Custom, Excise & Service Tax Tribunal
Komatsu India Pvt. Ltd vs Commissioner Of Central Excise, Nagpur on 25 August, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL Nos. E/86490, 86489/14-Mum (Arising out of Order-in-Original No. NGP-EXCUS-000-COM-016-13-14 dated 27.3.2014 passed by Commissioner of Central Excise, Nagpur) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) and Honble Mr. C.J. Mathew, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : nO CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Komatsu India Pvt. Ltd. Appellant T. Laxmi Narayana Vs. Commissioner of Central Excise, Nagpur Respondent Appearance: Shri G. Natarajan, Advocate, for appellant Shri Hitesh Shah, Commissioner (AR), for respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing: 9.8.2016 Date of Decision: 25.8.2016 ORDER NO Per: M.V. Ravindran
These two appeals are disposed of by a common order as they are challenging the findings recorded by the adjudicating authority in order-in-original No. NGP-EXCUS-000-COM-016-13-14 dated 27.3.2014.
2. The relevant facts that arise for consideration are M/s. Komatsu India Pvt. Ltd. (main appellant) was importing goods in bulk which were subjected to packing, repacking in unit containers/packages marked with Komatsu brand and affixed with MRP tags. On an information and subsequent visit of the officers, premises of the main appellant and subsequent investigation and statements recorded, it appeared that the activities of the main appellant like repacking and affixing of MRP of the unit containers of the goods amounted to manufacture in terms of Section 2(f)(iii) of the Central Excise Act, 1944. Show cause notice was issued to the main appellant as well as the individual demanding duty with interest and also for imposition of penalty. The main appellant as well as the individual contested the demands on merits as well as on limitation. The adjudicating authority, after following due process of law, did not agree with the contentions raised and by the impugned order, confirmed the demands raised along with interest and imposed penalties on both the appellants.
3. The learned counsel appearing on behalf of the appellant, after giving us overall picture of the demands raised, would submit that the demand is for the parts of dumpers and parts of others and is fully within the partly extended period. He would take us through the entire legislative intent and submit that the items/parts which are repacked are not parts of automobiles to fall under Third Schedule and/or Section 4A Notification. It is his submission that there was a drafting error and these items were not included in the Third Schedule but were included in the Section 4A Notification. He would then take us through the definition of motor vehicle and construction equipment vehicle under the Motor Vehicles Act, Air Pollution (Prevention and Control) Act and submit that these are not at all relevant as these statues are not pari materia to the taxing statute and hence the reliance placed by the adjudicating authority on these statutes are totally incorrect to confirm the demands raised. He would submit that the adjudicating authority has relied upon the definition under Automobile Association Standards, Bureau of Indian Standards etc. which are not relevant to the case in hand; we are concerned with the interpretation of the term automobile taxing statutes, especially those dealing with deeming fiction have to be interpreted strictly. He would submit that the Revenue relied on the decision in the case of JCB India Ltd. and Larsen and Toubro Ltd. but the facts are totally different as in the case of Larsen and Toubro Ltd., the parts were of Scania trucks, dumpers, motor graders, wheel loaders, dozers and hydraulic excavators while in the case of JCB India Ltd., the parts involved were of loaders, backhoe loaders, road rollers etc. while in the case in hand, the parts were of dumpers and parts of other vehicles. He would submit that in the case in hand, majority of the machines which are dumpers and other machineries, do not require any registration under the Motor Vehicles Act and hence reliance cannot be placed on Motor Vehicles Act. He would rely upon the following decisions Goodyear India Ltd. vs. UOI 1997 (92) ELT 14 (SC), BEML vs. CCE 2014-TIOL-2215-CESTAT-BANG (approved by the Honble Karnataka High Court as reported at 2015-TIOL-1189-HC-KAR-CX) and Western Coalfields Ltd. vs. State of Maharashtra 2016-TIOL-78-SC, for the proposition that reliance can be placed on other Central Acts for arriving at the correct conclusion.
