Custom, Excise & Service Tax Tribunal
Franke Faber India P Ltd vs Commissioner Of Central Excise And ... on 28 October, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
MUMBAI
REGIONAL BENCH - COURT NO. I
EXCISEAPPEAL No. 85030 of 2019
[Arising out of Order-in-Original No. 19/CEX/COMMR/2018-19 dated 24.10.2018 passed
by the Commissioner of Central GST & Central Excise, Aurangabad]
Franke Faber India Private Limited .... Appellants
Plot No.L-7, MIDC Industrial Area
Waluj, Aurangabad - 431 136.
VERSUS
Commissioner of CGST & Central Excise .... Respondent
Aurangabad Commissionerate Town Centre, N-5, CIDCO Aurangabad - 431 003.
APPEARANCE:
Shri Pankaj Gadekar a/w Shri Jitin Singhal, Advocates for the Appellants Shri Rajiv Ranjan, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) FINAL ORDER NO. A/86667/2024 Date of Hearing: 28.06.2024 Date of Decision: 28.10.2024 PER: M.M. PARTHIBAN This appeal has been filed by M/s Franke Faber India Private Limited, Aurangabad (herein referred to as 'the appellants' for short) against Order- in-Original No. 19/CEX/COMMR/2018-19 dated 24.10.2018 (referred to, as 'the impugned order') passed by the Commissioner of Central GST & Central Excise, Aurangabad.
2.1 The facts of the case, leading to this appeal, are summarised herein below:
2.2 The appellants herein, inter alia, are engaged in the manufacturing of S.S. Sink falling under the Tariff Item (TI) 7324.10.00, Waste Coupler 2 E/85030/2019 (TI7324.10.00) and (restaurant equipments) Food Service Products (TI 8438.8090). The appellants avail CENVAT credit of duty paid on inputs, capital goods and input services under CENVAT Credit Rules, 2004 (CCR).
The appellants are also having Service Tax Registration Certificate No. AAACEF4002GST003 for payment of Service Tax under reverse charge mechanism on consulting Engineering service, Management of business consultant service, Goods Transport by Road, Intellectual Property Right Services Other than Copyright, Information Technology Software Service, Legal Consultancy Service, Manpower recruitment/supply agency service and Rent-a-Cab Scheme operator service etc. 2.3 The appellants were of the understanding that their goods namely SS Sink is falling under Chapter Heading 7324 of CETA, 1985 and covered under Third Schedule of CETA, 1985 when cleared for retail sale, are required to be paid excise duty under Section 4A of the Central Excise Act, 1944, as the provisions of Legal Metrology (Packaged Commodities) Rules, 2011 are applicable to those goods, when cleared for retail sale. Accordingly, the appellants followed the practice of valuation under Section 4A of the Act of 1944, when the goods are sold for retail sale through dealer/distributor, and MRP was printed on each pack of goods (SS Sink) cleared for retail sale through dealer/distributor. The said goods are packed in corrugated boxes, and that a single unit is packed in each corrugated box when these are to be cleared for sale in retail sale. Further, the appellants also sell the goods to industrial/institutional consumer through dealer/distributor and on such sale of goods to industrial/institutional consumer, the goods are packed in "Bulk' i.e., more than one sink in a pack. In such cases, since the goods cleared to industrial/institutional consumer through dealer/distributor, the appellants were not printing the MRP on such packages. The department had conducted internal audit of the records of the appellants and had objected to the above practice of value adopted by the appellants on the ground that the excise duty is payable on MRP basis on all transactions, including the sale for industrial consumers, inasmuch as the goods are not sold directly from the appellants manufacturer to industrial consumer/institutional consumer and that multi- piece packages are also governed by the requirements of mandatory declaration of RSP/MRP in terms of the Legal Metrology (Packaged Commodities) Rules, 2011.
3E/85030/2019 2.4 The appellants also manufacture restaurant equipment which are used by restaurants such as Burger King, Yum restaurant (KFC, Pizza Hut & Others), Kitchen Solution and McDonald, on which applicable Central Excise Duty was paid at the time of its clearance from the factory premises. These goods after its clearance from the factory require assembly and installation at the site of customer, and hence they had employed the services of skilled labour provided at customer site, to make the restaurant equipment ready for use. In this regard, the appellants have availed the service of another agency; and service tax paid thereon being part erection, commissioning and installation of equipment manufactured by the appellants on the understanding that it forms part of sale of excisable goods, they had taken credit of such service tax in their CENVAT account. In terms of purchase agreement or purchase order of the customers, the installation services are included in the cost/price of restaurant equipment and after installation only the restaurant equipment are ready to use. However, the department had objected to such credit taken in respect of installation service, on the ground that the prices indicated in the purchase order are 'ex-factory price' and the sale culminates at the factory gate; further, the department also claimed that the installation service has no relation in the manufacturing process and is being provided beyond the place of removal. In addition to the above, Cenvat credit taken on garden maintenance service was also objected to by the department. Detailed investigation was conducted by the department and statements of concerned persons were also recorded.
2.5 On completion of the investigation, department had initiated show cause proceedings against the appellants by issue of Show Cause Notice (SCN) dated 28.11.2017, demanding central excise duty by invoking the extended period under Section 11A(4) of the Central Excise Act, 1944; demand of ineligible CENVAT credit taken and proposing for imposition of penalty under Section 11AC ibid read with Rule 15(2) of the CENVAT Credit Rules, 2004. In adjudication of the above SCN, learned Commissioner confirmed the proposals made in the SCN in its entirety vide the impugned order dated 24.10.2018. Feeling aggrieved with the above order, the appellants have filed this appeal before the Tribunal.
