Custom, Excise & Service Tax Tribunal
Mercedes Benz India Pvt. Ltd vs Cce Pune Iii on 26 October, 2017
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
E/1471/07
(Arising out Order-in-Original No. 31/2007/ADJ dated 29.08.2007 passed by the Commissioner of Central Excise, Pune III)
For approval and signature:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri Raju, Member (Technical)
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Seen
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
Mercedes Benz India Pvt. Ltd.
Appellant
Vs.
CCE Pune III
Respondent
Appearance:
Shri Gajendra Jain, Advocate for the appellant Shri Ajay Kumar, Addl. Commissioner (AR) for the respondent CORAM:
Honble Shri Ramesh Nair, Member (Judicial) Honble Shri Raju, Member (Technical) Date of hearing : 25.09.2017 Date of decision : 26.10.2017 O R D E R No: ..
Per: Ramesh Nair The fact of the case is that the appellant had imported various parts of motor vehicle. The said parts were subjected to process of packing repacking in unit container, labelling/ relabeling and affixing the brand name along with MRP on the product before clearing to their dealers/ customers. The case of the department is that the said activity carried out by appellant is covered under third schedule to Central Excise Act and also amounts to manufacture in terms of Section 2(f)(iii) of the Central Excise Act 1944 with effect from 01.03.2003. It was revealed that the appellant were affecting the clearance of the said goods without payment of duty. Therefore, after a detailed investigation a show-cause notice no. 01/2006-07 dated 19.12.2006 was issued demanding central excise duty amounting to `81,80,520/- for period 01.03.2003 to 06.11.2005. In the notice, interest and penalty was also proposed under Section 11AB and 11AC of the Central Excise Act 1944 respectively and confiscation of goods valued at `835,46,236/- (MRP) was also proposed. In the adjudication, demand of duty proposed in the show-cause notice along with interest penalty and Redemption Fine was confirmed. Therefore, appellant is before us.
2. Shri Gajendra Jain, ld. Counsel appearing on behalf of the appellant submits that imported parts were packed and sold as spare parts of the motor vehicle. Therefore the correct classification of all such parts is under 87.08. The chapter 87.08 is not falling under the third schedule of the Central Excise Act. Therefore the legal fiction of manufacture provided for the goods listed in third schedule is not attracted in respect of their goods which are classifiable under 87.08. Accordingly, the activity if any, carried out by the appellant is not amounting to manufacture, hence no duty demand is sustainable.
3. He further submits that demand for the period March 2003 to November 2005 was proposed vide show-cause notice dated 19.12.2006, therefore the extended period was invoked which is not applicable. He submits that import of spare parts, availment of cenvat credit and transfer of such goods to Spare parts Division on payment of duty was very much known to the department, therefore there was no suppression of fact on the part of the appellant. Accordingly, the invocation of longer period for demanding duty is not maintainable. He further submits that the appellant had paid the entire duty along with interest before issuance of show-cause notice, therefore the case of the appellant is covered by Section 11A(2B), hence no penalty can be imposed. As regards the confiscation, he submits that the goods ordered to be confiscated are admittedly those goods which were cleared by the appellant and was not available for confiscation. He submits that as per the decision of Larger Bench in the case of Shiv Kripa Ispat Pvt. Ltd. 2009 (235) ELT 623 (T-LB) which was affirmed by the Hon'ble Bombay High Court in 2015 (318) ELT A259 (Bom) it was held that when the goods are not available for seizure, no confiscation can be ordered in absence of such goods, therefore consequently Redemption Fine was not warranted. A similar view was taken in the case of CCE vs. Finesse Creations Inc. 2009 (248) ELT 122. As regards import of goods he placed reliance on the following judgment:-
* G.S. Auto International Ltd. vs. CCE 2003 (152) ELT 3 (SC) * Cast Industries (P) Ltd. 2015 (325) ELT 471 (SC) * CC vs. G.E.Lighting India Pvt. Ltd. 2007 (207) ELT 530 (T) Affirmed by Supreme Court in the case reported at 2007 (213) ELT A49 (SC) * CCE vs. Besmak Components (P) Ltd. 2007 (213) ELT 533 (T) * Cestat Order no. A/87528-87530/17/EB dated 03.05.2017 in Bajaj Auto Ltd. * CESTAT Order no. A/85227-85228/17/EB dated 30.11.2016 in CCE vs. Rallis India Ltd. * CCE vs. Panchsheel Soap Factory 2002 (145) ELT 527 (Tri-Del) Affirmed by Supreme Court in 2003 (156) ELT 382 (SC) * CCE vs. Loreal India Ltd. 2004 (167) ELT 417 (T-Mum) * Lal International Pvt. Ltd. vs. CCE 2003 (154) ELT 520 (Tri-Del)
4. Shri Ajay Kumar, Ld. Addl. Commissioner (AR) appearing on behalf of the revenue reiterates the finding of the impugned order. He further submits that the submission of the ld. Counsel that their goods are classifiable under 8708 is incorrect on the face of record that the goods were imported and cleared under bill of entry wherein the classification has been decided finally. The adjudicating authority followed the same classification. Secondly, when the imported goods as such were only packed, labelled and affixed with the MRP the nature of the goods is not changed. Therefore, the classification under which the goods were cleared from the customs which were neither disputed by the revenue or assessee, attained finality. Accordingly, the classification adopted by the adjudicating authority on the repacked goods is in consonance with classification decided in case of imported goods, which cannot be disputed. In this regard, he placed reliance on the judgement of this Tribunal in the case of Nitin Patki 2011 (273) ELT 104.
