M/S V.D. Engeneering vs. Commissioner

Held

The Court held that the appellant's contention of performing job work was unfounded. This was based on a crucial note appended to the contract/job work order. The note explicitly stated that the contract would not be treated as job work/work contract, and that excise duty would be recovered/adjusted based on actual use and consumption. It further clarified that the activity was entirely a manufacturing activity and not a work contract, thus negating the appellant's claim. Consequently, the CESTAT's finding that the appellant is a manufacturer under Section 2(f)(iii) of the Central Excise Act, 1944, was upheld. The issue regarding the marketability of the product was implicitly decided against the appellant as the contract itself defined the activity as manufacturing. The appeal was dismissed.

Facts

The appellant, M/s V.D. Engineering, engaged in fabricating underground storage tanks for HPCL and IOC, filed an appeal against orders from the CESTAT, Commissioner (Appeals), and Superintendent (Technical). The GST department issued multiple show cause notices demanding excise duty totaling Rs. 1,05,63,152/-, Rs. 19,15,279/-, and Rs. 5,12,071/-. The appellant contended that since HPCL and IOC supplied the raw materials (steel plates and other inputs), its role was merely job work/fabrication and it should not be treated as a manufacturer. This contention was rejected by all lower authorities, leading to the present appeal.

Key Issues

1. Whether the CESTAT correctly held the appellant as a manufacturer under Section 2(f)(iii) of the Central Excise Act, 1944, and if the appellant's job work/fabrication under specific contract terms constitutes a manufacturing process? 2. Whether a product that is not marketable or salable to a consumer in the open market, as defined under Section 2(f)(iii) of the Central Excise Act, 1944, can be treated as a manufactured product of the appellant, especially when the raw materials were supplied by IOC/HPCL under special contract terms? Petitioner's Arguments: The appellant argued that its activities constituted job work/fabrication, not manufacturing, as raw materials were supplied by HPCL/IOC. They relied on the nature of the contract and the fact that the product was not directly marketable to consumers. Revenue's Arguments: The revenue's contentions are not explicitly detailed in the judgment, but their stance, as upheld by the lower authorities and the court, is that the appellant is a manufacturer and liable for excise duty. The judgment highlights a specific note in the contract that the revenue likely relied upon.