3.1 Learned Advocate appearing for the appellants submitted that the appellants had followed the practice of declaring MRP/RSP to submit that 4 E/85030/2019 when sinks are sold for retail sale, these are packed as a single piece in a corrugated box and MRP is printed on presentation pack (corrugated box). However, when there is an order from industrial/institutional consumer or sale made to them, the sinks are packed in bulk, where more than one sinks are packed and no MRP/RSP is declared and specific label that the goods are meant for 'Not for retail sale, only for institutional purpose' is affixed on such packages. They submitted that the sinks required for retail sale are sent to dealer/distributor and they in turn sell the sinks at MRP to the retail consumers. Accordingly, the appellants adopted valuation as per Section 4A of the Central Excise Act, 1944 for retail sale; whereas for sale to industrial consumers, they had paid excise duty in terms of Section 4 ibid on transaction value.
3.2 In support of their stand, learned Advocate had relied upon the following judicial pronouncements: -
3.3 In support of their stand, the appellants had relied upon the following judicial pronouncements:
(i) EWAC Alloys Ltd. Vs. Union of India - 2012 (275) E.L.T. 193 (Kar.)
(ii) Radhe renewable Energy Development P. Ltd. Versus C.C.E. & S.T., Rajkot - 2015 (37) S.T.R. 388 (Tri. Ahmd.)
(iii) Jayanthi Food Processing (P) Ltd. Vs. Commissioner of C, Ex., Rajasthan 2007 (215) E.L.T. 327 (S.C.)
(iv) Zile Singh v. State of Haryana & Ors. [(2004) 8 SCC 1],
4. On the other hand, learned Authorised Representative for Revenue reiterated the findings of the Commissioner in the impugned order, and submitted that the fact of the impugned goods having been covered under the entry at Sl. No. 63 of Notification No.49/2008-C.E. (N.T.) dated 24.12.2008, as amended, prescribing the levy of central excise duty on the basis of RSP/MRP, is not in dispute. In the absence of supply of goods directly to the industrial consumer, and the factors such as nature of sale through purchase order, mode of its sale by installation at the premises etc., would not change the measure of levy on RSP basis. Further, ineligible CENVAT credit has been taken by the appellants on installation service, garden maintenance services are liable to be recovered under Rule 14 of 5 E/85030/2019 CCR. Therefore, he prayed that the appeal preferred by the appellants is liable to be set aside.
5. Heard both sides and perused the records of the case.
6. The short issue for consideration before the Tribunal in this case is as follows:
(i) whether the impugned goods viz., 'Stainless Steel (S.S.) Sink' falling under chapter heading 7324 of Central Excise Tariff Act, 1985 and other restaurant equipment, manufactured and supplied to various persons through dealers/distributors is liable to Central Excise duty on the basis of Retail Sale Price (RSP/MRP) under Section 4A of the Central Excise Act, 1944, or not?
(ii) whether the CENVAT credit can be taken of service tax paid on installation of impugned goods sold by the appellants at their customer's premises, garden maintenance etc., as input service and recovery of CENVAT credit under CCR, 2004, as confirmed in the impugned order is legally sustainable or not?
7. In order to address the above issues, we would like to refer the relevant legal provisions contained in Central Excise Act, 1944; and Legal Metrology Act, 2009 read with Legal Metrology (Packaged Commodities) Rules, 2011, for determination of proper Central Excise duty applicable on the subject goods under dispute. The disputed period in the present case relates to 2013-2014 to 14.05.2015.
Central Excise Act, 1944 "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 Legal Metrology Act, 2009 (1 of 2010) 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 the 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.
(3) The Central Government may, for the purpose of allowing any abatement under sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.
6E/85030/2019 (4) Where any goods specified under sub-section (1) are excisable goods and the manufacturer--
(a) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture, then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section.
xxx xxx xxx xxx:
LEGAL METROLOGY ACT, 2009
"Definitions
Rule 2. In this Act, unless the context otherwise requires---
xxx xxx xxx xxx
(l) "pre-packaged commodity" means a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre- determined quantity;
Legal Metrology (Packaged Commodities) Rules, 2011 "Definitions Rule 2. In these rules, unless the context otherwise requires---
xxx xxx xxx xxx (bb) "industrial consumer" means the consumer who buys packaged commodities directly from the manufacturer or from an importer or from wholesale dealer for use by that industry and the package shall have declaration 'not for retail sale';
(bc) "institutional consumer" means the institution which buys packaged commodities bearing a declaration 'not for retail sale', directly from the 'manufacturer or from an importer or from wholesale dealer for use by that institution and not for commercial or trade purposes;
1(bb) "industrial consumer" means the consumer who buys packaged commodities directly from the manufacturer or from an importer or from wholesale dealer for use that industry and the package shall have declaration 'not for retail sale';
2(bc) "institutional consumer" means the institution who hires or avails of the facilities or services in connection with transport, hotel, hospital or other organization which buy packaged commodities directly from the manufacturer or from an importer or from wholesale dealer for use by that institution, and the package shall have declaration 'not for retail sale'; (substituted - clause, wef 14.05.2015, GSR No. 385(E) dt.14.05.2015 1 Substituted with effect from 14.05.2015 by Notification GSR No.385(E) dated 14.05.2015 2 Substituted with effect from 14.05.2015 by Notification GSR No.385(E) dated 14.05.2015 7 E/85030/2019
(k) "retail package" means the packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages:
(kc) "multi-piece package" means a package containing two or more individual packaged or labelled pieces of the same commodities of identical quantity, intended for retail sale, either in individual pieces or the package as a whole:
Provided that for packages containing food articles, the provisions of the Food Safety and Standards Act, 2006 (34 of 2006) and the rules made thereunder shall apply.
Illustration:
(i) A package containing "5 toilet soap cakes of net weight 20g each and total net weight of 100 g" is a multi-piece package;
(l) "retail sale", in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales shops, agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer;
(m) "retail sale price" means the maximum price at which the commodity in packaged form may be sold to the consumer inclusive of all taxes;
(q)"wholesale dealer" in relation to any commodity in packaged form means a dealer who does not directly sell such commodity to any consumer but distributes or sells such commodity through one or more intermediaries;
(r)"wholesale package" means a package containing--
(i) a number of retail packages, where such first mentioned package is intended for sale, distribution or delivery to an intermediary and is not intended for sale direct to a single consumer; or
(ii) a commodity sold to an intermediary in bulk to enable such intermediary to sell, distribute or deliver such commodity to the consumer in similar quantities; or
(iii) packages containing ten or more than ten retail packages provided that the retail packages are labeled as required under the rules.
