Custom, Excise & Service Tax Tribunal
Cce, Delhi-Iii vs M/S.Alcatel India Ltd on 20 January, 2015
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066
CIRCUIT BENCH AT CHANDIGARH
Appeal No. E/1791-1794/2006-Ex(DB)
(Arising out of OIO No.15-18/CE/2005, dt.29.04.2005, passed by CCE, Delhi-III, Gurgaon)
CCE, Delhi-III Appellant
Vs.
M/s.Alcatel India Ltd. Respondent
Appearance:
Appellant: Shri A.K. Singh, Authorised Representative Respondent: Shri Ramesh Kumar Sharma, Advocate Honble Mr.P.K.Das, Member (Judicial) Honble Mr.P.S.Pruthi, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2. Whether it would be released under Rule 27 of the 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 Department Authorities?
Yes Coram: Honble Mr. P.K.Das, Member (Judicial) Honble Mr.P.S.Pruthi, Member(Technical) Date of Hearing/decision: 20.01.2015 FINAL ORDER NO.51051-51054/2015 PER: P.K.DAS These appeals are arising out of a common order and therefore, all are taken up together for disposal.
2. By the impugned order, the Commissioner, Central Excise dropped the proceedings initiated under four show cause notices. The Revenue filed these appeals against the order of the Commissioner.
3. Respondents are engaged in the manufacture of Digital Switching Systems and parts thereof classifiable under Heading No.85.17 of the Schedule to the Central Excise Tariff Act, 1985. Learned Authorised Representative for the Revenue, drew attention of the Bench to the relevant portion of the show cause notices. We find that there are three issues involved in the show cause notices, as under:-
a) The assessee had cleared software loaded in the Digital Switching Systems from their factory premises to the sites of BSNL/MTNL, collectively valued at Rs.31,79,01,546.00 during the period from 1st April 1998 to 31st May, 2000, without payment of duty amounting to Rs.5,09,76,529.00 under the cover of non-excisable invoices.
b) The assessee had also cleared certain items (such as Printer, PC Workstation, Modem, Cable Line, ISDN Telephone, Terminal Adapter which were bought to the premises of the unit) in the guise of as non-manufactured parts, valued at Rs.21,19,90,054.00 without payment of Central Excise duty amounting to Rs.3,43,67.490.00 in the period from 1st April 1998 to 31st May, 2000, under the cover of non-excisable invoices.
c) The other bought out items (such as Power Plant, Battery, Inverter, Main Distribution Frame and Digital Distribution Frame were supplied direct to the site of BSNL/MTNL), valued at Rs.66,25,64,092.00 were integral parts of the equipment manufactured by the assessee, but were cleared without payment of Central Excise duty amounting to Rs.10,66,34,203.10 during the period from 1st April 1998 to 31st May, 2002, under the cover of non-excisable invoices.
4. Revenue filed these appeals on the second issue, Whether dropping of demand of duty in respect of certain items such as Printer, PC Workstation, Modem, Cable Line, ISDN Telephone, Terminal Adapter, which were bought to the premises of the unit valued at Rs.21,19,90,054/- and cleared without payment of Central Excise duty amounting to Rs.3,43,67,490.00 during the period from 1st April 1998 to 31st May, 2000 1st April 1998 to 31st May, 2000 1st April 1998 to 31st May, 2000, under the cover of non-excisable invoices, was proper.
5. Learned Authorised Representative for the Revenue submits that the bought out items which were received by the Respondent are essential parts of the finished goods.
6. On the other hand, learned Counsel for the Respondent contested the demand of duty on merits as well as revenue neutrality. He submits that there is no dispute that the Respondents had not availed CENVAT Credit on the bought out items and the value of bought out items were not included in the assessable value. It is contended that if the value of the bought out items included in the assessable value, they were eligible to avail CENVAT Credit and the situation would be revenue neutrality. For the purpose of proper appreciation of the facts of the case, we reproduce below the relevant findings of the Adjudicating authority as under:-
25.1 I find that the Noticee supply Printers, PC Workstation, Modems, Line Testers and ISDN Telephone as bought out items. I find that all these items are in the nature of accessories of equipment manufactured by the Noticee and these items only provide additional features and convenience in the operation of the manufactured equipments, like printers are for printing purposes, PC workstations are for interface of customer with equipment, Modems are for linking between personal computers and Equipments, Line Testers are for testing cables and ISDN Telephones are for speedy transfer of data. In view of the above functions of the bought out items, I find that the items manufactured by Noticee are complete in themselves even without these bought out items.
