Job Worker Liable To Pay Excise Duty For Unloading Chemicals From Tankers, Repacking and Labelling In Small Drums: CESTAT

The two-member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that irrespective of the ownership of goods, whoever undertakes the manufacturing activity has to pay the duty.

The appellant submitted that the activity carried out by the job worker was unloading of chemicals of Chapter 29 from the tanker and converting them into small drums. On the drums, the label was pasted and it was cleared by issuing the invoice of the registered dealer. The activity is trading and cannot be considered manufacturing in order to attract excise duty.There are judgments wherein it is held that the transferring of chemicals from tankers to small drums cannot be said to be a conversion from bulk pack to retail pack. As regard the labeling/relabeling, though the label was pasted, that does not render the product marketable. The product was already marketable. Therefore, merely putting a label on the tanker cannot be said to have made the activity for marketing of the product. Therefore, since the activity in question does not amount to manufacturing but is only a trading activity, no excise duty is payable on such activity.

The appellant contended that if at all the activity is treated as manufacturing, even then, the appellant is not liable to pay the excise duty on the ground that the entire activity was undertaken by the job worker. Therefore, the job worker becomes the manufacturer for whom the duty demand cannot be made on the appellant.

The issue raised was whether the activity of unloading of chemicals from the tankers and re-packing and labelling in small drums by the job workers amounts to manufacture and is liable to excise duty. If all the activities amount to manufacturing, whether the appellant, being a principal supplier, is liable to pay duty or the job worker is liable to pay the demand.

The CESTAT noted that the entire activity of transferring chemicals from tanker to small drums and labelling was performed by the appellant's job worker. In this case, if all the activity amounts to manufacturing, the job worker is a manufacturer in the eyes of the Central Excise Act, 1944, to hold a person as a manufacturer. The ownership of goods is not relevant. Therefore, even though the goods belong to the appellant, the entire activities were carried out by the job worker.

The tribunal held that the appellant, in any case, is not liable to pay the excise duty.

Case Title: Dow Chemical International Pvt Ltd Versus C.C.E.-Kutch (gandhidham)

Citation: Excise Appeal No.11228 of 2019

Dated: 12.08.2022

Counsel For Appellant: Advocate Saurabh Dixit

Counsel For Respondent: Assistant Commissioner (AR) Dinesh Prithiani

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