Custom, Excise & Service Tax Tribunal
Nhava Sheva, Mumbai Zone - Ii vs Nitco Tiles Limited on 9 February, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO: C/1153/2008 [Arising out of Order-in-Appeal No: 243 (GR.III)/2008 (JNCH) dated 01/08/2008 passed by the Commissioner of Customs (Appeals), Mumbai Zone - II.] For approval and signature: Hon'ble Shri P.G. Chacko, Member (Judicial) and Hon'ble Shri Sahab Singh, Member (Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes Commissioner of Customs (Import) Nhava Sheva, Mumbai Zone - II ...Appellant Vs Nitco Tiles Limited ...Respondent
Appearance:
Shri K.M. Mondal, Special Consultant for the appellant Shri T.Viswanathan, Advocate for the respondent CORAM:
Hon'ble Shri P.G. Chacko, Member (Judicial) and Hon'ble Shri Sahab Singh, Member (Technical) Date of hearing: 09/02/2011 Date of decision: 09/02/2011 ORDER NO:
Per: P.G. Chacko:
In this appeal filed by the Revenue the short question arising for consideration is whether the goods (polished, vitrified porcelain tiles) imported by the respondent from China and covered by Bill of Entry No. 861871 dated 06/06/2008 are liable to be assessed to countervailing duty on the basis of MRP (with abatement of 43% from the MRP) in terms of Section 4A of the Central Excise Act as claimed by the appellant or otherwise in terms of Section 4 of the said Act as claimed by the respondent. In the said Bill of Entry, the respondent described the goods correctly as 'Polished, Vitrified and Porcelain Tiles' and also indicated the same to be RSP item and also declared inter alia that "wherever the RSP is applicable, same has been truthfully declared". However, in a letter dated 09/06/2008 addressed to the Dy. Commissioner of Customs (Gr. III) of the Custom House, the respondent stated that MRP-based assessment was not required for the goods and also that the payment of duty assessed on the basis of MRP was to be treated as payment under protest. Further, in a letter dated 06/06/2008 addressed to the Assistant Commissioner of Customs (Gr. III), the respondent submitted that the goods were meant for supply to industrial and institutional consumers and that the provisions of Chapter II of The Standards of Weights and Measures (Packaged Commodities) Rules, 1977 [SWM (PC) Rules] were not applicable to the packaged commodity imported by them for sale to industrial and institutional consumers. In this letter, the respondent also relied on CBEC circular No. 625/16/2002-CX dated 28/02/2002 and the Supreme Court's judgment in Jayanti Food Processing (P) Ltd. vs. Commissioner of Central Excise, Rajasthan 2007 (215) ELT 327 (SC). They submitted that The Standards of Weights and Measures Act or the Rules framed thereunder did not require them to affix MRP on the subject goods and hence the question of paying CVD with reference to MRP did not arise. The Assistant Commissioner of Customs (assessing authority) after hearing the respondent ordered that the assessment of Bill of Entry for levy of CVD be based on MRP under Section 4A of the Central Excise Act in terms of Notification No. 14/2008-C.E.(N.T.) dated 01/03/2008. Before the assessing authority, there was no dispute with regard to classification of the goods under CTH 6907 or that the item was not notified under Section 4A of the Central Excise Act for MRP-based assessment. The question agitated before the said authority was whether the respondent was required to declare MRP on the goods under the provisions of The Standards of Weights and Measures Act and the Rules framed thereunder. The assessing authority held that the tiles were meant for sale in the retail market and, therefore, the respondent was required to mention its retail sale price (RSP) on the packages. It was held that the importer was basically a trader / wholesale-dealer selling the tiles by way of trading. The Assistant Commissioner referred to the relevant factors for MRP-based assessment as laid down by the apex court in the case of Jayanti Food Processing (P) Ltd. and observed that the nature of sale was not relevant to such assessment. It was found that the goods imported by the respondent were not exempted by Rule 34 of the SWM (PC) Rules and hence the assessment was required to be made under Section 4A. On this basis, the assessing authority ordered for MRP-based assessment of the goods to CVD under Section 4A of the Central Excise Act.
2. In an appeal filed by the assessee against the above decision of the Assistant Commissioner, the learned Commissioner (Appeals) recorded contra findings. He held thus:
"It is not disputed that the Appellant have imported the goods meant for sale to the institutional / industrial consumers who use such tiles for construction purposes. They do not sell the same further in the market. The tiles as imported by the Appellant and meant for sale to industrial or institutional consumer cannot be treated as sale in retail since the sale or distribution is not through any retail sales agencies or other instrumentalities, but is directly made by the Appellant. For this reason, there is no requirement of affixing MRP on the imported packages. Consequently, the Appellant are covered by the exemption under Rule 2A. As such, the proviso to Section 3(2) cannot be applied for determining the value of the imported goods for the purposes of CVD."
