Custom, Excise & Service Tax Tribunal
M/S. Pelican Rubber Ltd vs Cce, Hyderabad (Vice Versa) on 27 April, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing:18/03/2010
Date of decision:..
Appeal No.E/520, 715 & 925/09;
Appn. No.E/COD/32/10
(Arising out of Order-in-original No.16/2009 dt. 30/4/2009;
Order-in-appeal No.25/2009(H-IV)CE dt. 26/6/2009 passed by CC&CE,ST, Hyderabad & Commissioner(Appeals), Hyderabad )
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, 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 the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Pelican Rubber Ltd.
..Appellant(s)
Vs.
CCE, Hyderabad (vice versa)
..Respondent(s)
Appearance Mr. Y.S.Reddy, Advocate for the appellant.
Mr. M.M. Ravi Rajendran, DR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2010 Per M.V.Ravindran This application for condonation of delay and all the appeals being inter-connected and in respect of the very same assessee, we take up all these matters for disposal by a common order.
2. Application for condonation of delay No.E/COD/32/10 is filed by the Revenue in appeal No.E/925/09. After hearing both sides, we find that the delay in filing the appeal by the Revenue before the Tribunal is only 11 days. Since the delay is marginal, we condone the delay, admit the appeal and take up the same for disposal.
3. Appeal No.E/520/09 and E/925/09 are directed against the Order-in-Original No.16/2009 dt. 30/4/2009. For brevity sake, appeal No.E/520/09 is filed by the assessee challenging the findings of the Commissioner and appeal No.E/925/09 is filed by the Revenue for non-imposition of penalty. Appeal No.E/715/09 is filed by the assessee against Order-in-appeal No.25/2009(H-IV)CE dt. 26/6/2009.
4. The relevant facts that arise for consideration are that appellants are manufacturers of Butyl rubber inner tubes falling under chapter sub-heading 40.13 of the Central Excise Tariff and they clear finished products to OEM customers, for retail sale and for exports as well. Notification No.11/2006-CE(NT) dt. 29/5/2006 amending Notification No.2/2006-CE(NT) dt. 1/3/2006 prescribed valuation of certain goods on the basis of their retail sales price (MRP/RSP). Entry at Sl.No.97 of the table in the said notification provides that parts, components and assemblies of automobiles falling under any heading attract provisions of sub-section (2) of Section 4A of the Central Excise Act, 1944 implying that the same are to be assessed on the basis of their RSP but not on the basis of their transaction value. The contention of the department is that butyl rubber tubes manufactured by the appellants fall under the category of parts of automobiles and are to be assessed under Section 4A of the Act. On the other hand, the appellants contended that their finished goods are specifically excluded from chapter 87 covering parts and accessories of automobiles and hence opted for provisional assessment of the goods till the issue was settled. The Commissioner of Central Excise, Hyderabad-IV Commissionerate had accordingly ordered for provisional assessment of the goods for six months from August, 2008 to January, 2009. After the said six months of time expired, the department finalized the assessment resulting in the impugned order. Ld. Commissioner as an adjudicating authority held that the products manufactured by the appellants would fall under the entry 97 of the Notification No.11/2006-CE(NT) dt. 29/5/2006 as amended for the purpose of valuation of the goods under provisions of Section 4A of the Central Excise Act, 1944. To come to such conclusion, he has relied on Boards circular. After coming to such conclusion, he confirmed a demand and ordered for the interest but did not propose any penal action against the appellant. Aggrieved by such an order, the appellants are before us. Revenue is also aggrieved by such Order-in-Original for non-imposition of penalty. In Appeal No.E/715/09, ld. Commissioner(Appeals) has upheld the Order-in-Original which concluded that the appellants products are covered by the heading, Sl.No.97 of Notification No.11/2006.
