Custom, Excise & Service Tax Tribunal
Sgs India Pvt. Ltd. vs Commissioner Of Central ... on 7 January, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. 01
Excise Appeal No. 515 of 2012
(Arising out of Order-in-Original No. 83/BR-83/Th-I/2011 dated 30.12.2011passed
by Commissioner of Central Excise, Thane-I)
M/s SGS India Pvt. Ltd. .....Appellant
Unit no.16A 16B 17A 17B Shree Rajlaxmi Commercial
Complex, Kalher Village, Thane
VERSUS
Commissioner of Central Excise, .....Respondent
Thane-I 4th Floor, Navaprabhat Chambers, Ranade Road, Dadar(W)- 400028.
Appearance:
Shri Rajesh Ostwal, Advocate for the Appellant Shri A.S. Parab, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.A/86018/2022 Date of Hearing: 07.01.2022 Date of Decision: 07.01.2022 PER : S.K. MOHANTY The appellants herein are inter alia, engaged in the manufacture of excisable goods falling under Chapter 29 of the first Schedule to the Central Excise Tariff Act, 1985. During the disputed period, the appellants have imported Cyclic Hydrocarbon-Marker (for short, referred to as "marker") in 200 litre drums on payment of applicable customs duties. The appellants re-packed the marker in 5 litres aluminium cans and sold the same to their customers. In terms of Chapter Note 10 to Chapter 29 of CETA, 1985, the activity of re-Excise Appeal No. 515 of 2012 2
packing the marker from bulk pack to retail packs amounts to and considered as deemed manufacture. The appellants cleared the said marker in retail packs to their customers on payment of appropriate Central Excise Duty. In this case, the appellants have imported IAS Columns on payment of customs duty and indigenously procured duty paid Test Kit's. On scrutiny of records and upon ascertaining the process adopted by the appellants, the department observed that the 'IAS Columns' & 'Test Kits' are essential for rendering the ultimate goods marketable, as the marker alone cannot be used to identify the adulteration in the petroleum products. The department concluded that the product marker, 'IAS Columns' and 'Test Kits' are inter- dependent and cannot function separately and as such, the value of those products together should be considered as assessable value, in terms of Section 4 (1) (a) read with Section 4(3) (d) of the Central Excise Act, 1944 for the purpose of discharging the central excise duty liability on marker.
1.1. On the basis of above conclusion, the department initiated show cause proceedings against the appellants, seeking confirmation of the duty demand along with interest and for imposition of penalties. The matter arising out of the show cause notice dated 21.09.2011 was adjudicated vide the impugned order dated
02.01.2012, wherein the original authority has confirmed central excise duty demand of Rs.1,62,38,249/- along with interest and imposed equal amount of penalty on the appellant. The impugned order also imposed fine of Rs.2,50,00,000/- in lieu of confiscation of the goods i.e. 'Test Kits' and 'IAS Columns' .
1.2. Feeling aggrieved with the impugned order, the appellants have filed this appeal before the Tribunal.
2. Learned Advocate appearing for the appellants submitted that the SCN had not proposed to re-classify the goods i.e. Test Kits/IAS Columns under Chapter 29 and hence, in absence of any such proposal, the value of such disputed goods cannot be included in the assessable value of marker. The learned Advocate also submitted that in case of deemed manufacture of goods, the question of Excise Appeal No. 515 of 2012 3 inclusion of value of brought-out items does not arise. He further submitted that there is no one to one co-relation between the marker, Test Kit's/IAS Columns sold by the appellants and for that reason, the value of such additional items cannot be included in the assessable value determined for marker for the purpose of computation of the duty liability. The learned Advocate also submitted that the marker and Test Kit's/IAS Columns are not sold together as a standard unit and those items are also not the essential or integral part of the marker; hence, the value of marker has to be considered alone for the purpose of determination of the assessable value.The learned Advocate has relied upon the following judgements to strengthen the case of the appellants that the adjudged demands cannot be confirmed on them:
i. UOI Vs. Alembic Glass Industries Ltd.-2010 (259) ELT 8 (SC) ii. Super Electronics Vs. CCE-2001 (127) ELT 302 (T) iii. Goetze (India) Ltd. Vs. CCE-2004 (169) ELT 274 (T) iv. Kerala State Electronic Development Corporation Vs. CCE-2008 (224) ELT 88 (T) v. Kores (India) Ltd. Vs. CCE-2014 (303) ELT 83 (T) vi. Greysham& Co. Vs. CCE-2014 (304) ELT 129 (T) vii. Neycer India Ltd. Vs. CCE-2005 (192) ELT 620 (T) viii. Diamond Beverages Pvt. Ltd. Vs. CCE-2018 (7) TMI 913-
