Custom, Excise & Service Tax Tribunal
M/S M.G. Automotives (P) Ltd vs Cce, Hyderabad-I on 8 August, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Division Bench Court I Appeal No. E/777 & 778/2008, 624 & 625/2009 (Arising out of Order-in-Original No. 5/2008-(C.E.)-Commr. dt. 08.08.2008, O-I-O No. 7/2009-(C.E.)-Commir. dt. 01.04.2009 passed by CC & CE, Hyderabad-I) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, 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? 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s M.G. Automotives (P) Ltd., ..Appellant(s) Vs. CCE, Hyderabad-I ..Respondent(s)
Appearance Sh. Karan Talwar, Advocate for the Appellant.
Sh. R.K. Dass, Assistant Commissioner (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, Member(Technical) Date of Hearing: 26.05.2016 Date of Decision: FINAL ORDER No._______________________ [Order per: Madhu Mohan Damodhar] The issue involved in these appeals being connected and identical, they were heard together and are disposed by this common order.
2. The facts of the case as put forth by the appellants are:
(i) They are engaged in the activity of building body at their factory on the duty paid motor vehicles chassis supplied to them as per the instructions from M/s Mahindra International Limited (hereinafter referred to as MIL) [April07-October07] and M/s Mahindra Navistar Automotives Limited (hereinafter referred to as MNAL [November07-September08].
(ii) For this purpose they entered into agreement with MNAL and MIL for sale of body to be built on the chassis supplied to them by MNAL and MIL.
(iii) The CENVAT credit of duty paid on such chassis was taken by the Appellants.
(iv) For the purpose of building body, the appellants purchased various raw materials on their own account and undertook the body building work.
(v) They charged a consolidated sales consideration for the body built on the chassis which included the cost of raw materials procured by them; body building costs including the profit margin.
(vi) The activity of building body on duty paid chassis amounted to manufacture as per Note 5 to Chapter 87 of the Central Excise Tariff Act, 1985.
(vii) The assessable value of the goods cleared by the appellants has been determined by adding the price of the body plus cost of chassis in terms of Section 4(1)(b) read with Rule 6 of the Valuation Rules. They are paying excise duty on the value determined in the aforesaid manner.
(viii) In the above background, the appellants were issued with a show cause notice dated 01.05.2008 proposing demand of differential duty of Rs.3,25,06,378/- @ 1%on the differential value of Rs. 19,08,21,210/- for the period from April 2007 to October, 2007 on the ground that they were acting as job worker to MIL and were therefore required to pay duty in terms of Rule 10A of the Central Excise Valuation Rules, 2000. The notice also proposed imposition of penalty on MIL under Rule 26 of the Central Excise Rules, 2002.
(ix) Adjudicating authority vide Order-in-Original dated 08.08.2008 confirmed the demands as proposed in the show cause notice and also imposed equivalent penalty and demanded interest at the applicable rate. The authority also imposed penalty on MIL.
(x) Hence appeals E/777/2008 and E/778/2008.
(xi) The appellants were issued with another show cause notice dated 25.11.2008 demanding differential duty of Rs. 4,63,05,014/- on the differential value of Rs. 34,11,05,546/- for the period from November, 2007 to September, 2008 on the ground that they were acting as job worker for MNAL and was therefore required to pay duty in terms of Rule 10A of the Central Excise Valuation Rules, 2000.
(xii) Order-in-Original dated 31.03.2009 / 01.04.2009 confirmed the demands as proposed in the show cause notice, also imposed equivalent penalty and demanded interest at the applicable rate.
(xiii) Hence appeals E/625/2009 and E/624/2009.
3. At the outset, Learned Advocate Sh. Karan Talwar appearing for the appellant fairly conceded that the issue involved in the case has been decided against the appellant and in favour of department by the Tribunal. However, the Learned Advocate proceeded to submit that these decisions are per incuriam as the Tribunal had not considered the Apex Court judgments relied upon by the appellants in those cases, in the correct perspective. He made the further following submissions:
(a) In the above decisions, the Honble Tribunals have failed to consider section 2(h) of the Central Excise Act, 1944 wherein the term sale has been defined to mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration.