5.1. Ld. Counsel appearing on behalf of the appellants takes us through the entire Order-in-Original and submits as under:-
a. The SCN dt.21/7/2008 in this case was issued demanding Central Excise Duty of Rs.77,95,800/- on the clearances made by the appellants during the period from 1/7/2007 to 31/5/2008 being the differential duty between the duty liable to be paid on the basis of MRP under Section 4A of the Act, and that paid on their transaction value under Section 4 of the Act. The issue arose with issue of notification No.11/2006-CE(NT) dt.29/5/2006 amending Notification No.2/2006-CE(NT) dt.l/3/2006 by inserting serial No.97 and bringing parts, components and assemblies of automobiles under the preview of MRP based valuation. The contention of the department is that as the inner tubes manufactured by the appellants are used in the automobiles they are to be treated as parts of automobiles and are therefore covered under this notification. The department referred a case law M/s. Perfect Electric Concern Pvt. Ltd vs. CCE, Patna [1997 (993) ELT 622 (Tri)] wherein the Honble Bench mentioned a passing remark stating that the automobile tubes though not classifiable under chapter 87 are nevertheless parts of automobiles. It is pertinent to mention that this case is not with regards to discussion on classification or valuation of inner tubes. Nothing has been brought on record to show that the goods cleared by the appellant are for automobiles only. It is also not discussed how this goods do not fall under chapter 87 or whether they are parts or accessories or component etc. The department contended that as the inner tubes are used in automobiles they are to be called as parts of automobiles.
b. It is a sealed legal position that mere end use is not determinative factor for classification of goods. In the case of CCE, Delhi vs. Carrier Aircon Ltd [2006 (199) ELT (577) SC], the Honble SC held that end use to which the product is put to by itself cannot be determinative of the classification of the product. See Indian Aluminium Cables Ltd vs. UOI and others 1985 3 8CC 284. There are number of factors which have to be taken into consideration for determining the classification of the product. For the purpose of classification, the relevant factors inter alia, are statutory physical entry, the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to, the end use to which the product is put to cannot determine the classification of the product. c. The CBEC vide circular no.21/90-CX-3 dt.l7/4/1990 g 65 of paper book) mentioned that for the purpose of classification of tyres and tubes, what is important is the use of the vehicle but not the actual use of tyres and tubes.
d. In the case of United Copiex India Pvt Ltd vs. Comm of Sales Tax [1997 (94) ELT 28 (SC)], the Honble Apex Court held that In the Central Excise and Tariff Act, flaps have not been treated as accessories of motor vehicles. Flaps are taxable under tariff item 40.12 under the heading solid or cushion tyres, interchangeable tyre treads and tyre flaps of rubber. That means the flaps will not come under the heading parts and accessories of motor vehicles in entry 87.08 in chapter 87 of that Act. It is well accepted that the entries in the Schedule to the Excise Act have been stated in the language of the market place and are to be understood as the market people understand them. If the flaps are treated as car accessories in market parlance, then there is no reason to treat it separately and independently as an item of rubber product in chapter 40. APPEAL NO.E/520/2009:
e. The Adjudicating authority vide the impugned order confirmed the demand basing on the circular which was not put to the notice of the appellant. He passed the impugned order with discussions and findings in a single page wherein he has categorically mentioned that though the assesses has referred to a number of decision that the inner tubes cannot be classified as parts of automobiles, yet he finds that the issues has clarified by the board in the letter F.No.167/38/2008-CX-4 dt.16/12/2008 (Para 46 of the impugned order). It is therefore clear that the impugned order has been passed contrary to the findings of the adjudicating authority.
APPEAL NO.E/715/2009:
f. The Order-In-Original was passed without issue of notice and without being heard. When the same was appealed, the Commissioner though notice should have been issued in this case, as there are no merits in the case of appellants, the same is dismissed.
INTERPRETATION OF THE NOTIFICATION HEADING IS WRONG g. The issue stated with the mentioning of term any heading in Column No.2 against Sl.No.97 covering parts, components and assemblies of automobiles. The column heading is mentioned as Chapter or heading or sub-heading of the first schedule to the Tariff. The notice was issued by the officers on the ground that as under this column any heading is mentioned it implies that parts of automobiles falling under any heading of any chapter are covered under this notification. The appellants contention is that the expression any heading implies any heading of Chapter 87 as Chapter 87 only covers parts of automobiles. Further if the legislative intention is that any heading of any chapter is covered against entry No.97, the expression any chapter would have been mentioned against the serial no as per the practice followed in issue of notifications by the department.
