Full Judgment
2. Shri Praveen Sharma learned Advocate, mentioned that the Appellant company manufacture electrical transformers and avail of credit of duty paid on inputs; that they also undertake repair work of old and used duty paid damaged transformers received from various sources; that they had imported TOBS which was sent to M/s. Apar Ltd. directly from place of import for processing on job work after furnishing an undertaking under Notification No. 214/86-C.E., dated 25-3-1986; that some of the quantity of the transformer oil processed out of TOBS and received back by the Appellants was used in the repair of old and damaged transformer for which separate account was maintained; that no MODVAT credit was also availed of by them in respect of such quantity of Transformer Oil; that the Revenue has confirmed the demand of duty on transformer oil used for repairing the duty paid transformers, adopted the sale price of transformer oil by the Appellants to various Electricity Boards and imposed equivalent amount of penalty on the Appellant-company and a penalty of Rs, 25,000/- on the Appellant No. 2, being Director of the Appellant-company.
3. The learned Advocate submitted that the real manufacturer of transformer oil is M/s. Apar Ltd. and the law is settled that the Central Excise duty on the goods manufactured on job work basis can be recovered from the job worker and not from the person who supplied the raw material. He relied upon the decision in the case of CCE & C, Surat v. Span Heat Transfer Equipment Mfrs. Pvt. Ltd., [2001 (135) E.L.T. 861 (T) = 2001 (46) RLT 845 (CEGAT)] wherein it has been held that the job worker who has manufactured the goods will pay duty upon the goods manufactured by it. He, further, submitted that as M/s. Apar Ltd. are manufacturer and the place of manufacture is Bombay, the officer having jurisdiction over the place of manufacture at Bombay has the jurisdiction to demand duty; that, therefore, the Additional Commissioner, Central Excise, Meerut does not have the jurisdiction to demand the duty; that thus the show cause notice and Order-in-Original are without jurisdiction. He also contended that the Revenue has wrongly adopted the sale price of the transformer oil by the Appellants as the assessable value; that the Appellants are only traders and as such the assessable value for the purpose of levying duty shall be value at the hands of the jobs worker in view of the judgment of the Supreme Court in the case of Ujagar Prints v. U.O.I., 1988 (38) E.L.T.535 (S.C.). Finally the learned Advocate submitted that the demand is time-barred as the show cause notice was issued on 26-6-2002 for demanding Central Excise duty for the period from December, 1997 to March, 2000 since the Revenue was aware of the practice of using transformer oil for the repair of the old and used transformers; that in February 2000, an amount of Rs. 58,147/- was debited on the advice of the Range Superintendent in the Modvat Credit Account in respect of the process loss of TOBS corresponding to the transformer oil used in repair. He gave a copy of their letter dated 22-3-2000 in which the payment particulars were intimated to the Range Superintendent. He also mentioned that no penalty is imposable on both the Appellants.
4. Countering the arguments, Shri S.C. Pushkarna, learned D.R., reiterated the findings as contained in the impugned Order and emphasized that duty of excise is payable by the Appellants only as they had given an undertaking under Notification No. 214/86-C.E. and they had never disclosed the fact that the transformer oil had been either cleared as such or used in the repair of old transformer without payment of duty; that their letter dated 22-3-2000 is almost after the period of demand and as such extended period of limitation for demanding duty is invocable.
5. We have considered the submissions of both the sides. It is an admitted fact that the Appellants have sent TOBS to their job worker for manufacture of transformer oil under Notification No. 214/86-C.E.The said Notification exempts specified goods manufactured in a factory as a job worker from the whole of the duty of excise leviable thereon subject to the conditions stipulated in the notification. One of the conditions is that the supplier of raw material gives an undertaking to the Assistant Commissioner having jurisdiction over the factory of the job worker that the said goods shall be (a) used in or in relation to the manufacture of the final products in his factory; or (b) removed on payment of duty for home consumption from his factory. In the present matter the Appellants have furnished an undertaking as stipulated in the Notification. Further, they have used the transformer oil for repair of the old and used transformers and as such have removed the transformer oil for home consumption instead of using the same in or in relation to the manufacture of the final products in their factory. The Notification permits them to remove the impugned goods for home consumption but "on payment of duty" which they have not done.
Accordingly duty is payable by them and has been rightly demanded from them. There is no force in their submission that the duty should have been demanded from job worker who has actually manufactured the goods since they are working under Notification No. 214/86-C.E. and are governed by the conditions mentioned in the Notification. Once they remove the goods for home consumption after receiving the same from job worker, the liability to pay duty of excise is on them. Consequently the jurisdiction to demand duty by issuing show cause notice is to be exercised by the Proper Officer who is having the jurisdiction over the factory of the Appellants. The decision in the case of Span Heat Transfer Equipment Mfrs. P. Ltd. is not applicable as the facts are entirely different. The issue involved therein was whether the goods cleared within the value of Rs. 30 lakhs for the purpose of Notification No. 1/93 would be entitled to the benefit of Notification No. 214/86.
6. The value adopted by the Revenue for the purpose of levying duty of excise is correct as the Appellants are using the transformer oil for repairing the old and used transformers and have to discharge duty liability under the Notification. It is not the case of the Appellants that they are getting the goods manufactured from the job workers who make the payment of duty. The decision in the case of Ujagar Prints is applicable when the job worker removes the goods manufactured by him on payment of duty. We also find no substance in their contention that demand of duty is hit by time limit specified in Section 11A(1) of the Central Excise Act. They have not controverted the findings in the impugned Order that they had never disclosed the fact that the transformer oil had been cleared as such without payment of duty or used in the repair of old transformer. The letter dated 22-3-2000 is almost at the end of the period which demand of duty has been confirmed for and as such does not attribute the knowledge of the facts to the Department during the relevant period. We thus hold that the extended period of limitation as provided in proviso to Section 11A(1) of the Central Excise Act is invocable and demand of duty is not time-barred.
7. As the Appellants had used the transformer oil without payment of duty, penalty is imposable on Appellant-company. It has been held by the Supreme Court in Zunjarrao Bhikaji Nagarkar v. Union of India, 1999 (112) E.L.T. 772 (S.C) that apart from the offending goods which are liable to confiscation the person concerned with that shall be liable to penalty under Rule 173Q of the Central Excise Rules. The Supreme Court did not accept the argument of the appellant ''that levy of penalty is discretionary." As per the Supreme Court "It is only the amount of penalty which is discretionary." The penalty, thus, need not be equivalent to the amount of duty not paid. We, therefore, reduce the penalty to Rs. 1 lakh imposed on the Appellant-company. No penalty is imposable on the Appellant No. 2 who is a director of the Appellant-company and no specific charge against him about his knowledge has been made. We, therefore, set aside the penalty imposed on Shri Adesh Singhal.
8. Thus the appeal filed by M/s. Kanohar Electricals Ltd. is partly allowed and Appeal No. E/3231/04-NB(A) filed by Shri Adesh Singhal is allowed.