(b) Reference can be drawn to the decision of the Tribunal in the case of Indian Rayon and Industries Ltd vs. CCE [2007 (212) ELT 358 (Tri-Bang)] wherein the Tribunal had considered the eligibility of exemption under Notification No. 38/2003-CE on the ground that the job workers are not actually purchasing the goods, which is an essential condition for availing the notification benefit. The Tribunal observed that the term sale or purchase are not defined in the notification and accordingly reference has to be drawn to section 2(h) of the Excise Act. In terms of the said definition, it is sufficient that there is transfer of possession to be considered as purchase and allowed the benefit.
(c) The said decision has been upheld by the Honble Supreme Court in the case of CCE Vs Aditya Birla Nuvo Ltd., [2015 (325) ELT 635 (SC)] wherein the Honble Supreme Court has referred to the principle laid down by the Constitutional Bench of the Honble Supreme Court in the case Ujagar Prints vs. Union of India [1988 (38) ELT 535 (SC)].
(d) Also, the Honble Bombay High Court in the case of Hyva India Pvt Limited [2015 (327) ELT 41 (Bom)] at Para 63 and 64 held that the Court did not render a conclusive opinion when excisable goods are manufactured by a job worker.
(e) Valuation rules has to be read with charging section. In the instant case, valuation of goods in terms of section 4(3) (d) of the Excise Act, it is the transaction value that has to be considered. Further, the said provision is subject to the charging provision contained in section 3 of the Excise Act. In other words, section of the Excise Act being the charging section, the definition of transaction value must be read in the text and context thereof and not dehors the same.
(f) In the instant case, while calculating the duty liability, the Ld. Commissioner has adopted highest selling price for a particular model on monthly basis on the basis of sales effected during a particular month, instead of adopting the actual sale price. Since the same is contrary to the principle provided under Rule 10A (ii) of the Valuation Rules, the Appellant submits that the value has to be re-determined in terms of Rule 10A (ii) of the Valuation Rules.
(g) Benefit of cum duty should be granted to them.
(h) The ingredients required to be present in a case to impose penalty under rule 25 of the Central Excise rules, 2002 is not present in the instant case. Therefore the impugned order imposing penalty under Rule 25 of the Central Excise rules, 2002 is incorrect and liable to be set aside. Hence interest under Section 11AB is also not payable by them.
4. On behalf of the department, the Learned AR Sh. R.K. Dass vigorously opposed the appeals. He stated that the matter is no longer res integra and has been settled in favour of the department in a number of Tribunal judgments. He also placed reliance on Boards Circular 902/22/2009-CX dated 20.10.2009.
5. Heard both sides and have gone through the facts, evidence and judgments placed before us.
6. We find it for a fact that identical matter has been agitated in the Tribunal, which have decided the issue against the appellant in a number of cases:
In the case of Audi Automobiles Vs CCE [2010(249) ELT 124 (Tri-Del)] on identical facts, the Tribunal inter alia held as below:
21.?In the facts and circumstances of the case, it is difficult to accept the contention that the work entrusted to the said firms was not to a job work within the meaning of expression under Rule 10A or that it was not the work on behalf of the principal manufacturer. In the facts and circumstances of the case, it is apparent that the said firms had cleared the goods in relation to the body fabricating and mounting on the chassis which were supplied to the said firms free of cost by the manufacturer of chassis. Being so, the activity for the purpose of valuation would squarely fall under Rule 10A and not under Rule 6. We, therefore, do not find any illegality in the impugned order as far as the demand of duty and interest payable thereon from the appellants.