h. It can been seen from any notification wherever the column heading is mentioned as Chapter or heading or sub-heading of the first schedule to the Tariff, if the intention is to cover the goods of any chapter, the department is mentioning any chapter. The general exemption Notification No.49 and general exemption Notification No.47 wherein this column no.2 also shows Chapter or heading or sub-heading of the first schedule to the Tariff, wherever the entry covers any sub heading of any chapter the expression any chapter is only mentioned which clearly shows that if the intention of the department is that all articles of all sub heading of all chapters are covered against this entry/ serial No.97 in notification No. 11/2006, the expression any chapter will have been mentioned as per the prevalent practice and judicial norms.
i. Even otherwise, it is a settled position that where a provision is capable of interpretation and two views are possible the one which is liberal and in favor of the accesses must be accepted as held in the case of CCE Bhopal vs. Rama Wood Crafis Pvt Ltd [2008 (225) ELT 348 (Tri-LB)].
CLASSIFICATION OF THE GOODS j. All excisable goods are classified under various chapters of the first schedule to the Central Excise Tariff Act, 1985. These goods are grouped under various heading and sub headings in each chapter with 8 digit nomenclatures. This classification is aligned with Harmonized Commodity Description and Coding System commonly known as HSN which is a universally accepted system. Every excisable item will have its entry in this system and is given unique code which is universal. No single item can be classified under two subheadings in this system.
k. Section XVII of the First Schedule covers automobiles and parts of automobiles in the Tariff. Chapter 87 covers Vehicles other than railway, tramway rolling stock parts and accessories thereof. Heading Nos. 8701 to 8705 and from 8710 to 8713 cover different types of automobiles and Headings 8708 and 8714 cover parts and accessories of automobiles.
l. This chapter has specific sub headings for some of the parts and accessories of vehicles and there is a residuary item others where under all other parts and accessories will fall. Therefore it is incorrect to say that the parts and accessories can fall under any chapter of the Tariff and this is against the principle of Harmonized System of Nomenclature.
INCONSISTENCIES IN BOARD CIRCULAR m. CBEC Circular F.No.167/38/2008-CX-4 dt.16/12/2008 has been issued giving instructions to follow uniform practice of assessment of parts of automobiles. This circular is against the settled legal position and against the stand taken by the Board itself. It has many contradictions in itself.
n. This Circular did not discuss about assessment of accessories of automobiles. The Circular also gives definition of the term automobile. The word automobile has not been defined in the Central Excise Act. The definition of automobile has been taken under Entry No.7 (5) of the First Schedule to the Industrial (Development & Regulation) Act, 1951. This has also been clarified by the Board in the cited Circular. The term automobile does not cover tractors, tillers, harvesters and the like falling under List 10 as Agriculture Machinery under the Schedule-I and dumpers, bull dozers, tillers, excavators and other earthmoving equipment falling under Entry 11 of the said Schedule. The inner tubes manufactured out of vulcanized or hard rubbers are used not only in the automobiles in entry no. 5 of the Schedule but also in other equipments classified under machinery in other entries. This is one of the reasons for not classifying the inner tubes and tyres as parts of automobiles under Section XVII.
CIRCULARS HAS PROSPECTIVE EFFECTIVE ONLY o. The Board Circular while issued directing the field formation to adopt the uniform approach in assessment of parts of automobile. Even assuming but not admitting that the inner tubes are parts of automobiles, the circular is applicable with effect from the date of issue i.e., 16-12-2008 only. It is clear from the Boards letter dt.9-6-2008 addressed to the field formation calling for the details on manner of assessment of duty; Cochin Commissioners clarification intimating that inner tubes are not parts of automobiles; Order-in-Appeal dt.15/12/2009 and the impugned order itself, it is clear that there was an ambiguity in the classification and valuation of inner tubes. The circular issued for the purpose of following a uniform practice of valuation is to be effective from date of issue and from the date of intimation to the trade. The appellant have been intimated by the department only on 13/3/09 only. It is further a settled legal position that in an oppressive circular has prospective effect only unless it is clearly stated therein as retrospective.
