Custom, Excise & Service Tax Tribunal
John Deere India Pvt. Ltd vs Pune Iii on 31 August, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/1042/2009 & E/1652 & 1092/2010
[Arising out of Order-in-Original No: 05/CEX/2009-10 dated 29/06/2009 passed by the Commissioner of Central Excise, Pune III & Orders-in-Appeal No: PIII/VM/106/10 dated 21/05/2010 & PIII/VM/160/10 dated 09/07/2010 passed by the Commissioner of Central Excise (Appeals), Pune III.]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
John Deere Equipment Pvt. Ltd.
John Deere India Pvt. Ltd.
Appellant
Vs
Commissioner of Central Excise
Pune III
Respondent
Appearance:
Shri S.A. Gundecha, Advocate for the appellant Shri Ajay Kumar, Jt. Commissioner (AR) for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 31/08/2015 Date of decision: 31/08/2015 ORDER NO: ____________________________ Per: C J Mathew:
The dispute of the appellant, M/s John Deere Equipment Pvt Ltd, registered under the Exported Oriented Unit scheme, arises from confirmation of excise duty of Rs 62,07,929 (including cess) held to have been short-paid while clearing spare parts to their own unit in the Domestic Tariff Area. Allegedly, the appellant, while discharging its duty liability during the period between May 2007 and February 2008, computed additional duty on Maximum Retail Price adjusted for abatement and did not pay Special Additional Duty at 4%. Export Oriented Units clearing goods into the domestic market are required to discharge excise duty liability equivalent to the duties of customs payable by importers of like goods; the excise duty in accordance with proviso to section 3 of Central Excise Act, 1944 is the basic customs duty on assessed value, additional duty of customs equal to excise duty computed on the assessed value and customs duty or the maximum retail price (MRP) adjusted for abatement, as the case may be, and the special additional duty at 4% to countervail VAT charged by the state governments on domestic sales. The special additional duty, being levied to countervail the tax burden in a domestic sale transaction, is not leviable on imports that are sold as such and, hence, a system of refund the special additional duty exists for availment upon production of proof of such trade.
2. Appeal no. E/1652/2010-MUM against order-in-appeal no. PIII/VM/106/10 dated 21st May 2010 upholding the order of the lower authority confirming duty of ` 4,96,388/- for the period from March to April 2007 and appeal no. E/1902/10-MUM order-in-appeal no. PIII/VM/160/10 dated 9th July 2010 upholding the order of the lower authority confirming duty of ` 33,91,537/- for the period from March to December 2008 are also taken up for simultaneous disposal.
3. The original authority, Commissioner of Central Excise, Pune III, vide impugned order-in-original no. 05/CEX/2009-10 dated 29th June 2009 based the demand on the finding that the goods had been cleared in bulk with further packaging for retail market done at the unit in the Domestic Tariff Area; that the provisions of section 4A of Central Excise Act, 1944 for MRP-based assessment would not apply to the appellant because the mandate of packing and affixing MRP under the Standards of Weights and Measures Act, 1976 comes into effect when the domestic unit sells these parts after further packaging; that VAT liability does not arise in such stock transfers and that they were not entitled to exemption notification no. 23/2003-CE dated 31st March 2003 in the absence of prior permission of Development Commissioner for clearances into the Domestic Tariff Area.
4. The Export Oriented Unit scheme (EOU) is embodied in the Foreign Trade Policy of the Government of India notified by the Director General of Foreign Trade under the Foreign Trade (Development & Regulation) Act, 1992. Such units are issued with Letter of Permission by the Development Commissioner who administers the scheme. Units are required to be Net Foreign Exchange positive over five-year periods and are entitled to import or to procure capital goods, consumables and raw materials without payment of import or excise duty respectively. Parallel notifications under Central Excise Act, 1944 and Customs Act, 1962 provide for exemption of duty on capital goods, consumables and raw materials imported or procured by the Export Oriented Unit subject to fulfillment of conditions relating to export obligation and procedures prescribed. The territory of India excluding such units are considered as the Domestic Tariff Area (DTA) and units are entitled to clear goods to the Domestic Tariff Area at concessional or full rate of excise duty, subject to fulfilling conditions for the former.