25.2 I find that that the scheme of payment of excise duty on accessories is optional in nature and the manufacturer clearing accessories with his final products has two options. Firstly, he can claim MODVAT Credit on the accessories, then, he has to pay excise duty on accessories. Secondly, he need not avail MODVAT Credit and in such a situation, he is not required to pay duty on the accessories. The manufacturer is free to exercise any of these options. This legal position is clear from Rule 57B(1) of Central Excise Rules 1944 which provides that MODVAT Credit on accessories is available that the value of accessories is included in the value of final products for the payment of excise duty. I find that in the present case, Noticee exercised second option during the period of dispute January, 1998 to May 2000 i.e. they neither claimed MODVAT Credit nor paid excise duty on accessories and before and after that period, Noticee were exercising the first option. I find that Noticee did not undertake any processing on these bought out items and therefore, they were not required to pay any excise duty on the clearance of bought out items.
...... .....
25.5 I also find that an identical controversy arose in the context of two other telephone exchange equipment manufacturers viz. M/s Ericsson India Pvt.Ltd. and M/s L.G. Electronics India Pvt.Ltd as to whether value of bought out items is to be included in the value of manufactured items or not. The Tribunal in the case of Ericsson India Pvt.Ltd. & Others Vs CCE 2004 (169) ELT 76 held that the value of bought out items is not to be included in the value of the manufactured items. Revenue filed an appeal before the Supreme Court against the above judgment. The appeal filed by the Revenue has also been dismissed by Supreme Court vide its order reported at 2005 (179) ELT A 53. The relevant portion of the judgment of the Tribunal is extracted hereunder:-
6. We have perused the records and considered the? submissions made by both sides. We do not find the revenues claim sustainable. Duty of Excise is in respect of goods manufactured in India. The appellant manufactured certain telephone equipment in its factory and cleared them on payment of duty. The liability to duty ends there. Its import and supply of software to the same telecom service providers is a separate transaction and cannot attract Central Excise duty. The question could arise only in case the imported items were parts or components of the goods manufactured in the factory and these parts were taken to the factory, assembled with the equipment and supplied thereafter as one equipment or equipment in knocked down condition. That is not the case here. Therefore, occasion for raising Central Excise duty did not arise. 25.6 I also find that the ratio of this judgment squarely applies to present case and for this reason also, the value of bought out items cannot be included in the value of manufactured items in the present case.
7. On perusal of the grounds of appeal filed by Revenue, we find that the Revenue had not disputed findings of the Adjudicating authority on revenue neutrality. The Honble Gujarat High Court in the case of CCE, Vadodara-II Vs Indeos ABS Ltd 2010 (254) ELT 628 (Guj.) dismissed the Revenues appeal, holding that since the goods were cleared to sister concern whatever duty payable and availed as credit to their own unit hence entire exercise would be revenue neutrality. It has further been observed that the Revenues grievance is acceptable, if the ultimate exercise benefited the Revenue by collection of duty and in that case, no such benefit accrues to exchequer. The said decision was upheld by the Honble Supreme Court as reported in 2011 (267) ELT A155 (SC). In the present case, we find that if the Respondents avail CENVAT Credit, demand of duty would not be sustainable.
8. In view of above discussion, we do not find any reason to interfere with the impugned order. Accordingly, all the appeals filed by the Revenue are dismissed.
(Pronounced in the court) (P.S.PRUTHI) (P.K.DAS) MEMBER (TECHNICAL) MEMBER(JUDICIAL) mk 4