Custom, Excise & Service Tax Tribunal
Ms Aks Bearing Ltd vs Jaipur-I on 13 July, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. I
Excise Appeal No. 50073 - 50074 of 2018
[Arising out of the Order-in-Appeals Nos. 245-
246(SM)CE/JPER/2017 dated 09.10.2017, passed by
Commissioner (Appeals), Jaipur (Raj) ]
M/s. A K S Bearing Ltd. Appellants
Shri Sudhir Kr. Agarwal
Vs.
CCE, Jaipur Respondent
Appearance:
Shri Ankit Totuka, Advocate for the Appellants Shri R K Mishra, AR for the Respondent CORAM:
Hon'ble Mr. Anil Choudhary, Member (Judicial) Hon'ble Mr. C L Mahar, Member (Technical) Date of Hearing/ Decision: 13.07. 2018 FINAL ORDER No. 52787-52788/2018 Per: C L Mahar:
The brief facts of the matter are that the appellant -assessee is engaged in manufacture of ball bearings classified under Central Excise Tariff Chapter heading No. 84.82. As the business practice, the appellant have been selling their manufactured products to E/50073-50074/2018 various actual users as well as to the retail sellers located in Jaipur and outside. It is matter of record that the appellant have been selling their manufactured ball bearings to various institutional buyers such as M/s. HMT Bearings, M/s. Hercules Hoist Ltd., M/s. Naively Lignite Corp. Ltd., Railway Coach Factory etc. The goods were sold to such institutional buyers on the tender prices which were approved by various institutional buyers. The appellant was also selling small quantities of their manufactured ball bearings to certain retail sellers. The appellant have been clearing all the goods manufactured by them at transaction value and paying Central Excise duty taking the transaction value as assessable value for the goods manufactured and sold by them. It has been the contention of the Revenue that for the goods sold by the appellant to retail sellers they should have adopted the MRP value as the basis of assessable value after allowance of prescribed abatement given in the relevant notification issued under section 4A of Central Excise Act, 1944. Thus the basic allegation of the department was that by not adopting the MRP value for the clearances made to the retailers, the appellant have mis-declared the assessable value and therefore, the demand of Central Excise duty amounting to Rs.3,51,125/- was demanded under the extended time under proviso to section 11 A (4) of the Central Excise Act, 1944. The penal provisions of section 11AC has also been invoked and the Director of the firm Shri Sudhir Kumar 2 E/50073-50074/2018 Agarwal has also been issued with Show cause notice for imposition of penalty under Rule 26 of Central Excise Rules. The Show cause notice has been adjudicated by the Asstt. Commissioner vide his order in original dated 27.11.2013 wherein the charges of Show cause notice have been upheld. The appellant have gone to Commissioner (Appeals) who has also endorsed the order of Asstt. Commissioner vide his order dated 9.10.2017. The basic premise for confirming the demand of above mentioned Central Excise duty is that under Notification No. 11/2006 CE (NT) dated 29.5.2006 have entry which reads that „Parts, Components and Assembly of Automobiles‟ need to be assessed taking MRP value as the basic price for determination of assessable value after providing the necessary abatement. It has been the contention of the Revenue that since ball bearings are also used by various Automobile manufacturers as part of automobile and, therefore the clearances made by the appellant to the retail sellers who may be further selling the same to various automobile service stations etc. and therefore, MRP value should have been taken as the basis for determining the assessable value of ball bearings cleared to the retail sellers.
2. Learned advocate has vehemently contended that the ball bearings has multiple use and that no clearances of ball-bearings have been effected by the appellant directly or indirectly to any automobile manufacturers or service stations and therefore it is 3 E/50073-50074/2018 imaginary to allege that the ball bearings being sold by them in retail market are being used as „parts, components and automobile‟ and therefore, the MRP value should have been taken for determining the assessable value for payment of Central excise duty. It has further been contended that Ball bearings are neither the parts nor component of the vehicles these products can only be used for further manufacturer of parts and components of vehicles and therefore, ball bearings as such cannot be called the parts or components of the automobile motor vehicle. It has been the case of the appellant that they have not made any direct or indirect sale of ball bearings to the automobile companies and they have always been selling their goods to institutional customers who are mostly manufacturers of agricultural equipment, domestic utility instruments / appliances etc. like fans, mixers, grinders and various other machineries.