SECTION NOTES EXCLUDES INNER TUBES FROM THE EXPRESSION OF PARTS OF AUTOMOBILES p. Note 2 of Section XVII stipulates that the expression parts and parts and accessories do not apply to the following articles whether are not they are identifiable as per the goods of this section.
a. Joints, washers are the like of any material (classified according to their constituent material or in heading 8484) or other articles of vulcanized rubber.
q. The inner tubes manufactured by the appellant are classified under Section 40 as per their constituent material i.e. rubber. Therefore they do not fall under the literal/legal expression of parts or accessories as per note 2 of Chapter XVII.
r. Note 3 of the Section stipulates that references in Chapters 86 to 88 to parts or accessories do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those chapters.
INNER TUBES ARE AT BEST ACCESSORIES OF MOTOR VEHICLES s. The term Accessory has been defined in McGraw Hill Dictionary of Scientific and Technical Terms as follows:
Accessory (Mech Eng): A part, sub-assembly, or assembly that contributes to the effectiveness of a piece of equipment without changing its basic function; may be used for testing, adjusting, calibrating, recording or other purposes. A part has been defined as follows:
Part (Eng) : An element of a sub-assembly, not normally useful by itself and not amenable to further disassembly for maintenance purposes. t. The inner tubes are not used on motor vehicles as they are as an independent part. It cannot be used so. It is attached to the tyre for effecting running of the tyre with the air filled in the tube. Therefore, it is only an adjunct or accompaniment of tyre. Therefore, even if it is assumed without admitting that inner tubes fall under the category of parts and accessories of automobiles, it may at best be termed as accessory of automobile. Accessory of an automobile is not covered in the notification No.11/2006-CE (NT). Therefore, inner tubes are not to be assessed on MRP. Even the Honble Supreme Court of India held that inner tube and tyre are accessories of automobiles.
5.2. He relies upon the following case laws:-
a. Ranpur Inds. Vs. CCE, Ahmd. [1999(108) ELT 495(Tri.)] b. Indichem Vs. UOI [1996(88) ELT 35(Guj.)] c. Interl Designs Sys. India Vs. CCE [2008(223) ELT 135(SC)] d. Qazi Noorul HHH Petrol Pump Vs. Dy. Director [2009(240) ELT 481(SC)] e. CIT, Kerala Vs. Tara Agencies [2007(214) ELT 419(SC)] f. Amrit Paper Vs. CCE, Ludhiana [2006(200) ELT 365(SC)] g. Gold Stone Engg. Ltd. Vs. UOI [2005(181) ELT 11(AP)] h. UOI Vs. Kanunga Inds. [2004(178) ELT 19(SC)] i. Perfect Electric Concern Pvt. Ltd. Vs. CCE, Patna [1997(193) ELT 622(Tri.)] j. CCE, Delhi Vs. Carrier Aircon Ltd. [2006(199) ELT 577(SC)] k. CCE, Bolpur Vs. Ratan Melting and Wire Inds. [2008(231) ELT 22(SSC)] l. Pragathi Silicon Pvt. Ltd. Vs. CCE [2007(211) ELT 534(SCC)] m. GS Auto International Vs. CCE, Chandigarh [2003(152) ELT 3(SCC)] n. Escots Ltd. Vs. CCE, Delhi [2002(142) ELT 379(Tri. Del.)] o. United Copiex India Pvt. Ltd. Vs. Comm. Of Sales Tax [1997(94) ELT 28(SSC)] p. Mehra Brother Vs. Jt. Commercial Officer [1991(51) ELT 173(SCC)] q. Eureka Forbes Ltd. Vs. CCE, Chandigarh [2000(12) ELT 533 r. CCE, Delhi Vs. Carrier Aircon Ltd. [2006(199) ELT 577(SC)] He would submit that the Order-in-Original and the Order-in-Appeal be set aside.