The appellate authority relied on the definition of "manufacturer" given under Rule 2(h) of the SWM (PC) Rules and held that the definition was very wide and was not restricted to actual manufacturer. After stating that the importer had put certain marks on the packages, the appellate authority held them to be 'manufacturer' as defined under Rule 2(h), and proceeded to take support from the Hon'ble Supreme Court's judgment in Hyderabad Industries Ltd. vs. Union of India 1999 (108) ELT 321 (SC). According to the learned Commissioner (Appeals), the importer should be treated as 'manufacturer' of the imported goods and consequently the exemption provided under Rule 2A should be applicable to the goods. The present appeal of the Revenue is directed against the appellate Commissioner's decision.
3. After examining the records and hearing both sides, we have found enough reasons for a remand of this case to the original authority. Firstly, the finding of fact recorded by the Commissioner (Appeals) is directly in conflict with that recorded by the original authority. The question before the authorities was whether the tiles imported by the respondent in packages should be considered to be 'retail packages'. The original authority held that the respondent sold the goods in the retail market in the same form and hence the goods merited consideration as 'retail packages' on which the importer was required to affix RSP (MRP) as per the provisions of The Standards of Weights and Measures (PC) Rules. On the other hand, the appellate authority held that the goods were meant for sale to institutional / industrial consumers who were to use the tiles for construction purpose and not to sell in the market. It was held that, therefore, the tiles imported by the respondent and meant for sale to industrial / institutional consumers could not be treated as a retail package inasmuch as the sale/distribution was not through any retail sale agency or other instrumentality but directly by the importer. The learned consultant for the appellant has submitted that the burden is on the respondent to show that the tiles covered by the Bill of Entry were actually sold to institutional/industrial consumers before claiming any benefit of exemption from declaring MRP on the goods. The learned consultant has made this submission without prejudice to his argument that the respondent was statutorily required to affix MRP on the imported packages even if sold to industrial / institutional consumers. In this connection, he has relied on the Hon'ble Supreme Court's judgment in the case of Jayanti Food Processing (P) Ltd. vs. Commissioner of Central Excise (supra). His focus is on paragraphs 31 to 33 of the apex court's judgment wherein it was held that the telephone instruments supplied by assessees to Department of Telecom, MTNL and BSNL and distributed by the latter to subscribers answered the definition of "retail package" and hence MRP was required to be printed on each package. Their Lordships laid down five important factors to be considered while determining whether any goods notified under Section 4A of the Central Excise Act should be assessed to duty on the basis of MRP. They observed that the nature of sale of the goods was not relevant. On this basis, ignoring the fact that the telephone instruments was sold in bulk by the assessees to DoT, MTNL and BSNL, the apex court held the transaction to be "retail sale" as defined under Rule 2(q) of the SWM (PC) Rules and the package to be a "retail package" as defined under Rule 2(p). Another significant observation made by the court is that retail sale does not have to be only through retail sale agencies or other instrumentalities. Ultimately, the packages sold by the assessees to the above agencies were held to be assessable to duty of excise on the basis of MRP under Section 4A of the Central Excise Act.
4. On the other hand, the learned counsel for the respondent claimed support from paragraphs 9 to 16 of the apex court's judgment, which dealt with the assessment of ice-cream sold by the assessees to hoteliers. The apex court held that the ice-cream packages supplied by the assessees to hotels for being sold to ultimate consumers in small quantities would certainly come within the definition of "wholesale packages" as defined under Rule 2(x)(ii). It was held that Rule 29 would apply to such packages, which did not require the price to be declared thereon. The Hon'ble Supreme Court also found the goods to be exempt under Rule 34 on the ground that the ice-cream was specially packed for serving an industry. Their Lordships observed thus:
"Hotel does not manufacture the ice-cream and is depended entirely upon the sale of ice-cream to it by the assessee for ultimately catering the commodity in the package, i.e. ice-cream to the ultimate consumer. In our view this can be squarely covered in the term "servicing any industry".
In this context, the learned counsel has also referred to the Tribunal's decision in Grasim Industries Ltd. vs. Commissioner of Central Excise, Jaipur - II 2004 (175) ELT 779 (Tri.-Del.), wherein cement in bulk, marked "specially for builders" and "not for retail sale", was found to be meant for servicing construction industry and, accordingly, excluded under Rule 34 from the requirement of displaying MRP on the packages. Construction was held to be an industry, and, on this basis, the sale of cement by the assessee to builders was held to be not a retail sale. It is submitted that the view taken by the Tribunal in Grasim Industries case stands impliedly upheld in the case of Commissioner of Central Excise, Bangalore - II vs. Mysore Cements Ltd. 2010 (259) ELT 30 (Kar.). In the case of Mysore Cements Ltd., the assessee had cleared cement in packaged form to the construction industry from January to March, 2008. The Hon'ble High Court upheld the Tribunal's view that construction industry was a service industry and accordingly it was held that the provisions of Chapter II of the SWM (PC) Rules were not applicable to the packaged commodity (cement) sold to the construction industry. The learned counsel has claimed support from the apex court's judgment in Jayanti Food Processing (P) Ltd. case and the High Court's judgment in Mysore Cements Ltd. case to his argument that the packaged tiles supplied by the respondent to industrial/institutional consumers in 2008 were not liable to be assessed to CVD under Section 4A of the Central Excise Act.