Chapter II PROVISIONS APPLICABLE TO PACKAGES INTENDED FOR RETAIL SALE Rule 3 with effect from 06.06.2013 3 Rule 3. Applicability of the Chapter.--The provisions of this Chapter shall not apply to,--
(a) packages of commodities containing quantity of more than 25 kg. or 25 litre excluding cement and fertilizer sold in bags up to 50 kg; and
(b) packaged commodities meant for industrial consumers or institutional consumers.
Rule 3 with effect from 01.01.2018 Rule 3. The provisions of this chapter shall not apply to--
3Earlier Rule 3 before substitution, stood as given therein and it was substituted by G.S.R. 629(E), dated 23rd June, 2017, for rule 3 (w.e.f. 1-1-2018). Earlier rule 3 was amended by G.S.R. 359(E), dated 6th June, 2013 (w.e.f. 6-6-2013). Rule 3, as under:
8E/85030/2019
(a) packages of commodities containing quantity of more than 25 kilogram or 25 litre;
(b) cement, fertilizer and agricultural farm produce sold in bags above 50 kilogram; and
(c) packaged commodities meant for industrial consumers or institutional consumers.
Earlier to 06.06.2013 Rule 3 was provided as Rule 2A Rule 2A. Applicability of the Chapter-
The provisions of this chapter shall not apply to,-
(a) packages of commodities containing quantity of more than 25 kg or 25 litre excluding cement and fertilizer sold in bags up to 50 kg; and
(b) packaged commodities meant for industrial consumers or institutional consumers.
Explanation :- For the purpose of this rule,-
'a) Institutional consumer.- Means those consumers who buy packaged commodities directly from the manufacturers/packers for service industry like transportation [including airways, railways],hotel or any other similar service industry.
b) Industrial Consumer - Means those consumers who buy packaged commodities directly from the manufacturers/packers for using the product in their industry for production, etc.'."
Rule 6. Declarations to be made on every package.
6. (1) Every package shall bear thereon or on label securely affixed thereto, a definite, plain and conspicuous declaration made in accordance with the provisions of this chapter as, to--
(a) the name and address of the manufacturer, or where the manufacturer is not the packer, the name and address of the manufacturer and packer and for any imported package the name and address of the importer shall be mentioned;
(b) the retail sale price of the package shall clearly indicate that it is the maximum retail price inclusive of all taxes in Indian currency:
Notification No.49/2008-C.E. (N.T.) dated 24.12.2008 MRP based valuation:
"In exercise of the powers conferred by sub-sections (1) and (2) of section 4A of the Central Excise Act, 1944 (1 of 1944) the Central Government, in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 14/2008- Central Excise (N.T.), dated the 1st March, 2008, published in the Gazette of India Extraordinary, vide number G.S.R. 147(E) of the same date, except as respects things done or omitted to be done before such supersession, hereby specifies the goods mentioned in Column (3) of the Table below and falling under Chapter or heading or sub-heading or tariff item of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) mentioned in the corresponding entry in column (2) of the said Table, as the goods to which the provisions of sub-section (2) of said section 4A shall apply, and allows as abatement the percentage of retail sale price mentioned in the corresponding entry in column (4) of the said Table.9
E/85030/2019 S. No. Chapter, Description of goods Abatement as heading, sub- a percentage heading or tariff of retail sale item price (1) (2) (3) (4) xxx xxx xxx xxx
63. 7324 Sanitary ware of iron or steel 35".
8.1 On careful perusal of the above legal provisions, it transpires that the Central Excise Duty is leviable on any excisable goods under Section 3 of the Central Excise Act, 1944. Valuation for the purpose of determining Central Excised duty is provided under Section 4 ibid, as the transaction value or the tariff value; further, valuation shall be done on the basis of Retail Sale Price (RSP/MRP) less permitted abatement, in case of goods for which there is a requirement for declaration of RSP under Legal Metrology Act, 2009 or Legal Metrology (Packaged Commodities) Rules, 2011, and such goods have been specified by the Central Government by issue of a notification in terms of the Section 4A ibid. Thus, it clearly transpires that the value of the excisable goods shall be determined on the basis of RSP/MRP declared on the package thereof, if such goods fulfil the following two legal requirements. These are, firstly (i) there shall be a requirement under the Legal Metrology Act, 2009 or the rules made thereunder, for declaration of RSP/MRP on the packages thereof; and secondly (ii) the excise duty on such article produced or manufactured are subjected to RSP/ MRP based levy under Section 4A of the Central Excise Act, 1944, in issue of a notification by the Central Government, specifying such goods to be subjected to valuation under said Section 4A ibid.
8.2 On careful perusal of the facts on record, and the entry appearing in Sl. No. 63 of Notification No.49/2008-C.E. (N.T.) dated 24.12.2008 as amended, it transpires that the goods covered by the description viz.,"sanitary ware of iron or steel" falling under chapter heading7324, are liable to pay Central Excise duty on the basis of RSP/MRP, in terms of the above notification. Therefore, impugned goods viz. 'S.S. Sink' classifiable under tariff item 7324.10.00 of the First Schedule to the Central Excise Tariff, being in the nature of sanitary ware of stainless steel are rightly covered under the scope of the entry under the above notification and thus, we find that the second legal requirement is fulfilled in the present case.