CESTAT KOLKATA
3. On the other hand, learned AR appearing for the Revenue reiterated the findings recorded in the impugned order.
4. In this case, the activity undertaken by the appellants of re- packing of marker from bulk to retail packs is deemed as amounting to manufacture, as per Note 10 to Chapter 29 of the CETA, 1985. The marker in question suffers duty upon carrying out such activity and removal of the same to the Oil Marketing Companies in the form of retail packs. It is an undisputed fact that separate invoices were issued for clearance of marker, Test Kit/IAS Column and appropriate duty /tax liability has been discharged on clearance of those goods separately. Thus, it cannot be said that Test Kit and IAS Columns are essential products, used for testing the petroleum products alongwith the marker. It is not a condition precedent that the Excise Appeal No. 515 of 2012 4 buyer placing purchase order on the appellants was compulsorily required to purchase all the three items together. Therefore, since marker and the Test Kit/IAS Columns were removed from separate premises of the appellants under separate set of invoices, in our view, the same cannot be considered as combined/standard unit for the purpose of consideration as single product for levy of Central Excise thereon.
5. It is a settled position of law that the value of bought-out items is includible in the accessible value of manufactured goods, only if the manufactured goods is not a complete item in itself and the bought-out items are essential parts of the manufactured goods. The aforementioned judgments relied upon by the learned Advocate squarly cover the case of the appellant that the value of all the separate items should be considered independently for determination of the assessable value and for payment of Central Excise duty.
6. In the case of Super Electronics (supra), the question raised before the Tribunal was whether, the value of Speaker should be included while determining the assessable value of Audio Decks on the ground that Speaker is essential to Audio Deck and both the items were cleared in the same pack. The question was answered by the Tribunal, holding that Audio Deck is complete in itself and Speaker is not an essential part of Audio Deck and hence, the value of Speaker is not includible in the assessable value of Audio deck.
6.1 In Goetze (India) Ltd. (supra), the issue before the Tribunal was whether the value of bought-out items such as piston rings and circlips is includible in the assessable value of 1C Engine parts like piston and gudgeon pins manufactured by the assessee, on the ground that the bought-out items are parts of piston assemblies cleared by the assessee. The Tribunal has held in favour of the assessee on the ground that a manufacturer would be liable to pay excise duty only on the goods manufactured by it and not on all the goods supplied by it.
Excise Appeal No. 515 of 2012 56.2 In Kerala State Electronic Development Corporation (supra), the point of contention was whether duty can be demanded on the bought-out items such as cable cards, armoured cables, communication cables etc. required for installation of Attendance Data Management Systems manufactured and installed by the assessee. The Tribunal has held that though bought-out items may be necessary for functioning of the system, there was no reason to add the value of such items to the value of goods manufactured by the assessee.
6.3 In Kores (India) Ltd. (supra), the dispute was whether the bought-out items such as drilling tools, accessories or operating equipment used in conjunction with the drilling rig amounted to essential parts of drilling rig manufactured by the assessee and whether the value of such bought out items is includible in the assessable value of drilling rig. Such issue was answered in negative by the Tribunal, holding that the drilling rigs were complete items in themselves and the bought-out items were not integral parts of drilling machines.
6.4 Similarly, In Greysham& Co., the question was whether the cost of pipes and pipe fittings purchased from outside were includible in the assessable value of Air Brake equipment manufactured by the assessee. It was held by the Tribunal that value of bought-out items was not includible in the assessable value of Air Brake equipment, since what had been manufactured and cleared by the assessee was Air Brake equipment and this was not a case where bought-out items had been brought to the factory for use in manufacture of final products.
6.5 In Neycer India Ltd., the issue involved was whether the value of bought-out items i.e., fittings should be included in the assessable value of flushing cistern manufactured by the assessee. The Tribunal has held that the value of bought-out items was not includible in the assessable value of cistern, even though the bought-out items were required to make the cistern functional. The aforesaid judgment was Excise Appeal No. 515 of 2012 6 affirmed by the Hon'ble Supreme Court, reported at 2015 (320) ELT 28 (SC).
7. The appellants in the present case, are only manufacturing marker (that too deemed manufacture). Even though the Test Kit/IAS Column are used in conjunction with the marker for purposes of testing, the marker is complete in itself and Test Kit/IAS Column are neither used in the manufacture of marker nor essential part of marker. In view of the facts of the case and the settled legal position, the value of Test Kit and IAS Column cannot be included in the assessable value of marker and hence, the demand of differential duty, according to our considered opinion is not sustainable.
8. In view of the foregoing discussions and analysis, we do not find any merits in the impugned order in support of confirmation of the adjudged demands on the appellants. Therefore, the impugned order is set aside and the appeal is allowed in favour of the appellant.
(Operative part of the order pronounced in the open court) (S.K. Mohanty) Member (Judicial) (Sanjiv Srivastava) Member (Technical) Sm