Custom, Excise & Service Tax Tribunal
M/S Audi Automobiles vs Cce, Indore on 21 May, 2009
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi COURT-I Date of hearing/decision:21.05.2009 Excise Appeal No. 94 of 2009 [Arising out of order-in-original No. 37/COMMR/CEX/IND/08 dated 30.09.2008 passed by the Commissioner of Customs & Central Excise, Indore]. M/s Audi Automobiles Appellant Vs. CCE, Indore Respondent
AND Excise Appeal No. 95 of 2009 [Arising out of order-in-original No. 37/COMMR/CEX/IND/08 dated 30.09.2008 passed by the Commissioner of Customs & Central Excise, Indore].
M/s Tata Motors Limited Appellant Vs. CCE, Indore Respondent AND Excise Appeal No. 96 of 2009
[Arising out of order-in-original No. 37/COMMR/CEX/IND/08 dated 30.09.2008 passed by the Commissioner of Customs & Central Excise, Indore].
Sh. Ashok Sharma, Director Appellant Vs. CCE, Indore Respondent AND Excise Appeal No. 97 of 2009
[Arising out of order-in-original No. 44/COMMR/CEX/IND/08 dated 17.10.2008 passed by the Commissioner of Customs & Central Excise, Indore].
M/s Audi Automobiles Appellant
Vs.
CCE, Indore Respondent
AND
Excise Appeal No. 98 of 2009
[Arising out of order-in-original No. 44/COMMR/CEX/IND/08 dated 17.10.2008 passed by the Commissioner of Customs & Central Excise, Indore].
Shri Ashok Sharma Appellant
Vs.
CCE, Indore Respondent
AND
Excise Appeal No. 99 of 2009
[Arising out of order-in-original No. 44/COMMR/CEX/IND/08 dated 17.10.2008 passed by the Commissioner of Customs & Central Excise, Indore].
M/s Eicher Motors Limited Appellant
Vs.
CCE, Indore Respondent
AND
Excise Appeal No. 103 of 2009
[Arising out of order-in-original No. 42/COMMR/CEX/IND/08 dated 14.10.2008 passed by the Commissioner of Customs & Central Excise, Indore].
M/s Bhagirath Coach & Metal Fabricators Pvt. Ltd. Appellant
Vs.
CCE, Indore Respondent
AND
Excise Appeal No. 104 of 2009
[Arising out of order-in-original No. 42/COMMR/CEX/IND/08 dated 14.10.2008 passed by the Commissioner of Customs & Central Excise, Indore].
Sh. Ashok Sharma, Director Appellant
M/s Bhagirath Coach & Metal Fabricators Pvt. Ltd.
Vs.
CCE, Indore Respondent
AND
Excise Appeal No. 157 of 2009
[Arising out of order-in-original No. 42/COMMR/CEX/IND/08 dated 14.10.2008 passed by the Commissioner of Customs & Central Excise, Indore].
M/s Tata Motors Limited Appellant Vs. CCE, Indore Respondent For approval and signature: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri M. Veeraiyan, 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 Lordships wish to see the fair copy of the Order?
4 Whether Order is to be circulated to the Departmental authorities?
Appearance:
Appeared for the Appellant Shri B. Lakshmi Kumaran, Advocate Appeared for the Respondent Shri Amit Jain, DR Coram: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri M. Veeraiyan, Member (Technical) Oral Order No.____________________ Per Shri Justice R.M.S. Khandeparkar:
Since common questions of law and facts arise in all these appeals, they were taken up for hearing together and are being disposed of by this common order.
2. The short point for consideration which arises in all these appeals is whether the goods cleared from the premises of M/s Audi Automobiles and M/s Bhagirath Coach & Metal Fabricators Pvt. Ltd., would be assessable in terms of Rule 10A of the Central Excise Valuation Rules 2000 or whether the provisions of Rule 6 of the said Rules would be attracted.