10E/85030/2019 8.3 As regards the first legal requirement, we find that the scope of coverage of Legal Metrology Act and Rules made thereunder, has specifically provide for declaration of mandatory details including the RSP/MRP only in respect of "pre-packaged commodity" under Rule 6 ibid. The phrase, pre-packed commodity has also been defined to mean a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre-determined quantity. In ascertaining the nature of the impugned goods, whether these are in the pre-packed form or not, we may take the aid of the facts appearing in the statement of Shri Rahul Ladniya, Deputy Manager of the appellants' company recorded by the department on 20.10.2015. The said statement provides details about the finished goods/final products and their marketing pattern adopted by the appellants. The same has been mentioned in para 5 of the impugned order, and it is extracted and given below:
"S.S. Sinks are sold in single as well as multi piece package of 2, 3 & 4 S.S. Sinks. Single S.S. Sink are sold on MRP basis on payment of central excise duty under Section 4A of the Central Excise Act, 1944. We have started clearing S.S. Sink in multi piece package of 2, 3 & 4 S.S. Sinks from 2012-
13. During the year 2012-13, the S.S. Sink in multi piece package of 2, 3 & 4 Sinks were sold on MRP basis on payment central excise duty under Section 4A of CEA, 1944. From 2013-14 onwards, S.S. Sinksin multi piece package of 2, 3 & 4 Sinks are being sold on transaction value in bulk for project on payment of central excise duty under Section 4 of CEA, 1944 through our dealer/distributor as well as directly to project. The details of the said product sold through dealer/distributor as well as directly to project has already been submitted from 2013-14 to September, 2015. Food service products are restaurant equipment used by restaurant. Our main customers are Burger King, Yum restaurant (KFC, Pizza Hut & Others), Kitchen Solutions and McDonald. We are paying central excise duty on this product on clearance from our factory premises i.e., our place of removal."
8.4 From the various types of distribution channel adopted by the appellants for clearance of excisable goods viz., S.S. Sinks, restaurant equipment, detailed as above and the submissions made by learned Advocates for the appellants, it clearly transpires that S.S. Sinks, are sold in three different pattern as follows:
(i) S.S. Sinks, when sold in a single unit/piece for retail sale, then these are packed individually in a corrugated box and MRP is printed on such package/ presentation pack.
(ii) S.S. Sinks, being sold in multi piece package of 2, 3, & 4 sinks, for retail sale through dealer/distributor, then MRP was printed on each 11 E/85030/2019 package of such goods during the year 2012-13; this practice was discontinued and their goods were sold in bulk.
(iii) S.S. Sinks, when sold to industrial/institutional consumer through dealer/distributor network, then goods are packed in "Bulk' i.e., more than one sink, as per requirement are packed in a package and no MRP/RSP is declared and specific label that the goods are meant for 'Not for retail sale, only for institutional purpose' is affixed on such packages.
(iv) restaurant equipment which are used by restaurants and required to be assembled at the site, are not sold in packaged form and each equipment is installed at the site of the restaurant. In such cases, the installation of such restaurant equipment is being undertaken by independent agencies as 'service providers', under an agreement entered by the appellants with such agency for installation services.
8.5 In respect of S.S. Sinks which are sold in individual units as explained at paragraph 8.4(i), in a pre-packaged condition, for retail sale through dealers/distributors, it is clear that the first condition of requirement of mandatory declaration of retail sale price and other details on the package in terms of Rule 6 ibid is required to be fulfilled. Therefore, determination of central excise duty on the clearances of such S.S. Sinks having fulfilled both the legal requirements as stated in paragraph 8.1 above, are required to be made under Section 4A of the Act of 1944, on the basis of RSP/MRP basis.
8.6. As regards, multi-piece packages of S.S. Sinks as explained at paragraph 8.4(ii) meant for retail sale are concerned, the issue whether the valuation is required to be done on the basis of RSP/MRP or on transaction value, and on which of the MRP prices indicated therein was clarified by the Central Board of Excise & Customs (CBEC) vide Circular dated 28.10.2002, providing four situations in which the MRP based valuation has to be adopted for the purpose of discharge of central excise duty. The extract of the said circular is reproduced below:
"Circular No. 673/64/2002-CX., dated 28.10.2002 F. No. 6/11/2002-Cx.I Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject :- Section 4A of the Central Excise Act, 1944.
I am directed to invite your attention to Board's Circular No. 639/30/2002-CX., dated 24-5-2002 regarding Section 4A of the Central Excise Act, 1944.12
E/85030/2019
2. A number of representations have been received from Trade Associations as well as field formations about difficulties in implementing the said Circular.
3. The matter has been therefore further examined in the Board and it has been decided to modify Board's Circular No. 639/30/2002-CX. dt. 24- 5-2002 to the effect that once an MRP is scored out, (even if it remains visible) and another MRP printed on the package, it could not be said that the package has two MRPs printed on it, since the scored out MRP could not be considered as an MRP either by the seller or by the consumer. Hence the scored out MRP is to be ignored.
4. I am also directed to say that there is no uniformity in valuation of multi-piece packages, consisting of 2 or more consumer items of the same kind, with MRP printed both on the individual items and the multi-pack. For valuing such multi-packs it is clarified that :-
(i) if the individual items comprising the multi-pack have clear markings that they are not to be sold separately or are packed in such a way that they cannot be sold separately, then the MRP indicated on the multi-pack would be considered for payment of duty u/s. 4A.
(ii) if the individual items do not contain any such inscription (that they are not to be sold separately) and are capable of being sold separately at the MRP printed on the individual pieces, then the aggregate of the MRP's of the pieces comprising the multi-pack would be considered for payment of duty on the multi-pack under section 4A. This clause will apply to only those multi-packs where the MRPs, both on the multi-pack and each of the individual items comprising the multi-pack, are clearly visible (e.g. soaps, powders, tooth pastes etc.). Only then can Explanation 2(a) to section 4A apply.
(iii) if the individual items have MRP's printed on them but are scored out, then the MRP printed on the multi-pack will be taken for purposes of valuation under section 4A.