3. It has also been added that the end-use to which a product is put to is not determinative of classification and dutiability. Statutory fiscal entry, basic character, function and actual use of product are relevant factors. Reliance has been made by them on the following decisions:
1. State of Tamil Nadu vs. Vinyl Cable Industries [1993 (88) STC 430 Mad HC]
2. CCE vs. Carrier Aircon Ltd. [2006 (199) ELT 577 (SC)] 4 E/50073-50074/2018
3. Chanddra Lakshmi Laminated Safety Glass Ltd. vs. CCE [1995 (77) ELT 877-CEGAT-3 (Mum) ]
4. Established practice of assessment cannot be changed without cogent reasons. That the appellants are paying duty on clearance of ball bearings on the basis of transaction value since the inception. It is pleaded that the established practice of assessment cannot be changed without cogent reasons as held by the Supreme Court in the case of Collector vs. Tata Iron and Steel Co. Ltd. [1977 (94) ELT A/133)].
5. That as per Note 2 of Section XVII (Vehicles, Aircrafts, Vessels and Associated Transport Equipments), the expressions "parts and accessories" do not apply to various articles [from (a) to
(l)] which includes battery, IC Engines and Ball and Roller Bearings whether or not they are identifiable as goods of Section XVII (which covers chapter 86 to 89). Thus, this note clearly applies to battery, IC Engines and ball and roller bearings as automobiles / vehicles fall in Chapter 87 and accordingly these cannot be classified as parts of automobiles. Therefore, a distinction has to be made between "parts of automobiles" (which are exclusively so manufactured and "Parts also used in automobiles". The payment of duty u/s 4A of the Central Excise Act, 1944 has been made applicable vide Notification No. 09/2010 only to Parts, components and assemblies of vehicles (including chassis fitted with engines) falling under 5 E/50073-50074/2018 Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716. The appellant submit that since, there product is classifiable under Chapter Heading 84.82; therefore, there is no doubt that the demand for the period deserves to be set aside.
6. Bearings imported are subjected to duty on transaction value.
That to the best of the information available to the appellant, the parties importing Ball bearings are paying CVD (Countervailing Duty as equivalent to Duty of Excise) on the transaction value of the goods imported and not on the MRP less abated value. The appellant submits that there should be no discrimination by the department in assessment of imported goods vis-a-vis indigenous goods.
7. It has also been contended by the appellant that the demand raised by the Department is barred by limitation as there has been no suppression or mis-declaration or collusion on their part with an intent to evade payment of Central Excise duty as department has always been aware about the practice of assessment adopted by the appellant. It is also submitted that there have been time to time audit of their unit by the department Audit Team. It is further been added that for the period upto 2012, the Audit team of the department audited their statutory records several times and they have never raised any objection on the assessment practice adopted by the appellant-assessee. They have made a reference to internal 6 E/50073-50074/2018 audit report No. IAR No. 77/2009 dated 2.4.2009 for the period September, 2005 to January, 2009 and IAR No. 702/2012 dated 22.01.2013 for the period February, 2009 to November, 2012. It has been stated that no objection has been raised by the department regarding methodology of reaching assessable value by the appellant assessee. Therefore, invoking the extended period of limitation under section 11A(4) is not legally tenable and therefore demand is liable to be set aside on limitation ground itself. The Learned advocate has taken shelter of various judicial pronouncements in this regard. Same are as follows:-
1. Anand Nishikawa Co. Ltd. vs. CCE [2005(188)ELT 149 (SC)];
2. Uniworth Textiles Ltd. vs. CCE [2013 (288) ELT 161 (SC)];
3. Naresh Kumar and Co. Pvt Ltd. vs. UOI [ 2014 (35) STR 506 (Cal)].
8. We have also heard the learned DR, who has read out the findings in the order-in-original and order in appeal.
9. We have heard both the sides and have perused the record of appeal carefully. It is seen that the appellant assessee have been clearing ball bearing to their institutional buyers as well as to their retail sellers on payment of duty on the basis of transactional value and not on the basis of MRP value given on the packing of such clearances. It is also the matter of record that the notifications issued time to time under section 4A of the Central Excise Act, 1944 7 E/50073-50074/2018 do not cover the ball bearings falling under Chapter 84.82 specifically for adopting Maximum Retail Price for determination of assessable value for payment of Central Excise duty.
10. Before proceedings further, let us look at relevant provisions of Section 4A of Central Excise Act, 1944 and the relevant notification issued under this section No. 11/2006 CE(NT) dated 29.5.06 as amended.