3. The undisputed facts in all these matters are that M/s Audi Automobiles and M/s Bhagirath Coach & Metal Fabricators Pvt. Ltd., hereinafter called as the said firms, are registered manufacturer of excisable goods i.e. motor vehicles and they are engaged in fabricating and mounting the bodies of busses and trucks on the chassis manufactured by M/s Eicher Motors Limited as well as M/s Tata Motors Limited. The said body building activity is being carried out by the said firms on the automobile chassis supplied free of cost by the manufacturers namely M/s Eicher Motors Limited and M/s Tata Motors Limited and for the purpose of body building activity, the raw materials are also procured by the said firms from the vendors identified by the manufacturers of automobile chassis. The manufacturers of automobile chassis had been discharging duty liability on the value arrived at in accordance with the provisions of Section 4(1)(a) of Central Excise Act, 1944 hereinafter called as the said Act as revealed from the invoices and challans issued by them but do not charge sales tax at a time the chassis are delivered to the said firms. The said firms avail cenvat credit in relation to the duty paid on the chassis by the automobile chassis manufacturers and undertake the fabrication and mounting activity. The said firms pay the duty as per the provisions of Rule 11(8) of the said rules, worked out on the basis of fabrication and mounting on the chassis supplied free of cost by the manufacturer of chassis.
4. The delivery of the goods on completion of the work of fabrication and mounting of body on the chassis to the manufacturer of chassis by the said firms is under invoices issued by the said firms.
5. The dispute in the present matters relate to the assessable value of the goods cleared in the above manner by the said firms from their factory. The said firms cleared the goods as motor vehicles classifying the same under Chapter 87 of the schedule to the Central Excise Tariff Act, 1985 by paying self assessment duty as provided in rule 8 and 6 of the said rules. As noted above the manufacturers of automobile chassis supplied the chassis of the vehicle manufactured in their factory to the said firms after payment of duty and the said firms availed CENVAT credit duty paid on those chassis treating them as input, as also on other raw materials purchased by them and used as the inputs for the purpose of the work of fabrication and mounting of body on the chassis.
6. Show cause notices came to be issued to the appellants on the ground that the vehicles were being manufactured by the said firms on job work basis and as soon as the excisable goods were cleared from their premises as the vehicles, the same are to be assessed in terms of Rule 10A of the said rules and not in accordance with the rules the appellants are seeking to apply.
7. Learned Counsel appearing for the appellant taking us through Rule 10A as well as Rule 6 of the said Rules and drawing our attention to the decision of the Apex Court in Prestige Engineering (India) Ltd. vs. Collector of C. Excise, Meerut reported in 1994 (73) ELT 497 (S.C.) as well as the circular of the Board dated 18.07.2007 submitted that considering the activity carried out by the said firms, the same cannot be said to be an activity in the nature of job work. He submitted that the Apex Court in clear terms has held that the job work is a piece of work especially one done for hire or profit and taking into consideration the meaning of the expression job work under Rule 10A of the said rules and bearing in mind the nature of the activity carried out by the said firms in relation to the chassis supplied to them by the manufacturer of chassis as well as clearance of such goods on completion of the product to the manufacturer of chassis, the activity cannot be termed as one done on job work basis. He further submitted that the Apex Court has stressed the requirement involvement of labour and skill as the main ingredients for the application of the concept of job work though it could be done with the help of machine. Considering the same and taking note of the activity in relation to fabrication and mounting of body building activity which is being carried out by the said firms on the automobile chassis supplied free of cost by the manufacturer of chassis and subsequent sale of such vehicles, there is no scope for classifying the activity of the said firms in that connection to be on job work basis. Attention was also drawn to the copy of the invoice placed on record in relation to the sale of the product of the said firms to the manufacturer of chassis. He further submitted that the activity of fabrication and mounting of body on the chassis involves utilization of significant number of inputs and, therefore, it cannot be termed as mere working on the chassis supplied by the manufacturer to the said firms involving mere labour and skill.
8. He further submitted that in any case plain reading of Rule 10A would disclose that the activity of fabrication and mounting of the body on the chassis supplied free of cost by the manufacturer of the chassis to the said firms would not be a job work as Rule 10A clearly requires such activity to be on behalf of the principal manufacturer for the benefit of the third party. According to learned Counsel, for the purpose of the applicability of Rule 10A, it has to satisfy that the work is not only on behalf of the principal manufacturer but it has to be for the benefit of the third party. He further submitted that the person carrying out the manufacturing activity on job work obviously represents to the third party on behalf of the principal in relation to the activity carried out by him. Rule 10A according to learned Counsel does not speak of job work for the principal but on behalf of the principal whereas it has been the case of the Department that the activity of the said firms is for the principal. In this regard, the understanding of the Board about the expression on behalf was also brought to out notice in the form of Boards Circular dated 18.07.2007. He submitted that though the circular was in different context, it discloses the understanding of the Board in relation to such expression and applying the same to Rule 10A it would be clear that the intention of legislature in incorporating rule 10A is not to apply it to the job work for the principal but to the job work on behalf of the principal. He further submitted that the said firms are merely sub contractors and not the job workers. In order to contend that the activity is beyond the scope of job work, heavy reliance is placed in the decision of the Apex Court in the matter of Prestige Engineering (India) Limited (supra).