(iv) if an individual item is supplied free in the multi-pack and has no MRP printed on it, the MRP printed on the multi-pack will be taken for purposes of valuation under section 4A....."
From the above, it clearly transpires that in respect of S.S. Sinks cleared in multi piece package, for retail sale through the dealer/distributor, since these goods are packed in a single package of 2 or 3 or 4, the requirement of mandatory declarations to be made on such retail sale package under Rule 6 ibid would apply in such cases, and therefore such goods are required to be valued under Section 4A of the Act of 1944, for the purpose of determination of appropriate Central Excise duty.
13E/85030/2019 8.7 In respect of S.S. Sinks, sold to industrial/institutional consumer through dealer/distributor network as explained in paragraph 8.4(iii) above, since the goods are packed in "Bulk' i.e., more than one sink, as per requirement of customers, and specific label indicating that the said goods are meant for 'Not for retail sale, only for institutional purpose' is affixed on such packages in terms of Rule 2(bb) (bc) ibid, in the impugned order, learned Commissioner had held that such clearances are subject to valuation under Section 4A ibid, as the goods are sold first to dealer or distributor for further delivery to industrial consumer/institutional consumer, and the payment is received from dealer/distributor and nor from the industrial consumer/institutional consumer. In this regard, we find that the definition of the phrase 'industrial consumer' and 'institutional consumer' has been defined in Rule 2(bb) and Rule 2(bc) of the Rules of 2011; and the same was substituted with effect from 14.05.2015 by Notification GSR No.385(E) dated 14.05.2015, wherein purchase of goods by industrial/institutional consumer from wholesale dealer besides purchase directly from manufacturer or importer, had been permitted for being considered as supply to industrial consumer/institutional consumer. We also note that with respect to substitution of the entire definition, in Rule 2(bb) and Rule 2(bc) of the Rules of 2011, the substituted provisions have to be read in terms of the legal pronouncements given in this regard by the judicial forum.
In the case of EWAC Alloys Ltd., (supra) the Hon'ble High Court of Karnataka have held that in respect of goods supplied to industrial consumer or institutional consumer through a stockiest need not comply with the requirement of mandatory declaration of Rule 6 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 as amended. The relevant paragraphs of the said order is extracted and given below:
"28. With great respect, I find it difficult to fully agree with the reasoning in the aforesaid judgment because, as is clear from Rule 2-A, the explanation expressly states that 'For the purpose of this rule' and then gives the meaning of institutional consumer and industrial consumer. On the date of Rule 2A was introduced by way of amendment into the Rules, Rule 2(p) was also substituted introducing the very same words 'industrial consumer and institutional consumer' in the proviso. If the intention of the legislature that the same meaning given in the explanation is to be attributed to the definition clause also, they would not have used the word, 'this rule', they would have used the word 'Rule'. Thus it amounts to re-writing the Rules by the Court which is not permitted in law. Keeping in mind the object with which this enactment was passed, there is a need to protect an individual consumer and 14 E/85030/2019 certainly not the industrial consumer. When the legislature, for the purpose of Rule 2-A only, explained the meaning of institutional consumer and industrial consumer, such legislative intent is to be respected. If the interpretation sought to be placed by the Revenue is accepted, it would do violence to the Rules. The difference between the definition of institutional consumer and industrial consumer in Rule 2-A and Rule 2(p) appears to be thus :
29. In Rule 2-A industrial consumer or the institutional consumer are purchasing the packaged commodities directly from the manufacturer. In the case of retail package, the manufacturer of goods meant for industrial use may not be able to supply the goods directly. Therefore, they may take the assistance of a stockist. If the customers are speared over the country and if the manufacturing unit is in one part of the country and they want to concentrate on manufacturing activity, they may not have resource or ability to arrange for the sale of their product throughout the country. In those circumstances, it is quite but natural that they need middle men or stockist as distributors, through whom they would distribute their product or sell their products to an industrial or institutional user. In such an that packaged commodity cannot be construed as a retail package. Therefore, after deleting Rule 34(a), in the very definition of 'retail package', the legislature while defining the meaning of 'ultimate consumer' to whom a retail package is meant, excluded institutional or industrial consumer.
30. Therefore, a harmonious reading of these provisions, keeping in mind the object with which the Act is passed, it is reasonable to arrive at the conclusion that the meaning assigned to industrial consumer and institutional consumer in the explanation 2-A cannot be attributed to the meaning of those consumers in proviso to Rule 2(p). Rule 2(p) and Rule 2-A operate in distinct and separate fields. Therefore, the object is very clear. This Act is meant only for an individual consumer or a group of individuals who purchase packaged commodities from a retail dealer. To protect their interest, this Act and Rules are enacted and compliance of Rule 6 was made mandatory. The proviso contained in the definition of 'retail package' as per Rule 2(p) defines the ultimate consumer, which shall not include industrial or institutional consumers. Therefore, it is clear that the protection under this Act is confined only to individuals and persons who are eking out livelihood by self employment and not to institutional and industrial consumers or consumers who purchase goods in large quantities. Therefore, requirement of Rule 6 is not required to be complied with by a manufacturer who sells his packaged goods to an industrial or institutional consumer through a stockist."
In the case of Zile Singh, (supra) the Hon'ble Supreme Court have held that substitution of legal provision will have retrospective as it repeals the old rule and brings into existence the new rule in its place. The relevant paragraphs of the said judgement is extracted and given below:
"24. The substitution of one text for the other pre-existing text is one of the known and well-recognised practices employed in legislative drafting. 'Substitution' has to be distinguished from 'supersession' or a mere repeal of an existing provision.15
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25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (See Principles of Statutory Interpretation, ibid, p. 565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. v. State of U.P., State of Rajasthan v. Mangilal Pindwal, Koteswar Vittal Kamath v. K. Rangappa Baliga and Co. and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael. In West U.P. Sugar Mills Association case a three- Judges Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case a three-Judge Bench of this Court emphasized the distinction between 'supersession' of a rule arid 'substitution' of a rule and held that the process of substitution consists of two steps: first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place."
