order dated April 1, 1993 (Project 8) placed by M/s. Park Hotel on M/s. Interscape, a copy of which was submitted before me during the present proceedings. The said copy bears a handwritten endorsement against Item No. 4 under the broad head, Fixed Furniture which was possibly written in course of execution of the work. It reads "completed To be Fixed". This clearly indicates that the so-called "Fixed Furnitures" were first 'completed' and then 'fixed', i.e. those came into existence before being fixed. Thus, such furnitures were also movable contrary to the noticee's claim. Again, that such furnitures were actually sold is matter of records and, therefore, the noticee's claim that those were not marketable falls through. The photographs submitted by them during these proceedings, when examined in the aforesaid perspective, also strengthens the view that the impugned goods were both movable and marketable. These are of such nature which are to be completed before fixing. It is not of a type of in situ construction. Hence the question of treating these furniture items as non-excisable articles, as per the main noticee, M/s.
Interscape's claim, does not arise. Merely because of the fact that the excisable goods or its certain parts are fixed with bolts and nuts or otherwise to the ground or wall would not convert the movable article to immovable.
A reading of the above paragraph shows that the so-called Fixed Furniture was first completed by the appellants and then, subsequently fixed either to wall or on the floor. The adjudicating authority has seen the photographs placed by the appellants before him, and has given the finding that the bar-counter, salad etc. were first completely manufactured and then fixed to the floor. The appellants have also not shown us anything contrary to what has been recorded by the adjudicating authority. Similarly, the appellants have also not placed on record anything to show that the almi-rahs came into existence stepbystep along with their fixation on the wall and that they were not first completely manufactured and then fixed in the place meant for the same. As such, in the absence of any evidence to the contrary, we agree with the findings arrived at by the adjudicating authority.
7. The next contention raised by the appellant is that the entire demand is barred by limitation. For the above contention, the appellants, apart from relying upon the various decisions and judgements of the Honourable Tribunal, has also referred to the Supreme Court's decision in the case of Collector of Central Excise, New Delhi v. Louise Shoppe order holding the furniture as handicrafts was reversed, and submitted that till the decision was reversed, there was an understanding in the industry that the furniture has to be treated as handicrafts and the same was exempted. In these circumstances, he prayed that there can be no question of suppression with an intent to evade payment of duty. We find that the effect of the above decision has not been considered by the adjudicating authority and no detailed findings are available on record. Accordingly, we consider it fit to remand the matter to the Commissioner for deciding afresh on the point of limitation.
8. The appellants have also pleaded that in case the duty is confirmed against them, the price charged by them from their customers, should be treated as cum-duty price and the benefit of deduction of duty now held to be payable by them, should be allowed, in view of the Larger Bench decision in the case of V.C. Chakra Buyers v. CCE .
We agree with the above submission and direct the adjudicating authority to apply the ratio of the above decision in case the duty is found to be payable by the appellants in de novo proceedings.
Similarly, in de novo proceedings, he would consider the appellants' plea of levy of interest under the provisions of Section 11AB, in the light of the case laws cited by the appellants. With these observations, we set aside the impugned order and remand the matter to the Commissioner for fresh decision on the point of limitation.
9. We also direct the adjudicating authority to consider the appellants' plea that it is the entire value of contract inclusive of the civil work and the other non-excisable work, which has been taken into consideration for quantification of demand of duty against them and not only the furniture items manufactured by them.
10. Inasmuch as the appeal filed by M/s. Interscape has been remanded on the point of limitation, the appeals filed by the other two appellants are also remanded for fresh decision by the Commissioner. It may, however, be noted that the grievance of the other two appellants, as duly represented by Dr. Samir Chakraborty and Shri Oripal Kundalia, both Advocates, is that the work contract given by them was not only in respect of furniture items, but included other works also like POP work, civil work, ceiling work etc. etc. The Commissioner has not gone into all these facts and has imposed a very high redemption fine. We direct the adjudicating authority to look into the said grievances of the appellants, and to decide accordingly in de novo proceedings.
As a result, all the three appeals are allowed by way of remand, on the point of limitation in respect of the first appellant company, and in respect of redemption fine for the other two appellants.