9. On the other hand, the learned DR submitted that the decision of the Apex Court was in relation to an exemption notification and was in totally different context as also the Board circular was in relation to service tax matters. He further submitted that the product manufactured by the said firms was cleared on payment of duty and the description of the same product clearly discloses the fabrication and the mounting of body on the chassis manufactured by the manufacturer of chassis as the motor vehicle and that is apparent from the invoice placed on record wherein it has been clearly described that the commodity sold is a passenger motor vehicle. In that regard the attention was drawn to the description column in the invoice issued by the said firms. Considering the same according to the learned DR the provisions of Rule 6 would not be attracted, as the sale in that regard cannot be considered as that of the vehicle as such but it is only an activity of the body mounting upon chassis. Further referring to the definition of the term sale under Section 2(h) of the said Act, he submitted that the transaction in relation to the product manufactured by said firms does not include sale of the chassis as they were supplied to them free of costs by the manufacturer of chassis and the same are returned to manufacturer alongwith sale of the body mounted on the chassis but not as a vehicle as such. Attention was also drawn to Chapter 87 and head note 5 thereof. He states that for the purpose of said chapter, a body fabrication or mounting on chassis would fall under heading 8706 and shall amount to manufacture of a motor vehicle. In that regard reliance was sought to be placed in the decision of the Tribunal in CCE, Ghaziabad vs. T.P.S. Mfg. & Construction Co. (P) Ltd., reported in 2003 (162) ELT 1122 (Tri.-Del.). He further drew our attention to the CENVAT Credit Rules 2004 and particularly to rule 2(h) wherein the expression job work has been defined. Referring to the same, he submitted that the goods manufactured by the said firms clearly amount to manufacture of the products which have been entrusted to the manufacturer for completion of the manufacture of motor vehicle and therefore it squarely falls within the description of job work. It was also submitted that all the assessees were not following same practice in relation to the discharge of their duty liability and some assessee were applying the provisions of Rule 10A whereas some others Rule 6.
10. Upon hearing the learned Senior Advocate and learned DR, and on perusal of the materials produced before us, the dispute essentially relates to the controversy pertaining to the assessable value of the goods cleared by the said firms pursuant to the chassis supplied to them free of cost by the manufacturer of the chassis. The contention about non applicability of Rule 10A is based primarily on the ground that the activity by the assessee is not in the nature of job work and secondly in any case, the activity is not on behalf of the principal manufacturer.
11. Rule 10A provides that where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer)-
(i) in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sold consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer;
(ii) in a case where the goods are not sold by the principal manufacturer for delivery at the time of removal of goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of job-worker and where the principal manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of the said goods from the factory of job-worker;
(iii) (i) or (ii), provided if any excisable goods-
Explanation.- For the purpose of this rule, job-worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorized by him.
12. Plain reading of Rule 10A would reveal that apart from providing the method of valuation for the purpose of deciding excise duty liability in respect of the goods manufactured by the job-workers, the provision clearly defines the meaning of the term job-worker for the purpose of the said rule. It clearly states that a job-worker means a person engaged in the manufacture or production of goods, on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorized by him. Obviously, therefore, whenever any person is engaged by the principle manufacturer for completion of process of manufacture of any particular product and such manufacture is out of inputs or goods supplied either by the principal manufacturer himself or by any other person authorized by the principal manufacturer, then the same would fall in the category of the manufacture by a job-worker for the purpose of the said rule.
13. If one peruses the decision of the Apex Court in Prestige Engineering (India) Ltd., (supra) it is apparent that the same was relating to the exemption Notification No. 119/75-CE dated 30.4.75. The said notification read as under:-
In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), manufactured in a factory as a job work from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of the amount charged for the job work.