5. The receiving unit of the appellant packs the spare parts and affixes labels on the individual packs. In the grounds of appeal, it is submitted that these goods are then sold to dealers and VAT discharged in accordance with Entry 96 of Schedule C in the Maharashtra VAT Act, 2002. It is further contended that the sale to dealers is effected by the appellant itself and the goods are required to conform to Packaged Commodity Rules, 1977 issued under the Standards of Weights & Measures Act, 1976. The grounds claim that the notification issued under section 4A of Central Excise Act, 1944 includes automobile parts.
6. Learned Counsel for appellant drew attention, inter alia, to the provisions of section 3 and 4A of the Central Excise Act, 1944, section 3 of Customs Tariff Act, 1975 and Maharashtra Value Added Tax Act, 2002. On the issue of liability to pay Special Additional Duty, the decisions of this Tribunal in Micro Inks v Commissioner of Central Excise & Service Tax, Daman [2014 (303) ELT 99 (Tri-Ahmd)] and M/s VVF Ltd v Commissioner of Central Excise, Belapur [2014-TIOL-04-CESTAT-MUM] were cited. It was also brought to our attention that in LOreal India Pvt Ltd v Commissioner of Central Excise, Raigad/Thane [2014 (308) ELT 746 (Tri-Mumbai)] the Tribunal held that imported goods which underwent labeling prior to clearance for home consumption after landing in India being liable to additional duty did not amount to manufacture and excise duty thereon since additional duty equal to excise duty was leviable. On the issue of invoking extended period, the decision of the Tribunal in Alembic Ltd v Commissioner of Central Excise, Vadodara-II [2014(308) ELT 535 (Tri-Ahmd)] was cited.
7. Learned Authorized Representative relies upon the provisions of section 3, 4 and 4A of Central Excise Act, 1944 and section 3(1) and section 3(5) of Customs Tariff Act, 1975. It was contended that the goods that are valued under section 4A (2) must be such that have declaratory mandate under what was then the Standards of Weights and Measures Act, 1976 and should be notified under section 4A(1). It was also contended that the immunity to invoking the extended period on the count of revenue neutrality was not tenable in view of the decision of the Honble Supreme Court in Dharampal Satyapal v Commissioner of Central Excise, New Delhi [2005(183)ELT 241 (SC)] was relied upon.
8. Having perused the records and considered the submissions made, we observe that though the transaction in the dispute, viz., clearance to the domestic undertaking of the appellant, is one, two duties are involved and, considering the distinctive role of each in the scheme of taxation, the treatment accorded for levy or for escapement are separate and distinct.
9. The appellant, as an Export Oriented Unit, is, operationally, no different from any other manufacturing entity within the territory of India and thus liable to duty of excise under section 3 of Central Excise Act, 1944 on goods cleared locally. However, being eligible for exemption from duty on inputs, domestic clearances manufactured out of exempted inputs are treated at par with imports in computing the tax liability under the proviso to section 3 of Central Excise Act, 1944.
10. We take up the matter of Special Additional Duty of 4% which, according to impugned orders, are not eligible for exemption in relation to appellant because goods are cleared to another undertaking of the appellant and thus not sold. A specific exemption of an amount equal to the special additional duty is granted when clearances are effected by EOUs to the local market. Notification no. 23/2003-CE dated 31st March 2003 permits such an exemption subject to the condition that goods are not exempt from state VAT levies. Appellant has established that parts of tractors are not exempt under Maharashtra Value Added Tax Act, 2002; in terms of the said notification, taxability is the sole criterion for extending the benefit of exemption. There is no statutory requirement to furnish any evidence of discharge of VAT liability. The competent authority for implementation of VAT collection is the state government and it is not within the assigned responsibility of Central Excise authorities to ascertain compliance or to predicate the grant of exemption to such compliance.
11. The scheme of countervailing the VAT with the special additional duty under the Customs Tariff Act, 1975 also provides an exemption through the refund route for importers who place their imports into the market as such. That is an essential element to avoid double taxation. While the intent of countervailing is to ensure that imports are not placed in advantage vis-`-vis indigenous goods, the equity inherent in such countervailing will cease if the similar goods of EOUs are subject to special additional duty without recourse to the refund mechanism available to countervailed imports. The refund under notification no. 102/2007-Cus dated 14th September 2007 is administered by Customs authorities who collect the special additional duty on imported goods. Imported goods do not come within the ambit of VAT statutes of states and will not be leviable to VAT if used by the importer; countervailing being necessary in that specific type of transaction, ascertainment of non-use by the importer is a pre-requisite for refund of tax. Produce of EOUs are, by its transaction within the taxable territory of the states, directly under the control and assessment of the commercial tax department of the states. Therefore, the exemption under Central Excise Act, 1944 supra operates without the need for a procedure corresponding to that performed in relation to import goods. The attempt in all three impugned orders to predicate the exemption on ascertainment of discharge of VAT liability is contrary to the exemption notification itself and also contrary to the constitutional scheme of taxation. That the goods are liable to VAT is sufficient to exempt it from the ambit of the countervailing tax entailed upon import of like goods. The demand for special additional duty is, therefore, in excess of jurisdiction and untenable.