In view of the above, we are of the considered opinion that the definition of Rule 2(bb) and 2(bc) of the Rules of 2011, as substituted by Notification GSR No. 385(E) dated 14.05.2015, would apply retrospectively. Therefore, in the above factual matrix of the case, S.S. Sinks which are packed in "Bulk' and containing a declaration of specific label indicating that the said goods are meant for 'Not for retail sale, only for institutional purpose', even though sold firstly to a dealer or distributor, for further delivery to industrial consumer/institutional consumer, would not attract the provisions of Rule 6 of the Rules of 2011. Thus, valuation of S.S. Sinks cleared in such situation, would be governed by Section 4 of the Central Excise Act, 1944 for the purpose of determining appropriate duty of central excise duty to be paid on such clearances.
8.8 As regards, restaurant equipment/food service products, which are used by restaurants and are required to be assembled at the site as explained in paragraph 8.4(iv) above, since these are not sold in packaged form and each equipment is to be installed at the site of the restaurant, with the assistance of independent agencies providing installation service, these would not get covered under the scope of 'packaged commodities' for which the requirement of declaration under Rule 6 of the Rules of 2011 would apply. Therefore, valuation of restaurant equipment, would be 16 E/85030/2019 governed by Section 4 of the Central Excise Act, 1944 for determining appropriate duty of central excise duty to be paid on such clearances.
8.9 We further find that the Hon'ble Supreme Court in the case of Jayanthi Food Processing (P) Ltd., (supra) have held that if the appellant is successful in showing that there is no requirement under the Standards of Weights and Measures Act or the Rules made thereunder for declaration of MRP on the package, then there is no question of application of Section 4A(1)&(2) of the Act for MRP/RSP based levy. The relevant paragraphs of the said judgement is extracted and given below:
"12. We have already referred to the facts appearing in the orders of the authorities below which suggest that at one point of time the assessee used to display the MRP on the four litres pack voluntarily. Shri Subba Rao very heavily relied on this fact. We do not think that merely because the assessee displayed the MRP on the four litres pack, that would negate the case of the appellant altogether. We have already shown in the earlier part of the judgment the conditions required for application of Section 4A. The plain language of Section 4A(1) unambiguously declares that for its application there has to be the "requirement" under the SWM Act or the Rules made thereunder or any other law to declare the MRP on the package. If there is no such requirement under the Act and the Rules, there would be no question of application of Section 4A. Thus if the appellant is successful in showing that there is no requirement under the SWM Act or the Rules made thereunder for declaration of MRP on the package, then there would be no question of applicability of Section 4A(1) & (2) of the Act. Even if the assessee voluntarily displays on the pack the MRP, that would be of no use if otherwise there is no requirement under the SWM Act and the Rules made thereunder to declare such a price.
xxx xxx xxx xxx
16. There is one more substantial reason supporting the appellant. Shri Ravinder Narain invited our attention to Rule 34 in Chapter V of SWM (PC) Rules which provides for exemptions. We have quoted Rule 34 earlier. The Rule has now been amended. However, under the unamended Rule there is a specific declaration that the SWM (PC) Rules shall not apply to any "package" containing a commodity if the marking on the package unambiguously indicates that it has been specially packed for the exclusive use of any industry as a raw material or for the purpose of "servicing any industry, mine or quarry". Learned Counsel points out that the "package" which is sold by the assessee mentions that it is specially packed for the exclusive use of the catering industry. Learned Counsel further argues that such "package" was for the purposes of "servicing the hotel industry or catering industry" as the case may be.
Learned Counsel is undoubtedly right when he seeks to rely on Rule 34 which provides for exemption of the "packages" which are specially packed for the exclusive use of any industry for the purposes of "servicing that industry". Shri Subba Rao supported the view expressed by the Tribunal that the words "servicing any industry" could not cover 17 E/85030/2019 the present case and he further suggested that ice-cream cannot be a "raw material" for any industry. He is undoubtedly right that the ice- cream cannot be termed as "raw material" for any industry. However, the words "or for the purposes of servicing any industry" are broad enough to include the transaction in question, i.e., the sale of a pack of ice-cream to the retail industry. 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". The word "service" is a noun of the verb "to serve". This Court in Coal Mines Provident Fund Commissioner v. Ramesh Chander Jha [AIR 1990 SC 648] in a different context, observed as under
:
The word "service" in Section 2(17)(h) must necessarily mean something more than being merely subject to the orders of Government or control of the Government. To serve means 'to perform functions; do what is required for'." [Emphasis supplied] A hotel is a hospitality industry and undoubtedly supplies food and eatables to the consumers. Therefore, to supply the ice-cream to such a hotel would be doing what is required for the hotel. In that sense the supply by way of sale of ice-cream which is ultimately sold to the 'ultimate consumers' would, no doubt, be covered in the term "servicing the hotel industry". Even otherwise the word "service" as per Concise Oxford English Dictionary means :
(i) perform routine maintenance or repair work on (a vehicle or machine);
(ii) provide a service or services for;
It is an act of helpful activity - help, aid or to do something. It also includes supplying of utilities or commodities. In that view we are not prepared to give a narrow interpretation to the term "service any industry". We, therefore, accept the arguments advanced by Shri Ravinder Narain that the "package" sold by the assessee to the hotel was, apart from being for the exclusive use of the hotel was, also "for the purpose of servicing that industry". If that is so, then the SWM (PC) Rules would not apply at all.
17. The Tribunal has given very narrow meaning to Rule 34 by firstly holding that ice-cream is not a "raw material". There the Tribunal was right but the Tribunal was not right by holding that the words "servicing any industry" were not applicable to such "package". We, therefore, accept the arguments of the learned Counsel and reject the contention raised by Shri Subba Rao. If that is so, the appeal would have to be allowed and it would have to be held that Section 4A will not apply to the ice-cream sold by the assessee.
xxx xxx xxx xxx
28...... It was rightly contended before the Tribunal that the thrust of Section 4A is on the packages and not on the commodity and it is only where the goods are sold in the packages that the section would be attracted. The submission was undoubtedly right. The Tribunal, while rejecting this submission, has clearly ignored the language of Section 4A(1) of the Act."