Explanation.- For the purposes of this notification, the expression job work shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier, after the article has undergone the intended manufacturing process, on charging only for the job work done by him.
14. Referring to the said notification, the Apex Court held that we find it difficult to agree with the learned counsel that the expression manufacture contemplated by the Notification is confined to those processes alone which are incidental or ancillary to the completion of manufactured product processes contemplated by clause (i) of Section 2(f). We do not see any warrant for restricting the meaning of the expression manufactured occurring in the Notification only to the aforesaid processes. In our opinion, the stress in the Notification is rather upon the word job work. Now, what does the expression job work mean? On this question, the Explanation is not of much assistance. The Concise Oxford Dictionary assigns several meanings to the expression job but the relevant meaning having regard to the present context is a piece of work especially one done for hire or profit. The expression job work is assigned the following meaning: work done and paid for the job. The Notification, it is evident, was conceived in the interest of small manufacturers undertaking job-works. The idea behind the Notification was to help the job-workers persons who contributed mainly their labour and skill, though done with the help of tools, gadgets or machinery, as the case may be. The Notification was not intended to benefit those who contributed their own material to the articles supplied by the customer and manufactured different goods.
15. Obviously, the Apex Court was dealing with the meaning of the expression job work in the context in which the said expression was used in the Notification No. 119/75-CE. It is true that the Apex Court has held that for the purpose of deciding whether it is a job work or not, the explanation clause to the notification was not sufficient and therefore the Apex Court has considered the several meanings of the said expression as found in The Concise Oxford Dictionary. However, at the same time, the Apex Court has clearly observed that the Concise Oxford Dictionary gives several meanings to the said expression, and out of those several meanings, the one which is relevant in the context in which the said term is found to have been used in the said notification, is required to be taken and therefore it was held that: The expression job work is assigned the following meaning- Work done and paid for the job. The notification, it is evident, was conceived in the interest of small manufacturers undertaking job-works. In other words, the Apex Court accepted the meaning of the job work bearing in mind the context in which the expression was found to have been used in the said notification No. 119/75. It is true that the Apex Court has also observed that the idea behind the notification was to help the job-workers who had contributed mainly their labour and skill, though the implementation of works was with the help of tools, gadgets or machinery. Apparently, the entire discussion was with reference to the context in which the said expression was found to have been used in the said notification. It was specifically observed in the said decision that the notification was not intended to benefit those who had contributed their own material to the articles supplier by the supplier and manufactured a different products.
16. Considering the facts of the said case and the context in which the expression job work, had been understood and explained by the Apex Court in Prestige Engineering (India) Ltd., it cannot be said that the Apex Court has ruled that the expression jobwork, in every provision of law is to be understood irrespective of the context in which the same is used therein. Learned DR is right in contending that the decision of the Apex Court was in the facts of that case and particularly with reference to the context in which the said expression was used in the said notification.
17. Rule 10A undoubtedly speaks of work on behalf of the principal manufacturer. It does not use the expression for the manufacturer. In that connection as said earlier, attention was drawn to the provisions relating to the service tax and the circular issued by the Board. The circular dated 18th July 2007 issued by the Board refers to service tax liability in respect of common bio-medical water treatment facility when such activity falls under the category of business auxiliary service. It was clarified by the Board that the incineration/shredding of bio-medical waste can by no stretch of imagination, be called as processing of goods, even if in certain cases the shredded materials may be used as fillers etc. Further, the activity also does not qualify to be called as provision of service on behalf of the client. It was in a case of taxable activity falling within the category of business auxiliary service while the client is obliged to provide some service to a 3rd person but instead of the client providing such service, the service provider provides such service to the 3rd person, on behalf of the client: i.e. acting as an agent of the client. With this observation it was opined that it would not fall under business auxiliary service or any other existing taxable services.
