[Order per : P.G. Chacko, Member (J)]. - In the impugned order, the Commissioner demanded duty of over Rs. 1.30 crores from M/s. Sree Aravindh Steels Ltd. [M/s. Aravindh, for short] and M/s. Arudra Steel Rolling Mills (P) Ltd. [M/s. Arudra, for short] on bars and rods cleared from the factory during the period July 2002 to March 2004. He also imposed a penalty of over Rs. 34.00 lakhs on the first company and a separate penalty of Rs. 4.20 lakhs on the second. Penalties were also imposed on the Managing Director of M/s. Aravindh and the Managing Director of M/s. Arudra. The Commissioner’s order is under challenge in these appeals of M/s. Aravindh, M/s. Arudra and their Managing Directors.

2. It appears from the records that M/s. Aravindh and M/s. Arudra had entered into a ‘Memorandum of Understanding’ dated 25-4-2002, whereunder the factory manufacturing MS ingots, bars and rods was entrusted to M/s. Arudra for independent day-to-day operations with effect from the said date and accordingly M/s. Arudra undertook the manufacturing activity independently since 25-4-2002. The department, after investigations, reached a conclusion that the two companies shared the manufacturing activity and, accordingly, in two show-cause notices issued for the aforesaid period, duty was demanded from both of them. These demands were confirmed and penalties imposed by the Commissioner in the impugned order.

3. The factory [manufacturing plant + plant-operators] belonged to M/s. Aravindh. It was registered with the department in their name. Its licence under the Factories Act was held by them only. The Cenvat accounts in respect of capital goods and inputs was also maintained by M/s. Aravindh. The daily production account (RG-I) was also maintained by them. The goods manufactured in the factory were cleared under invoices issued by M/s. Aravindh and these goods were purchased by M/s. Arudra. Nevertheless, learned Commissioner found the manufacturing activity to be a ‘joint venture’ of both the companies and accordingly held them to be ‘jointly responsible for any legal liability’. Though, in one part of his order, learned Commissioner considered the relationship between M/s. Aravindh and M/s. Arudra to be that of a raw material supplier and job worker, he held each of them to be ‘manufacturer’ and ‘assessee’ in respect of the goods manufactured in the factory and cleared during the period of dispute and accordingly held them to be ‘jointly and severally liable’ for payment of duty. Having found the two companies to be joint manufacturers of the goods, the Commissioner held that there was no sale at arms length by M/s. Aravindh to M/s. Arudra and hence the value indicated in the relevant invoices did not satisfy the requirements of Section 4(1)(a) of the Central Excise Act. He determined the assessable value of the goods on the basis of the price charged by M/s. Arudra from their dealers. Accordingly, he quantified the duty and directed both the companies to pay the amount ‘jointly’ and ‘severally’. Earlier payment of Rs. 92.00 lakhs by M/s. Aravindh was appropriated towards this demand and both the companies were directed to pay the balance amount of duty of Rs. 38,41,887/- forthwith. Penalties also followed.

4. After hearing both sides and considering their submissions, we have seen an interesting issue cropping up: Whether duty could be demanded from two different persons in respect of the same goods. Relying on the Tribunal’s decision in Tecumseh Products India Ltd. v. Commissioner - (Tri.-Bang.), learned Counsel for M/s. Aravindh submitted that there could be no two manufacturers for the same excisable goods. In this connection, he also relied on the decision in Vadilal Embroidery Unit v. Commissioner - (Tri.-Mum.). Learned Consultant for M/s. Arudra supported the above submissions, relying on the following decisions:-

(i)      Gajanan Fabrics Distributors v. Collector - (S.C.)

(ii)    Collector v. Kooverji Devshi & Co. (P) Ltd. - (Tribunal)

(iii)   Orissa Womens Voluntary Services v. Collector - (Tribunal)

(iv)   Famous Textile v. Commissioner - (Tri.-Mumbai)

Both learned Counsel and learned Consultant referred to relevant provisions of law also. While the former referred to Notification No. 27/92-C.E. (N.T.) dated 9-10-1992, the latter referred to Sections 2(f), 3 and 6 of the Central Excise Act and Rule 4 of the Central Excise Rules, 2002.