4. As regards the invocation of extended period, it is his submission that the business of packing, repacking was commenced by the appellant in 2009 and circular issued by the Central Board of Excise and Customs in 2008 was indicating the dumpers and other machineries would not be automobiles and later circulars of 2011 also supports the appellants view that the dumpers and other machineries are not automobiles. It is his submission that even though proper legislative amendment has come only in the Finance Act with retrospective effect in 2010, the invocation of extended period was upheld in the case in hand wrongly and on all the parts imported by the appellant, they have paid CVD only under Section 4. It is his submission that in the similar situation in the case of JCB India Ltd., the demand has been confirmed only for normal period. He relies upon the judgment of the Honble Karnataka High Court in the case of BEML (supra). The demand has been restricted by the Honble High Court within the limitation period. It is his submission that personal penalty imposed on the employee of the appellant is not at all justified, hence it may be dropped.
5. The learned departmental representative, on the other hand, would take us through the entire order-in-original. He would submit that the term automobiles and various definitions in the Motor Vehicles Act and the Rules made thereunder, an automotive aspect of the vehicles and the machinery aspect has been considered by the Larger Bench of the Honble Supreme Court in the decision of Western Coalfields Ltd. (supra) and held that excavators are motor vehicles under the Motor Vehicles Act. He would submit that the product literature of the parts manufactured by the appellant indicates that the vehicles are self-propelled, either on rubber/pneumatic wheels or steel drum wheels and hence they are all automobiles and the parts manufactured by the appellant would fall under the category of parts of automobiles for applying the demand of the duty under Section 4A of the Central Excise Act, 1944. He would submit that automotive vehicles may be classified under Chapter 84 or 87 but did not lose the identity as automobiles. He would submit that reliance placed on the circulars of CBEC of 1990 and 1987 cannot be applied in the case in hand. It is his submission that the appellant herein has not contested the allegation in the show cause notice that the activity of packing, repacking of the parts of them amounts to manufacture by virtue of deeming manufacture fiction and falls under Section 2(f)(iii) of the Central Excise Act, 1944. It is his submission that cenvat credit eligibility on the parts was not produced before the lower authorities nor before CESTAT, hence it cannot be extended at this juncture. As regards the benefit of cum duty, the said benefit cannot be extended for the goods under Section 4A. This is because there is prescribed abatement available and was considered while fixing the abatement. He would rely upon the decision of the Tribunal in the case of CCE, Pune- vs. JCB India Ltd. reported in 2014-TIOL-09-CESTAT-MUM and Larsen and Toubro Ltd. vs. CCE reported in 2015-TIOL-2561-CESTAT-MUM, as the issue is decided on merits against the appellant and submits that extended period of limitation is invokable as is held in the case of Larsen and Toubro Ltd. He would also submit that one more additional fact in this case is regarding the fact that the parts are supplied by the appellant to Larsen and Toubro Ltd. are being sold by Larsen and Toubro Ltd., is held as liable to duty in the judgment of the above cited decision.
6. We have considered the submissions made at length by both sides and perused the records.
7. On perusal of the records, the dispute involved in this case is regarding the liability to duty on the parts imported, further repacked and labelled by the appellant and sold. It is on record that the appellant sells most of its parts to Larsen and Toubro Ltd. and some quantity to others. The parts which are repacked are for dumpers and other vehicles.
8. At the outset, we find that on merits, the appellant has no case as the Tribunal in the case of Larsen and Toubro Ltd. vs. CCE reported in 2015-TIOL-2561-CESTAT-MUM, in paragraph 5, recorded the activity of Larsen and Toubro, which is reproduced below:-
5. In brief, the appellants are dealing in parts, components and assemblies of certain earth moving vehicles, namely, scania trucks, dumpers, motor graders, wheel loaders, dozers and hydraulic excavators. These parts, components and assemblies are either imported by them or procured from a local associate of a foreign company, namely, Komatsu; and procured locally from the manufacturing facilities in Pune/Bangalore. Parts, components and assemblies of automobiles are covered in the third schedule to the Central Excise Act which is required to be read with Section 2(f)(iii) of the same Act. Further, parts, components and assemblies are also specified by notification for purpose of valuation under Section 4A. The appellants contention is that earlier mentioned earth moving vehicles/equipments are not automobiles and therefore parts, components and assemblies being dealt with by them are not covered under Section 2(f) (iii) read with third schedule or Section 4A. The other contention of the appellant is that even if the goods dealt with by him are covered by parts, components and assemblies of automobiles, even in that situation, as far as unpacked goods, parts are concerned, the activity undertaken by them will not amount to manufacture and, therefore, there cannot be any duty liability in respect of unpacked goods. (emphasis supplied) It can be seen from the above reproduced paragraph that the Tribunal was considering identical issue and also the fact that the goods which were repacked and manufactured by the appellant were sold to Larsen and Toubro Ltd., who further sold the same. The Tribunal held in the case of Larsen and Toubro that these items are liable for central excise duty as per Section 2(f)(iii) of the Central Excise Act, 1944 after considering the entire gamut of the arguments made by the learned counsel before them. On careful reading of the judgment of the Tribunal, we find that the arguments which were advanced before the Tribunal in that case and the arguments which are advanced before us are similar and not much of a difference is seen in the arguments. After considering all the arguments, the Tribunal in paragraphs 27 and 28 did not agree with the contentions raised, and confirmed the demands along with interest. The Tribunal also did not agree with the appellants arguments that extended period cannot be invoked. The same arguments were put forth in this case also. We find that the appellant being in the organized sector, should have known the law and should have considered the implications of that before hand. In view of this, we hold that the invocation of extended period is correct.