Again, in the case of Hyva India Pvt Ltd., Vs CCE, Belapur [2013 (292) ELT 59 (Tri-Mum)], on similar facts, the Tribunal inter alia held as follows:
14.?The ld. Sr. Advocate also relied on the following decisions to prove his case that when the body is sold, it is a sale as per the Sale of Goods Act, 1930 :-
1. Patnaik & Company v. State of Orissa
2. Mackenzies Ltd. v. State of Maharashtra
3. Commissioner of Commercial Taxes v. M.G. Brothers
4. Pothula Subba Rao v. State of A.P.
5. Jiwan Singh & Sons v. State of Punjab
6. Commissioner of Sales Tax v. Haji Abdul Majid & Sons.
All these decisions were in respect of dispute with regard to levy of sale tax in respect of body built on chassis. These decisions are, therefore, distinguishable from the present case as the dispute before us is with regard to valuation of the goods under Rule 10A of the Central Excise Rules.
15.?Appellants also contended that Rule 10A is attracted only when goods are manufactured on behalf of and when the transactions are on principal to principal basis, Rule 10A is not applicable. The appellants relied on the decisions in Basant Industires, Mahavir Metal Industries, Poona Bottling Co. Ltd., Spencer & Co. Ltd. and Steel City Beverages Pvt. Ltd. We find that the issue in these decisions was regarding applicability of Exemption Notification under Notification No. 85/72; 176/77 and 211/77 etc. Therefore, we find that the interpretation of words on behalf of was not in respect of interpretation of Rule 10A which was not in fact in existence at that time. We, therefore, find that these decisions are distinguishable from the present case.
16.?The ld. Sr. Advocate also relied on the Patna High Courts decision in the case of Tata Engineering & Locomotive Company Ltd. which was in respect of body builders. We find that the decision of the Honble Patna High Court was in respect of show cause notice issued by the Excise Department demanding duty from Tata Engineering & Locomotive Co. Ltd. and not from the body builders, whereas, in the present case the duty has been demanded from the appellants and not from Tata Motors. Moreover, when the decision was passed Rule 10A was not in existence. Therefore, we are of the view that the ratio of the said decision is not applicable to the present case.
17.?The appellants also relied on the decision of the Tribunal in the case of CCE v. M/s. Innocorp Ltd. mainly on the ground the said decision was in respect of the interpretation of Rule 10A and the Tribunal had taken a view that for applicability of Rule 10A the definition should satisfy three requirements viz. (i) he should manufacture or produce goods; (ii) he should do it on behalf of a principal manufacturer; and (iii) he should do it from any inputs or goods supplied by the principal manufacturer or by any other person authorized by him. We find that the Tribunal in that case had examined the agreement between the assessee and Tupperware and all the clauses from (a) to (j) were examined by the Honble Tribunal and on the basis of which the Tribunal held that the second requirement with regard to on behalf of was not satisfied in that case and accordingly the case was decided in favour of the assessee. We find that in the present case the appellants are sub-contractors in relation to the body building activity on the chassis. Purchase Order also referred to the expression sub-contracting and the appellants had not produced before us any copy of the agreement between the Tata Motors and the appellants. In the absence of any detailed contract as was available in the case of M/s. Innocorp. Ltd. before the Tribunal in that case, the ratio of the said decision is not applicable to the present case.
18.?We are, therefore, of the view that the decision of the Audi Automobiles cited supra is squarely applicable to the present case before us and accordingly we hold that the value of the goods supplied by the appellants is to be determined under Rule 10A of the Central Excise Valuation Rules, 2000 and not under Rule 6. We, therefore, do not find any infirmity in the Orders-in-Original with regard to valuation of the goods under Rule 10A of the Valuation Rules. Since the duty is required to be paid under Rule 10A, interest is also required to be paid on the duty quantified by the department. Accordingly, we uphold the Orders-in-Original with regard to confirmation of duty under Rule 10A of the Valuation Rules along with interest. However, sales tax amount paid by the appellants needs to be deducted from the value.