12. Countervailing of central excise duty levied upon indigenous manufacture by charging additional duty of customs on imports extends mutatis mutandis to domestic clearances effected by Export Oriented Units. Produce of indigenous industry is subject to assessment of transaction value by default or by applying the tax rate to adjusted Maximum Retail Price where goods are required to comply with the Packaged Commodity Rules, 1977 issued under the Standards of Weights & Measures Act, 1976. The case of Revenue, actuated by the apparently revenue-friendly declared value, is that the maximum retail price adjusted for abatement should not have been the basis for self-assessment of additional duty which was liable to duty on the invoice price and the basic customs duty thereon.
13. The claim of the appellant, on the other hand, would be tenable if like goods manufactured and cleared from a domestic tariff area unit is subject to abated maximum retail price for computation of excise duty. Automobile parts are, without doubt, required to be assessed under section 4A for computation of Central Excise duty and. consequently, for computation of additional duty of customs payable by an Export Oriented Unit for clearance of parts of tractors to the local market.
14. The case of Revenue is that the parts are not cleared from the Export Oriented Unit undertaking of the appellant in retail packing and, therefore, not required to conform to the labeling requirements, including that of MRP. From the manner in which these proceedings have been initiated, it would appear that Revenue is convinced that the appellant has deliberately resisted the legal requirement of transaction value because of higher revenue implications. The mandate of the Standards of Weights & Measures Act, 1977 pre-date the incorporation of section 4A of Central Excise Act, 1944 which was given effect from 14th May 1997. The Central Excise Act, 1944 cannot, of its own, prescribe the mandate of maximum retail price with tax collection as the intent; such assessment can be notified only for such goods that are required to do so under the Packaged Commodity Rules, 1977. That these are, therefore, not options that may be exercised can be deduced from the confiscability of the goods for failure to declare retail sale price on the package.
15. It is not the packaging that determines the applicability of mandate of affixing the retail sale price but the product itself. Consequences of non-conforming packaging are not escapement from the mandate but the enforcement of penal detriment. The reasoning in the impugned order that bulk packaging will render the tractor parts outside the pale of retail selling price is flawed as the primary responsibility under Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 is to penalize non-compliance and to determine the retail selling price as per the Rules instead of opting for an opportunity to collect more duty through an inapplicable provision. Being parts of tractors, the goods cannot but find their way through commercial channels to an end-consumer who is an individual. The form of packing cannot alter this reality. By and large, manufacturers do not sell directly to retailers; they, too, with such an interpretation of applicability of retail selling price prescription could claim that their packing is intended only for the intermediaries in the channel. That would run counter to the avowed objective of the law relating to affixing of details on retail packing. The channel is, therefore, not relevant and only the product is.
16. Upon sales of such notified products to institutions who are the deemed final consumers, escapement from maximum retail price assessment even if the goods do have such labeling is an option. This facilitation is a consequence of such institutions absorbing the product as an input for the service rendered by them to the final consumers or for manufacture of a final product. Tractor parts are not amenable to sale in such manner. It is the produce of the appellant that will alone satisfy the consumer need. The produce of the appellant cannot be cleared in any manner other than in accordance with the prescriptions in the Packaged Commodity Rules, 2007. No evidence has been put forth that it has been cleared otherwise by the appellant. The assessment by the appellant is, therefore, not liable to be faulted.
17. The appellant is, thereby, eligible for the abatement. The computation and payment of duty by the appellant has been appropriate and in accordance with law. No action for recovery of any further amount lies.
18. The impugned orders are, accordingly, set aside.
(Pronounced in Court) (M V Ravindran) Member (Judicial) (C J Mathew) Member (Technical) */as 12