H.R. Syiem, Member (T)

1. By his order No. 36(52) 82-Collr-30/82 dated 5-4-1982, the Collector of Central Excise, Calcutta called upon M/s. Techma Engineering Enterprise to file declaration in terms of notification No. H1/78-CE to the proper ' central excise officer.

The facts leading to this order are quite simple and may be related here. Officers of central excise searched the sales office and godowns of the appellants, M/s. Techma Engineering Enterprise, and seized books of accounts and goods, namely, bolts and nuts falling under item 52 of the Central Excise Tariff, because the factory was not able to produce evidence of payment of duty on the goods. The central excise said that the company supplied raw materials to different manufacturers who manufactured bolts and nuts on their behalf on payment of job charges, during the period of April, 1977 to November 1981 and during which a quantity of 96,154.8 kgs. bolts and nuts valued Rs. 531,576.80 were manufactured. The department called upon the company by a notice dated 2-2-1982 to show cause why they should not pay duty amounting to Rs. 66,869.35, why the seized goods weighing 44,618.50 kgs. seized from them should not be confiscated and why penalty should not be imposed on them under rule 1730.

2. The company argued that they could not be held to have manufactured the goods, bolts and nuts; they were manufactured by different independent manufacturers on payment of charges. The activity of the company in giving raw material to various manufacturing units and getting goods manufactured did not mean that they (company) had become a manufacturer of the bolts and nuts. The liability to pay central excise duty was always on the manufacturer of the goods and in this case the goods were manufactured by others out of the raw materials supplied by themselves. The duty liability will, therefore, rest on the person who actually carried out the manufacturing activity. M/s. Techma Engineering Enterprise received from the manufacturers fabricated goods, bolts and nuts, manufactured from the raw materials supplied by them. Accordingly, the liability to observe central excise formalities and to discharge duty liability devolves on the actual manufacturers who are also liable for any violation of the Act and the rules. The business undertaken by them does not make them a manufacturer. They are only dealers of the goods and not manufacturers and they are not subject to any central excise control and regulation.

3. The Collector, however, rejected the arguments of the company and said that they had supplied raw materials to different manufacturers and got goods manufactured out of the raw materials, on their behalf. He relied on the Supreme Court judgment in Shree Agency case and held hat the company were manufacturers of the said goods and liable to comply with the rules. He found, however, that the clearances of the said goods were within the exemption limit provided by notification No. 71/78-CE and, therefore, central excise duty was not chargeable on the bolts and nuts falling under item 52. But he held them liable to file proper declaration under the provisions of notification No. 111/78-CE.

4. The learned counsel for M/s. Techma Engineering said that the Collector was totally wrong, because his reliance on the Shree Agency case was misplaced. That case dealt with a matter where the outworkers were dummies. The show cause notice served on M/s. Techma Engineering did not make such an allegation. In his defence, he quoted MANU/MH/0157/1983 : 1984 (16) ELT 40, 1984 (16) ELT 415, 1985 (-21) ELT 187, MANU/CE/0245/1984 : 1985 (21) ELT 299, 1985(22) ELT 750 and Tribunal's order No. 49/86-B1. The counsel did submit that the Collector did not order the payment of duty, but he said that they should not be made to file declaration under notification 111/78-CE because they were not the manufacturers.

5. The learned counsel for the department quoted MANU/SC/0296/1986 : 1986 (25) ELT 609 to argue that