18E/85030/2019 9.1 On the issue of CENVAT credit of service tax paid on garden maintenance service, it is not in dispute that the appellants have paid the said credit, being inadmissible to them, by debiting the CENVAT credit on 08.10.2015 for a total amount of Rs.1,44,623/- and informed the same to the department. Further, the appellants have also paid the applicable interest of Rs.26,738/- on 09.11.2015 as pointed out by the department. Thus, the only part of CENVAT credit under dispute is the inputs service tax, which is taken on 'installation service' of goods sold by the appellants at their customer's premises. In the impugned order, the specific conditions of the agreement/ contract have been discussed in paragraph 3.2 of discussion and findings by learned Commissioner to come to a conclusion that the place of removal of goods is the factory gate and the installation of goods even though is the responsibility of the appellant, it is not used in the manufacture, directly or indirectly, and hence he denied the CENVAT Credit. It is on record that one of the conditions about installation as mentioned in the impugned order is as below:
"v. Installation and commissioning will be done by the Franke Faber Pvt. Ltd. (or by their authorized service agent) at no extra cost"
Since, there is a specific Clause in the contract/agreement that it is the responsibility of the appellants to depute installation engineers/agents for installation and commissioning of goods free of cost, and that there is no evidence on record that any extra amount is recovered by the appellants from the customer and on the other hand it is specifically stated that the prices include installation, it is logical to conclude that the sale of goods is completed at the customers premises upon installation. Therefore, we are of the view that the service tax paid on 'installation services' is eligible to be considered as CENVAT credit in terms of Rule 2(l) of CENVAT Credit Rules, 2004. Our above view is also supported by the decision of the Co- ordinate Bench of the Tribunal in the case of Radhe Renewable Energy Development Pvt. Ltd. (supra). The relevant paragraphs of the said case are extracted and given below:
"4.2 It is observed from the case records that appellant enters into comprehensive contracts with the customers which includes activities from Designing, Engineering, Manufacturing, Transporting to Erection, Installation and Commissioning of 'Gasifier Plant' to the customer's premises. A lump sum amount as contracted is charged by the appellant from the customers including all the elements and excise duty is paid on the entire amount so recovered. There is a specific Clause in the contract that it is the responsibility of the appellant to depute engineers for 19 E/85030/2019 Erection, Installation and Commissioning of 'Gasifier Plant' free of cost. There is no evidence on record that any extra amount is recovered by the appellant from the customer. Therefore, reliance placed by the first appellate authority, in Para 8 of the OIA, dated 6-6-2012, upon some general clauses printed on the invoices is not proper. First appellate authority has also observed in this Para that appellant has failed to submit the relevant contracts whereas Para 2.6 of the OIO, dated 15-12- 2011, containing defence submissions of the appellant, clearly convey that such contract copies were provided to the lower authorities. In view of the express clauses of the contracts and in the absence of any documentary evidence that any extra amount is recovered for erection, installation and commissioning, it has to be held that entire transaction from the designing to manufacturing and installation is one. In this regard the observation made by this Bench, in Paras 4.1 and 4.2 of the case law of CCE, Vapi v. Alidhara Textool Engineers Pvt. Limited [2009 (14) S.T.R. 305 (Tri.-Ahmd.) = 2009 (239) E.L.T. 334 (Tri.-Ahmd.)], are very relevant and are reproduced below :-
"4.1 In this case erection and commissioning charges have been included in the cost of the machines sold. The appellants have selected the agency to do this work and once the purchaser enters into an agreement for supply of the machine including the erection and commissioning charges, the responsibility for erection and commissioning is of the manufacturer. Therefore, what is happening in this case is that the supplier of the machine is not only selling the machine but is also providing the service of erection and commissioning. Once erection and commissioning cost is included, in the transaction value, the natural conclusion that would emerge is that the processes undertaken in the buyer's premises are actually incidental to manufacturing activity undertaken in the manufacturer's premises. What has been sold in this case is the complete machine duly erected and commissioned and operational. The incidental process of erection and commissioning being incidental to manufacture, has to be treated as continuation of the earlier process which started in the manufacturer's premises. In this case even though the position of the machine in CKD condition gets transferred to the buyer when it is removed from the factory as per the contract, the question to be examined is whether such a service is related directly or indirectly to the manufacture of their goods in question. As already mentioned by me earlier, the process of erection and commissioning at the buyer's premises is incidental to the manufacture of the machine and therefore, the erection and commissioning services provided also can be said to be in relation to the manufacture, since the process in this case is complete only after the erection and commissioning takes place. As rightly pointed out by the Learned Advocate, Rule 2(l) of Cenvat Credit Rules does not require that service has to be rendered at the factory of the manufacturer for the purpose of eligibility for Service Tax credit. Therefore, the stand of the revenue that since the service was provided at the buyer's premises credit is not admissible cannot be accepted. What has to be examined is whether the service provided is in or in relation to manufacture.
4.2 Another point that has been relied upon by the revenue is that Service Tax credit is not admissible since the erection and commissioning activity is a post removal/post manufacturing activity. I have already mentioned earlier that in the case of Service Tax what is required to be examined is whether the service has been used in or in relation to manufacture directly or indirectly. While the eligibility for Service Tax credit on outward transport services is to be examined in connection with place of removal, there is no such requirement as regards other services. In respect of other services what is to be examined is whether they can be held to be rendered in or in relation to manufacture directly or indirectly. Once the whole transaction of manufacture of the machine, erection and commissioning and supply is treated as one transaction and excise duty is charged on the whole 20 E/85030/2019 transaction value, services rendered for the purpose of completion of this whole transaction has to be treated to have been rendered in or in relation to the manufacture."