9. As regards the cum duty benefit on the goods which were considered as manufactured, we find that the duty has been demanded under old Section 4 as well as Section 4A of the Central Excise Act, 1944. On perusal of the annexures to the show cause notice, which has calculated the duty liability, we find that there is no abatement given to the appellant in respect of the demands raised under Section 4A and no deductions have been given for the demands raised under Section 4 as the annexures indicate that the demands have been raised on the transaction value only. On this point, we agree with the learned counsel that the value which has been considered, if it is, the transaction value as per the invoice, then the benefit of cum duty has to be extended to the appellant, is the law settled by various High Courts and even in the case of Larsen and Toubro Ltd., the Bench had extended such a benefit. Having held so, we find that the quantification of the duty after extending cum duty benefit needs to be redone by the lower authorities.
10. As regards the eligibility to avail cenvat credit of the CVD paid by the appellant on the goods imported, we find strong case in favour of the appellant as it has to be held that if the appellant is saddled with the central excise duty on the ground of deemed manufacture, the pars which have been imported by the appellant in bulk, if they have suffered CVD, the benefit of cenvat cannot be denied as the same parts are considered as manufactured on repacking and central excise duty is paid. On this point also, we hold in favour of the appellant that they are eligible for cenvat credit of the CVD paid, subject to production of duty paying documents/bills of entry on the parts which were imported, repacked and sold. For verification of the claim of the CVD, we remand the matter back to the adjudicating authority to requantify the demands after extending the eligible cenvat credit to the appellant.
11. After requantification of the demands as indicated in paragraphs 9 and 10, the adjudicating authority will also work out the interest liability on the main appellant. Since the penalty imposable is on the main appellant is dependent upon the quantum of duty liability, we also direct the adjudicating authority to consider the quantum of penalty to be imposed on the appellant after requantification of the duty liability.
12. As regards the penalty imposed on the individual, we find that the adjudicating authority has summarily imposed the penalty on the individual holding that he was instrumental in suppression of correct and germane facts concerning the manufacture of excisable goods in question. We do not agree with the bland findings recorded by the adjudicating authority. As regards the appellant, T. Laxmi Narayana, General Manager (Finance) and Company Secretary of the main appellant, no role seems to have been attributed to him in any form in the impugned order for visiting him with personal penalty. In any case, we find that the issue involved in this case being in the nature of interpretation of the provisions of the Central Excise Act, personal penalty under Rule 26 is not imposable on the individual. Accordingly, we set aside the penalty imposed on the individual.
13. In view of the foregoing, respectfully following the judgment of the Tribunal in the case of JCB India Ltd. (supra) and Larsen & Toubro Ltd. (supra), on merits we hold against the main appellant as indicated hereinabove, but remand the matter for a limited question of requantification of the duty liability, interest thereof and the penalty on the main appellant as per our direction in paragraphs 9, 10 and 11.
14. The appeal of the individual on the imposition of penalty is allowed and the appeal of the main appellant is disposed of as indicated herein above.
(Pronounced in Court on 25.8.2016) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) tvu 1 12 E/86490, 86489/14