6. Ld. DR would submit that the issue involved in this case is squarely covered by the entry in the Notification very clearly reads as parts, components and assemblies of automobiles. It is his submission that the inner tyre tubes manufactured by the appellants are automobiles. These tubes are carefully assessed under the provisions of Section 4A of the Central Excise Act, 1944. He would submit that the Boards circular dt. 16/12/2008 has clearly clarified the situation and hence the demand of the duty as confirmed by the lower authorities is correct. As regards the appeal filed the Department, it is his submission that the Revenue has preferred the appeal for non-imposition of the penalty on the appellant despite there being a finding that the appellant has not discharged the duty liability as per the notification. He would submit that the appellant should be penalized for such an act.
7. We have considered the submissions made at length by both sides and perused the records. The issue involved in this case is regarding the applicability of provisions of Section 4A of the Central Excise Act, 1944 to the products manufactured and cleared by the appellant. The provisions of Section 4A are made applicable to the appellants product vide Notification No.11/2006-CE(NT) dt. 29/5/2006.
8. It is undisputed that the appellant is manufacturing inner tubes for tyres of automobiles. It is also undisputed that the classification of the said product manufactured by the appellant is under chapter heading 40.13 of the Central Excise Tariff Act, 1985. It is also undisputed that the appellant has been clearing these tubes on payment of appropriate central excise duty on the transaction value as arrived at under Section 4(1)(A) of the Central Excise Act, 1944. On this factual matrix, we take up the matter for disposal whether the products manufactured by the appellant would be covered under Section 4A of the Central Excise Act, 1944 or not. In order to arrive such conclusion, it is necessary that the entry to the table at Sl.No.97 of the Notification No.11/2006-CE(NT) dt. 29/5/2006 as amended needs to be read, which reads as under:-
Sl.No. Chapter, heading, sub-heading or tariff item of the First Schedule Description of goods Abatement as a percentage of retail sale price 97 Any heading Parts, components and assemblies of automobiles 30 It can be seen from the above reproduced entry that this entry continued till 27/2/2010 when Notification No.9/2010-CE(NT) was issued, which reads as under:-
Sl.No. Chapter, heading, sub-heading or tariff item of the First Schedule Description of goods Abatement as a percentage of retail sale price 108 Any heading Parts, components and assemblies of vehicles (including chassis fitted with engines) falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716 30
9. It can be seen that during the period in question in this case i.e. July, 2007 to May, 2008 and August, 2008 to January, 2009, the entry to be considered is as per the entry in Notification No.11/2006 as amended. It is to be noted that the table to the notification very clearly indicates chapter, heading, sub-heading or tariff item of First Schedule for the purpose of coverage under the Section 4A. Under this column, the entry No.97 reads as any heading which would mean that the products falling under any heading of the Central Excise Tariff act, 1985 would be covered under the table entry No.97 in the table. The next point which is to be considered is whether the said product falling under any heading of the Central Excise Tariff Act would fall under the description of the goods as indicated in column 3 of the said table to the Notification No.11/2006. The description of the column clearly reads Parts, components and assemblies of automobiles. As already indicated herein above, the inner tubes manufactured by the appellants are only cleared to automobile manufacturers. These inner tubes are used by the automobiles companies for the purpose of using in the tyres and inflate them with air to be used with the tyres. Undoubtedly these products would fall under the categories of Parts, components and assemblies of automobiles. The ld. Counsels argument that this would be considered as accessories will not carry the case of the appellant any further as the tyre of a car cannot function without inner tube. Further the arguments of the ld. Counsel that the Central Excise Tariff Act does not have definition of automobiles. He would submit that this anomaly has been rectified by the Department by issuing a Notification No.9/2010 wherein they have very clearly mentioned as any heading excluding the vehicles falling under specific chapter. We find that this entry in Notification No.9/2010 will have prospective effect only. The issue in the hand would be squarely covered by the entry made in the Notification. We also find that the ld. Commissioner has correctly relied upon clarification issued by the Board on the very said notification.
In view of this, we concur with the finding of both the lower authorities as regards the confirmation of the demand of duty and interest thereon. We also concur with the lower authorities that the appellant need not be visited with the penalties as this issue is of interpretation of notification.
10. In view of the foregoing reasonings, appeals filed by the appellant/assessee and by the Revenue are rejected. Impugned orders are upheld.
(Pronounced in court on ..) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr 16