5. Learned SDR also referred to some of these legal provisions and cited the following decisions in her bid to support the impugned order :-

(i)      Supreme Engineering Works v. Collector - (Tribunal), affirmed by the Supreme Court vide (S.C.)

(ii)    Commissioner v. Hindustan Zinc Ltd. - (S.C.)

(iii)   Final Order Nos. 1087-1094/2004, dated 7-10-2004 passed by this Bench in Appeal Nos. C/44, etc./2002/MAS [Sundaram Finance Ltd. & Ors. v. Commissioner]

6. After considering the submissions, we find that the question whether there could be two manufacturers in respect of the same goods is no longer res integra. There cannot be two manufacturers for the same product as held by the Tribunal in Orissa Womens Voluntary Services (supra), Tecumseh Products India (supra) and Vadilal Embroidery Unit (supra). It was held to the same effect by the Allahabad High Court in the case of Philips India Limited and Others v. Union of India and Others - (All.). In view of these judicial authorities we cannot accept the finding of the Commissioner that the subject goods had been manufactured jointly by M/s. Aravindh and M/s. Arudra and that the two companies are jointly and severally liable to pay duty thereon.

7. Learned Commissioner has relied on Section 13 of the General Clauses Act, 1897 to hold that “manufacturer” in Section 2(f) of the Central Excise Act and “assessee” in Section 4(3)(a) of the latter Act could be read in the plural also and therefore more than one person could be manufacturers/assessees in respect of the same goods. What Section 13 ibid says is that, unless there is anything repugnant in the subject or context, words in the singular shall include the plural and vice versa. We find that the above interpretation given by learned Commissioner is repugnant to the scheme of collection of duty under Section 11A of the Central Excise Act, which reads :

“11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded - (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the Rules made thereunder, a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect as if for the words one year, the words “five years” were substituted.”

Use of the words “the person chargeable with the duty” in the main part of sub-section (1) and of the words “by such person or his agent” is significant and the same clearly indicates that only one person can be charged with the duty on a given goods. By virtue of the definition of “person” under the General Clauses Act vide Section 3(42), such person may be an individual or a company or a body of individuals such as a partnership firm. It is trite law that charging provisions of a taxing statute should be strictly construed. On such construction of the relevant provisions of the Central Excise Act, one cannot say that there can be two or more manufacturers or assessees for the same goods.

8. The lower authority appears to have been carried away by the terms of the MoU between M/s. Aravindh and M/s. Arudra, unmindful of what the law says. Its endeavour should have been, in the first instance, to find out as to who among them could, on the facts of the case, be held to have manufactured the goods attracting the liability under Section 3 of the Central Excise Act. The Commissioner ought to have remembered that such liability fixed on a person by the statute cannot be affected by any contract.

9. The case law cited by learned SDR does not offer any answer to the question whether more than one person could be called upon to pay duty on the same excisable goods. In Supreme Engineering Works (supra), there were three units, one manufacturing bare rubber hoses, another manufacturing rubber hose assemblies and fittings and the third manufacturing rubber hose assemblies besides the business of electroplating. The question considered by the Tribunal was whether the values of clearances of the 3 units were to be clubbed for purposes of Notification No. 175/86-C.E. (SSI exemption). The Tribunal answered the question in the affirmative and upheld the order of the Collector of Central Excise demanding different amounts of duty from the three units. Any particular amount of duty was not demanded from each of the units in respect of the same goods. In the case of Hindustan Zinc Ltd. (supra), show-cause notice was issued to the said company and no show-cause notice was issued to their job worker. The Apex Court remanded to the Tribunal the question whether it was the company or their job worker who was liable to pay duty. The judgment of the Apex Court cannot be construed to mean that both the company and their job worker could be called upon to pay the duty. Indeed, it is the other way round. The Tribunal’s order in Sundaram Finance Ltd.’s case (supra) is also a remand order which is not an authority on the question which we have addressed in the present case.

10. In the result, the two show-cause notices and the Commissioner’s order passed in adjudication thereof are set aside and these appeals are allowed. The Department will be at liberty to issue fresh show-cause notice(s) to the appellants and proceed in accordance with law.

(Operative portion of the order was pronounced in open Court on 8-3-2007)