Custom, Excise & Service Tax Tribunal
Berger Paints India Ltd. (Rajdoot ... vs C.C.E, Delhi I on 7 December, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-I Date of hearing: 22.11.2016 Date of pronouncement:07.12.2016 Central Excise Appeal No.692 of 2010 Arising out of the order-in-appeal No.253/CE/DLH/2009 dated 21.12.2009 passed by the Commissioner (Appeals), Central Excise , Delhi I. Berger Paints India Ltd. (Rajdoot Division) .. Appellant Vs. C.C.E, Delhi I Respondent
Appearance:
Present Shri S.V. Arya, Advocate for the appellant Present Shri R.K. Manjhi, A.R. for the Respondent-Revenue Coram: Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. V. Padmanabhan, Technical Member Final Order No.55744/2016 Per Mr. V. Padmanabhan:
The appellant is a manufacturer of various types of paints.The Departmental officers, during the visit to the appellants depot, on 21.11.2007 noticed that duty paid goods were received in the depot on stock transfer basis and subsequently , sold to their dealers from the depot. It was found that they were carrying out the processes of tinting at their depot to obtain the required shade of the paint. The process involved opening the containers wherein the base paint was received from the factory and immersing the tinter in the container in the required quantities to obtain desired shade of the paint . The container was then closed and computer generated sticker affixed on the container. The departmental authorities took the view that process of tinting amounts to process of manufacture and hence excise duty was liable to be paid after the process of tinting. Show cause notice was issued on 27.12.2007 raising the demand of central excise duty for the period 1.6.04 to 30.9.07. No tinting process was carried out after September 2007.The demand for central excise duty was confirmed by the original authority and upheld by the Commissioner (Appeals). Aggrieved by the orders passed by the lower authorities, the present appeal has been filed.
2. The appellant have contended that the process of tinting cannot be considered as one of manufacture since the goods continued to remain paints even after the process. They also cited CBEC Circular dated 3.10.96 wherein it was clarified that the process of tinting does not amount to manufacture.
3. We have heard Shri S.V.Arya, ld. Counsel for the appellant as well as Shri R.K. Manjhi, ld. A.R. for Revenue. We have perused the CBEC Circular dated 3.10.96. In the said said Circular, the CBEC has clarified as follows:
9. Therefore, it is clarified that the process of tinting of base enamel/emulsion paint with strainers to obtain paint of different shades does not amount of manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944 and if the base emulsion/enamel paint and th stainer are duty paid then the resultant product obtained after tinting would not attract any fresh duty liability.
However, it is to be noted that the CBEC Circular was issued in the light of the law as it stood in the relevant time. With effect from 1.3.2003, Section 2(f), which defined the term manufacture, has been amended. The amended definition reads as follows:
manufacture includes any process, - (iii) which, in relation to the goods specified in the Third Schedule, involves packing ore repacking of such goods in a unit container or labeling or re-labeling of containers including the declaration or alternation 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 manufacture 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 manufacturer on his own account.
The lower authorities have taken the view that process of tinting amounts to manufacture in the light of the amended provision of Section 2(f) as above. It has been held that the process of tinting involved repacking, mixing with tinter, repacking and re-labelling of the goods. This process makes the goods marketable . There is no dispute that all these processes are being carried out in the depot of the appellant. It has been argued, on behalf of the appellant, that the processes outlined in the amended Section 2(f) are to be construed as activities which should make the product marketable to the consumer. It is their further submission that the goods are cleared after this process to their dealers and not to the ultimate user of the paint. Hence their argument is that these processes are bing undertaken to make the goods marketable to the dealers and not to the ultimate consumer. They also cited in their support, the case law in the case of Air Liquide North India Pvt. Ltd. vs. C.C.E., Jaipur - 2011 (271) ELT 321 (SC) in which the Honble Supreme Court has held that the phrase marketable to the consumer means marketability to the person who purchases the product for his own consumption.
The amended clause of Section 2(f) clearly specifies that the activity of packing or repacking as well as labeling or relabelling of containers would amount to manufacture. Having said so, the definition further states that the said activity shall also include the activity in the nature of alteration of the retail sale price or adoption of any other treatment to the goods which would render the goods marketable to the consumer. The requirement of marketability would always be there to consider the product as manufacture, however, in the definition of Section 2(f), any treatment given to the goods with the intention to make the product further marketable to the consumer also amounts to manufacture . It is fairly obvious that the ultimate consumer of the paints shall be interested in purchase of paints of the required shade and not base paint. Consequently, the process of tinting resulting in the paint of the required shade is definitely covered within the amended definition of manufacture given in Section 2(f). Consequently, the orders passed by the authorities below holding the process as amounting to manufacture cannot be faulted with and is required to be upheld. The observation of the Honble Supreme Court in the case cited by the appellant is in a different context and delivered in respect of Helium Gas and hence we are of the view that the said decision is not applicable to the present facts of the case.
4. The process of tinting of base paint is not a new process in the industry. CBEC has taken the view in 1996 that such process cannot be considered to be process of manufacture. However, this view merits revision amendment of Section 2(f). The appellant have entertained a bona fide view that process of tinting may not be liable to excise duty in the light of long standing practice in the industry and CBEC clarification. It is also to be noted that the demands in the present case have been made for the period immediately after the amendment of Section 2(f) .As such, we are of the view that the allegation of suppression made against the appellant cannot be sustained. Consequently, there can be no demand of excise duty beyond the normal period of limitation sanctioned by the Section 11A. Accordingly, we set aside the demand beyond the normal period of limitation and directing the original adjudicating authority to re-quantify the demand in the light of our observation above. In the facts and circumstances of the case, we are of the view that there is no merit for imposing any penalty. The appeal is disposed of in above terms.
(Pronounced in the open Court on 07.12.2016) (Justice Dr. Satish Chandra) President ( V. Padmanabhan) Technical Member scd/ E/692/2010 1