18. Apparently, the Boards opinion was in relation to the service tax matter. It was in relation to the activity which was in question and to ascertain whether it would fall under the category of business auxiliary service or not. In that regard, the expression provision of service on behalf of the client and more particularly the term, on behalf of was sought to be explained by the Board. The explanation in relation to such expression used in a provision in a particular taxing statute cannot be straightway applied to understand the meaning of the similar expression used in a different statute, more particularly ignoring the context in which it is used. If we read rule 10A, the expression on behalf of used therein, it is obvious that it clearly refers to the principal manufacturer and not to any third person. The said expression has nothing to do with the representation to any third party on behalf of the principal manufacturer. The said expression has been used to refer to the job-work and vis-`-vis the principal manufacturer in respect of such job work. In this context, it would also be worthwhile to take note of the definition of the term manufacture and manufacturer found in Section 2(f) of the said Act. Considering the same, it is evident that the expression on behalf of used in Rule 10A denotes the manufacturer of the excisable goods. The said expression cannot be understood in a manner sought to be argued on behalf of the appellants that it would refer to representation to the third party on behalf of the principal manufacturer in relation to the product manufactured. This is further clear from the explanation to Rule 10A. The explanation clearly states that the person engaged in the manufacture of production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorized by him would be a job worker. In other words, the person who manufactures or produces the goods for or on behalf of the principal manufacturer is a job worker. Being so, it is difficult to agree with the contention canvassed on behalf of the appellants that the use of the expression on behalf of would reveal that in order to be a job-worker he has to be a representative of or on behalf of the principal manufacturer to the third party in relation to the manufacture of excisable goods. The rule nowhere refers to any third person as such nor the expression in the manner it has been used discloses any intention of the legislature to the representation to any third party on behalf of the principal manufacturer.
19. In the circumstances, therefore, neither the decision of the Apex Court nor the circular of the Board is of any assistance to the appellants to drive home their contention with reference to either the expression job-worker or the expression on behalf of in Rule 10A.
20. It is also pertinent to note that the contention on behalf of the said firms is that they are the sub-contractors in relation to the body building activity of the motor vehicle. The purchase order to which our attention was drawn, also refers to the expression sub-contracting. With reference to the same it was sought to be contended that there was a contract between the manufacturer of chassis and the said firms in relation to the manufacture of body building for the purpose of fabricating and mounting on the chassis manufactured by the chassis manufacturer. However, no copy of any such agreement has been placed on record nor it appears to have been made available to the Commissioner before passing the impugned order. The purchase order also refers to terms and conditions but it states that the same are printed overleaf. However, the copies of the purchase order placed on record do not disclose any of the terms and conditions having been printed on those purchase orders either on the front page or overleaf. Though we need not draw adverse inference for failure on the part of the appellants in this regard, yet it is not possible to ignore the same totally while dealing with the matter, as the issue involved clearly required the appellants to establish therein contention that they are the sub-contractors as claimed by them. If the document in the form of invoice was merely to disclose sale of fabrication and mounting of the body on the chassis and that the motor vehicle is ultimately to be the product saleable by the manufacturer of chassis, it was required for them to establish the same with cogent materials. The records nowhere disclose any justification for non production of the said documents i.e. the contract and terms and conditions in relation to the purchase order. It is however clarified by the learned Counsel for the appellants that the appellants had not specifically raised before the original authority the point about the said firms being sub-contractors and therefore had no occasion to produce the said documents and the arguments by the appellants in relation to this point are in an answer to what has been submitted on behalf of the department and in that context it is contended that the work by the said firms was in the nature of sub-contract. Therefore, the appellants cannot be accused of any suppression of documents. As already observed, we are not drawing any adverse inference for non production of the documents. We have only observed that once it is sought to be contended that Rule 10A will have no application in the facts of the case, it was for the appellants to produce relevant documents like the invoice and agreement which would support the case putforth by the appellants. In that context in our considered opinion it was necessary for the appellants to disclose the nature of the understanding between the manufacturer of chassis and the said firms, and in case, such understanding was in the form of writing, to place on record the document in that respect.
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.
22. As regards the penalty, however, we find that the learned Advocate is justified in contending that matter being related to the interpretation of the provisions of law and the fact that the Apex Court in Prestige Engineering (India) Ltd., case had taken a particular view on the aspect of expression job work, the appellant, taking shelter of the said decision, was seeking to claim benefit in terms of Rule 6. In the circumstances, we do not find any justification for imposition of penalty in the matter in hand. The impugned order does not disclose consideration of this aspect of the matter.
23. In the circumstances, the appeals partly succeed and they are allowed to the extent they make grievance regarding the imposition of penalty. However, as regards the challenge to the demand of duty and interest thereon, the same stands dismissed. All the appeals are accordingly disposed of in the above terms.
(Justice R.M.S. Khandeparkar) President (M. Veeraiyan) Member (Technical) /Pant/