Section 4A. Valuation of excisable goods with reference to retail sale price. - (1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette. 8
E/50073-50074/2018 a. Notification No. 11/2006-CE(NT) dated 29.5.06 w.e.f. 01.06.2006 by amendment in Notification No. 02/2006- CE(NT) dated 01.03.2006 which read as under:-
S.No. Chapter, heading, Description of Abatement sub-heading or goods as a tariff item of the percentage First Schedule of retail sale price (1) (2) (3) (4)
97. Any heading Parts, 33.5% components and assemblies of automobiles b. Superseded by 14/2008-CE(NT) dated 01.03.2008 which read as under:-
S.No. Chapter, heading, Description of Abatement sub-heading or goods as a tariff item of the percentage First Schedule of retail sale price (1) (2) (3) (4)
107. Any heading Parts, 31.5% components and assemblies of automobiles c. Superseded by Notification No. 49/2008-CE(NT) dated 24.12.08 which read as under:-
S.No. Chapter, heading, Description of Abatement sub-heading or goods as a tariff item of the percentage First Schedule of retail sale price (1) (2) (3) (4)
108. Any heading Parts, 30% components and assemblies of automobiles 9 E/50073-50074/2018 a. Amended by Notification No. 09/2010-CE(NT) dated 27.02.2010 which read as under:-
S.No. Chapter, Description of goods Abateme heading, sub- nt as a heading or percenta tariff item of ge of the First retail Schedule sale price (1) (2) (3) (4)
108. Any Chapter Parts, components and 30% assemblies of vehicles (including chassis fitted with engines) falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716 From the aforesaid notifications it is clearly evident that during the period 01.06.2006 to 27.02.2010 description goods on which provisions of MRP were applicable was 'Parts, components and assemblies of automobiles' and subsequently vide Notification No. 09/2010 the same was made applicable only to 'Parts, components and assemblies of vehicles (including chassis fitted with engines) falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716. The appellant submit that since, there product is classifiable under Chapter Heading 84.82; therefore, there is no doubt that the demand for the period post 27.02.2010 deserves to be set aside, even if the other grounds of the appellant are not allowed.
10
E/50073-50074/2018
11. A perusal of above entries under the relevant notifications for arriving at the assessable value on the basis of MRP price covers only parts, components and assemblies of automobiles. It is very clear that bearings are not specifically covered under the above notifications for MRP basis assessment. The department is of the view that bearings are part of automobiles and therefore, the above notification namely 11/2006 etc. as amended covers ball bearings for MRP based assessment as being a part of automobiles. We are of the view that the bearings as such, are not part or components of the automobile vehicles though the ball bearings to form a part of other parts of automobile vehicles. It is also relevant that the Central Excise Tariff under section 17 which covers the classification of vehicles, aircrafts, vessels and other associated transport equipment specifically excludes under Section Note 2 the bearings falling under Chapter 84.81 or 84.82 from the expression of „parts and accessories of vehicles‟. Thus, from the careful study of the section note it becomes clear that it has been intention of the legislature ab initio not to consider that ball bearings as parts of automobile vehicles. We also find great force in the argument of learned advocate that the department has not brought on record any evidence to prove that as appellant assessee has sold any of his consignments of ball bearings to any manufacturer of automobile or any service station of automobiles.
11
E/50073-50074/2018
12. In view of our observations, we find that the department has stretched the provisions of law unnecessarily to include small quantities of ball bearings cleared on retail sale under the provisions of section 4A without substantiating such claim with some concrete evidences. In view of the above, we find that ball bearings are not included under relevant notifications issued under section 4A of the Central Excise Act, 1944 and therefore, same cannot be considered for assessment on the basis of MRP value. While holding the above view, we also take shelter of following case laws which are cited by the learned advocate, State of Tamil Nadu vs. Vinyl Cable Industries (supra) where Hon‟ble High Court has observed as under:-
6. It is well settled that a particular use to which a single article is put alone is not conclusive to know the real nature or character of the article that will determine how to identify it for the tax purpose. As noticed by the Tribunal, the Revenue authorities identified these cables as electrical goods for all purposes, except that in the matter of sale of such cables to automobile parts dealers, they wanted to impose a tax rate of 13 per cent treating only such sales as sale of parts and accessories of motor vehicles and trailers in entry 3 of the First Schedule. The revenue authorities evidently committed an error of law in so dividing the PVC cables for tax purposes into electrical goods and parts and accessories of motor vehicles. The Tribunal has taken a correct view in holding that the assessment originally made was in order and the reassessment at 13 per cent on a 12 E/50073-50074/2018 portion of turnover is not justified. There is no merit in these petitions. These petitions are accordingly dismissed.
No costs."
13. Following the decision of Hon‟ble Madras High Court, we set aside the order-in-appeal and allow both the appeals with consequential benefit, if any, to the appellants.
(operative part of the order pronounced in the open Court) ( Anil Choudhary ) ( C L Mahar ) Member (Judicial) Member (Technical) ss 13