7. This decision was appealed against by Hyva India Ltd. However, the Honble High Court of Bombay did not find any merit and dismissed the writ petition, as reported in Hyva India Vs Union of India [2015 (327) ELT 41 (Bom)] the relevant part of which is extracted as under:
63.?Finally, and in the light of the view that we have taken we need not go into all the contentions and with regard to applicability of Rule 10A. We do not think that the petitioners and in the given facts and circumstances can urge that they have not manufactured the goods on behalf of another person or that their relationship with M/s. Tata Motors Limited is on principal to principal basis. The argument on relationship can be advanced in future cases by the petitioners irrespective of the conclusions that we have reached on the legality and validity of Rule 10A. Insofar as order dated 30th November, 2012 passed by the Tribunal is concerned, that clearly proceeds on the applicability of Rule 10A to the transactions and dealings noted therein. Therefore, it would be open for the petitioner to urge in other and future cases that the relationship being not covered by Rule 10A it has no applicability. In other words, they can urge that Rule 10A cannot be invoked or has been erroneously and incorrectly invoked and applied to a given transaction and case. All such contentions and based on the judgments which have been relied upon by Mr. Sridharan can be canvassed. We, therefore, need not express any opinion as to when Rule 10A could be said to be applicable.
64.?Similarly, we do not wish to render a conclusive opinion as to what could be the situation in which it would be concluded that the excise goods are produced or manufactured by a job worker. If they are excisable goods produced or manufactured by a job worker but they are not on behalf of a person referred to as a principal manufacturer nor could the activity carried out be deemed as job work also because a person engaged in the manufacture or production of goods has not obtained any inputs or goods from the principal manufacturer or by any person authorised by him. In other words, no inputs or goods being supplied by the said principal manufacturer or any other person authorised by him the activity cannot be termed as job work within the meaning of the explanation. In that event it would be possible to urge that Rule 10A has no application at all. The case, therefore, should be then processed and dealt with by the rules other than Rule 10A. Even that contention and plea is open and, therefore, we need not express any opinion as to whether the expression on behalf of is distinct from the expression for, or on behalf of. We also, therefore, do not deem it necessary to express any opinion on the fourth and fifth submissions set out in the written submissions. We are of the view that the Revenues interpretation and which we have accepted does not render the phrase on behalf of redundant. If the Rule is read in its entirety with the proviso and the explanation, then we are sure that the applicability of Rule 10A is a matter which can be independently dealt with and depending on the facts and circumstances in each case. Therefore, it is not possible to lay down a general rule as to when can the process be said to be a job work and undertaken on behalf of a person named as principal manufacturer from any inputs or goods supplied by him or by any other person authorised by him. The contentions on the applicability of Rule 10A thus can be canvassed irrespective of Rule 10A being upheld by us.
65.?Therefore, all the judgments in the compilation Vol. 2 need not be referred in further details.
66.?As a result of the above discussion, we do not find any merit in each of these writ petitions. Rule is discharged in each of them. Each of the writ petition is, accordingly, dismissed. In the circumstances, there will be no order as to costs.
8. The same view has been reiterated by the Tribunal even in a subsequent Order No. 75263-75318/2014 dated 22.05.2014 in the case of Hyva India Ltd Vs CCE & ST, Jamshedpur.
9. From the discussions above, it becomes evident that the identical issue involved in these appeals has already been analysed at length in the aforesaid judgments of Tribunal upholding the stand of the department, and in fact the Tribunal view has also been sustained by the Honble High Court of Bombay. This being the case, notwithstanding the Learned Advocates valiant, but vain, efforts to convince us that the above judgments are per incuriam and his other arguments that valuation rules has to be read with charging section, his reference to Committee set up by CBEC and report thereof on provisions for job work valuation etc., judicial discipline and judicial propriety requires us to follow and apply the ratio of the judgments cited supra especially when it is not the case of appellant that the same has not been stayed or overturned by higher courts.
10. In the circumstances we are of the considered opinion, that the four appeals requires to be dismissed, which we hereby do. Appeals dismissed.
(Pronounced on. in open court)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER(JUDICIAL)
Jaya.
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