5. We have carefully considered the submission made by both sides.
6. We find that the adjudicating authority as regards classification of the goods under Central Excise followed the classification of the imported goods in the bill of entry. Therefore the same cannot be disputed. We also observed that Interpretative Rules and note 2(a) of Section XVI of Central Excise Tariff Act, 1985 for the goods covered under Chapter 85 provided that even though goods are used as a part but the same should be classified under the specific tariff entry of the product. If the goods are not capable of being classified in a particular chapter heading then only it will be classified as parts of equipment/ machine/vehicle. In the present case, various parts imported by the appellant have its respective tariff entry which will prevail overall general entry, therefore not only on the basis of the classification decided at the time of assessment of bill of entry, but independently also it is correctly classifiable under the specific tariff entry of the product in respective chapter heading. Therefore, the submission of the ld. Counsel that all the items which were cleared as spare parts should be classified as parts of motor vehicles under 8708 is not acceptable on the facts as well as on law point. Therefore, we hold that the goods repacked and sold as spare parts is not classifiable under 8708 but it is correctly classified under respective chapter heading as held by the adjudicating authority. As regards the issue whether the activity carried out by the appellant is amounting to manufacture, we refer to the relevant provision of Section 2(f) of the Central Excise Act which is reproduced below:-
Section 2(f) manufacture includes any process, ?(i) incidental or ancillary to the completion of a manufactured product; and ?(ii) which is specified in relation to any goods in the Section or Chapter notes of [the First Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or
(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labeling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;
7. From reading of the Section 2(f)(iii), it is seen that in respect of goods specified in third schedule activity such as packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer amounts to manufacture. In the facts of the present case, the goods as discussed above are falling under various chapter heading as proposed in the show-cause notice are covered under third schedule and the activity which is undisputedly carried out by the appellants are packing in unit container, labelling with declaration of the MRP on the unit container are clearly covered under Section 2(f)(iii) therefore amounting to manufacture. In this undisputed fact the appellant was liable to pay excise duty on the basis of MRP based valuation under Section 4A after deduction of abatement as provided under notification issued thereunder. Therefore we are of the view that on merit, the activity being one of manufacturing, clearance of the goods was liable to payment of duty.
8. As regards the submission of ld. Counsel that the demand is time barred as there is no suppression of fact, we find that though the transfer of spare parts to the spare part division on payment of duty may be known to the department from the records, but the activity of packing, repacking, declaration of MRP thereon was not known to the department which alone is the basis for making the product excisable. Therefore the activity of manufacture was not disclosed to the department by the appellant. Therefore there is a clear suppression of vital fact from the department. Accordingly, the proviso to Section 11A(1) is clearly invocable hence the demand for extended period is legal and correct. Since we hold that there is suppression of fact on the part of appellant, the payment by the appellant of the duty along with interest will be of no help to the appellant. Therefore, the demand of duty, interest and penalty under Section 11AC is upheld. As regards the issue of confiscation of the goods, we find that the confiscation was made in respect of the goods which had already been cleared and the same was not available. No seizure of such goods were made. Therefore, confiscation of the goods which were not available is not legal and correct as held in the Larger Bench judgment in Shiv Kripa Ispat Pvt. Ltd. (supra). We therefore set aside the confiscation of the goods and consequential Redemption Fine.
9. As regards the judgment relied upon by the ld. Counsel, all the judgment are related to the dispute about the activity of manufacture with reference to the Chapter note of Central Excise Tariff Act. In the present case, the entire case is based on the activity of manufacture as prescribed under Section 2(f)(iii) of Central Excise Act 1944 which is different from the deemed manufacturing provided under Chapter note of the Central Excise Tariff Act. Therefore the judgment relied upon by the ld. Counsel are on different facts. Therefore, the same are not applicable.
10. As per our above discussion, we modify the impugned order in the above terms. The appeal is partly allowed.
(Pronounced in Court on ..............................) (Raju) Member (Technical) (Ramesh Nair) Member (Judicial) //SR
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