4.3 The above case law was also followed by Chennai Bench in the case of Autoprint Machinery Manufacturer Pvt. Limited v. CCE, Coimbatore [2010 (19) S.T.R. 428 (Tri.-Chennai)] and by this bench in the case of Alidhara Texspin Engineers v. CCE, Vapi (supra). It is observed from the decision of this Bench in the case of CCE, Vapi v. Alidhara Textool Engineers Pvt. Limited (supra) that in a contract of composite nature the activities of erection and installation have to be considered as an activity in relation to manufacture. It is not a case for interpreting the inclusive part of the definition given in Rule 2(l) of the Cenvat Credit Rules, 2004 but the present case of the appellant is covered by the main body of definition of 'Input Service' given in Rule 2(l) of the Cenvat Credit Rules, 2004. This part of the definition has not undergone any change either before 1-4-2008 or after 1-4-2008. Case law of CCE, Ahmedabad-II v. Cadila Healthcare Limited (supra) relied upon by the Revenue rather fortifies the above view. In Para 5.1(xix) Hon'ble Gujarat High Court has observed as follows :-
"5.1(xix) In the facts of the present case the assessee is engaged in the manufacture of medicaments. By their very nature, the drugs manufactured by the assessee prior to final production thereof are required to be subjected to technical testing and analysis before entering into commercial production. For such purpose, the products are manufactured in small trial batches and thereafter, sent for testing and analysis purpose. Undisputedly, when the goods are removed for testing and analysis, excise duty has been paid thereon. Since production of medicaments are subject to approval by the regulatory authorities of various countries to which such drugs are exported, the assessee is required to obtain approval before starting commercial production. Thus the final product can be manufactured only upon approval of the regulatory authority after the product undergoes technical testing and analysis. Under the circumstances, it cannot be gainsaid that the activity of testing and analysis of the trial batches is in relation to the manufacture of final product. Unless such testing and analysis is carried out, it would not be possible to produce the final product inasmuch as unless the trial batches are sent for testing and analysis and approval is obtained, the final product cannot be manufactured. Under the circumstances, the services availed in respect of technical testing and analysis services are directly related to the manufacture of the final product. The contention of the department that unless the goods have reached the commercial production stage, Cenvat credit is not admissible in respect of the technical testing and analysis services availed in respect of the product at trial production stage, does not merit acceptance. Besides, the learned counsel for the assessee is justified in contending that when the product which is sent for testing and analysis is subject to payment of excise duty, the respondents cannot be heard to contend that Cenvat credit is not admissible on the Service Tax paid in respect of such service. Under the circumstances, the Tribunal was justified in holding that the assessee was entitled to avail of Cenvat credit in relation to Service Tax paid in relation to technical testing and analysis services availed by it."
In the above case law certain services availed by M/s. Cadila Healthcare Limited with respect to Research and Development activities outside the factory were also held to be admissible for Cenvat credit when the drugs were not even commercially manufactured. In the light of the above observations I do not find any justification in taking a different view than what is taken by this bench in the case of CCE, Vapi v. Alidhara Textool Engineers Pvt. Limited. Appellant's case is thus covered by the main body 21 E/85030/2019 of the definition of 'Input Services' and it has to be held that services availed by the appellant are in relation to the manufacturing of the excisable goods. The case laws of Quality Steel Tubes (P) Limited v. CCE, UP (supra), Thermax Limited v. CCE (supra) and Maruti Suzuki Ltd. v. CCE, Delhi-III (supra), relied upon by the learned AR are not applicable to the facts and circumstances of the present proceedings as the same were delivered either with respect to eligibility of Cenvat credit as 'Inputs' or for determining assessable value under Section 4 of the Central Excise Act, 1944 and were not with respect to eligibility of Cenvat credit on 'Input Services'. It is now a settled legal position that Cenvat credit on 'Input Services' is also admissible if the same are availed beyond the 'place of removal' provided such services are availed in relation to manufacture. On merits case goes in favour of the appellant and against the Revenue."
9.2 Further, we also find that there is no specific ground for invoking extended period having been made out in the SCN or in the impugned order, when the entire modus of clearance of goods are known to the department and to the audit officers, when they examined the records of the appellants.
10. In view of the above discussion and analysis in paragraphs 8.4 to 8.9 above, we find that the impugned order, insofar as it had confirmed the adjudged demands for subjecting the impugned goods, other than those S.S. Sinks which are sold in a pre-packaged condition in individual units or in multi-piece packages, for retail sale through dealers/distributors, for RSP/MRP based levy of excise duty under Section 4A of the Central Excise Act, 1944 is not legally sustainable. Consequently, imposition of penalty on the appellants also does not survive to the above extent.
11. In view of the above, we do not find any merits in the impugned order passed by the learned Commissioner as it does not stand the scrutiny of law. Therefore, by setting aside the impugned order dated 24.10.2018, the appeal is allowed partly in favour of the appellants. However, for the limited purpose of determining the exact quantum of central excise duty that is liable to be paid in respect of S.S. Sinks cleared for retail sale, as discussed in paragraphs 8.5 and 8.6 above, which are subject to RSP/MRP based levy in terms of Section 4A of the Central Excise Act, 1944, we deem it necessary to remand the matter to the original authority. Needless to state that sufficient opportunity of personal hearing shall be given by the Commissioner while determining such duty liability, after taking into account the documents, details of clearance of goods, if any, to be submitted by the appellants before him.
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12. In the result, the impugned order dated 24.10.2018 is set aside and the appeal is allowed partly in favour of the appellants, with a direction to the learned Commissioner for re-determination of the amount of Central Excise duty payable as above, within a period of three months from the date of receipt of this order.
(Order pronounced in the open court on 28.10.2024) (S.K. MOHANTY) MEMBER (JUDICIAL) (M.M. PARTHIBAN) MEMBER (TECHNICAL) Sinha