5. After considering the relevant definitions given under Rule 2 of SWM (PC) Rules and perusing the judgments cited before us, we are of the view that there must be a correct finding of the crucial fact in the first instance, which should be followed by application of statutory provisions and case law. The fact to be found is whether the goods imported by the respondent by declaring that they were meant for sale to industrial/institutional consumers and not for retail sale were actually sold to such consumers. The finding of the original authority on this question of fact is in favour of the Revenue and that of the appellate authority on the same question is against the Revenue. Apparently, this has resulted from non-application of mind on the part of the Commissioner (Appeals).
6. Secondly, we have found from the available records that the procedure of provisional assessment of tiles imported by the respondent was withdrawn by the Customs House in March 2008. Earlier, the tiles imported by the respondent used to be provisionally assessed and the assessments were finalised on the basis of certificates issued by the jurisdictional Central Excise Superintendent regarding the manner in which the tiles were disposed of in India. This procedure, it appears, was appropriate under Section 18(1) of the Customs Act. However, this procedure was withdrawn w.e.f. 01/04/2008 as evidenced by a letter dated 27/03/2008 of the Additional Commissioner of Customs (Gr. III) addressed to the Managing Director of the respondent-company. Accordingly, the subject Bill of Entry was assessed without resort to the procedure of provisional assessment. In the new procedure, the assessing authority had to look for compliance from the assessee/importer who were expected to comply with what was declared in the relevant Bill of Entry. We have seen the Bill of Entry and have found the importer's declarations. The respondent declared the tiles to be RSP item (although under protest) and also declared that "wherever the RSP is applicable same has been truthfully declared." We have already indicated that the party paid CVD under protest by stating that MRP-based assessment was not required for the goods imported by them. In the circumstances, the question would arise whether the respondent complied with the conditions for assessment of the goods to CVD on the basis of MRP. We also note that the withdrawal of provisional assessment was not challenged before the Commissioner (Appeals). In other words, the respondent submitted themselves to final assessment in the first instance. In this scenario, the burden is on them to establish that the commodity imported by them were not sold in retail market. This burden has to be discharged before the original authority, if necessary by relying on the relevant provisions of law, relevant circulars of CBEC and relevant case law.
7. Thirdly, we have found that the learned Commissioner (Appeals) misunderstood certain marks found on the packaged commodity. The imported packages had come with the mark "imported and marketed by M/s. NITCO Tiles Ltd.". It appears, the words "imported and marketed" were misunderstood by the appellate authority as "imported and marked". This misunderstanding lead the appellate authority to the erroneous notion that the importer had to be treated as 'manufacturer' in India on account of having "marked" the packages. This mistake bred other mistakes also, like pressing into service Rule 2(h) (definition of 'manufacturer') and claiming support from the apex court's judgment in Hyderabad Industries case (supra). We find that the learned Commissioner (Appeals) was virtually adopting the assessee's averments as contained in their appeal filed with the appellate authority verbatim to take a view in their favour. We are making this observation after a perusal of the memo of appeal filed by the respondent before the Commissioner (Appeals). On the part of the original authority, that authority did not have the benefit of many relevant decisions of High Courts and this Tribunal. Though it referred to Supreme Court's judgment in Jayanti Food Processing (supra) it did not usefully advert to the relevant findings recorded by the apex court. It is not clear whether the amended rules were considered by the original authority.
8. Of all the aspects considered by us, the most crucial one is about the burden of the respondent to establish before the adjudicating authority that the provisions of Chapter II of the SWM (PC) Rules are not applicable to the packaged commodity imported by them. We are of the view that the respondent should get a reasonable opportunity of adducing evidence and of being heard so that the original authority can take a decision afresh, having regard to the observations contained in our order. In order to enable that authority to do so, we set aside the orders and allow this appeal by way of remand. It will be open to the respondent to place documentary evidence before the original authority and rely on appropriate case law in support of their claim for assessment of the goods in terms of Section 4 of the Central Excise Act. It goes without saying that the case law cited before us on behalf of the Revenue should also be considered. In case the respondent succeeds in establishing that the goods covered by the Bill of Entry were actually sold to industrial / institutional consumers, then they will be entitled to the benefit of the definition of "retail packages" under Rule 2(p) read with Rule 2A of the SWM (PC) Rules.
9. The appeal is allowed by way of remand.
(Dictated in Court) (Sahab Singh) Member (Technical) (P.G. Chacko) Member (Judicial) */as 14 14