Custom, Excise & Service Tax Tribunal
M/S. Ncl Alltek & Seccolor Ltd vs Cce, Guntur on 18 August, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench Division Bench Court I Appeal No.E/188/2007; E/83/2008; E/740/2008 (Arising out of Orders-in-Appeal Nos.5/2006(H-III)(D)CE dt. 31/10/2006; No.47&48/2007(H-III)CE dt. 22/11/2007 and No.44/2008(H-III)CE dt. 25/06/2008 passed by CCE(Appeals-III), Hyderabad) For approval and signature: Honble Ms. Sulekha Beevi, Member(Judicial) Honble Mr. 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. NCL Alltek & Seccolor Ltd. ..Appellant(s) Vs. CCE, Guntur ..Respondent(s)
Appearance Shri M.S. Nagaraja, Advocate for the appellant.
Shri Arun Kumar, Deputy Commissioner(AR) for the respondent.
Coram:
Honble Ms. Sulekha Beevi, Member(Judicial) Honble Mr. Madhu Mohan Damodhar, Member(Technical) Date of Hearing:18/08/2016 Date of decision:18/08/2016 FINAL ORDER No._______________________ [Order per: Madhu Mohan Damodhar] Details of the appeals involved are as under:-
Appeal No. Order-in-Appeal No. Period Differential duty with interest & penalty E/188/2007 No.5/2006 (H-III)(D)CE dt. 31/10/2006 January 2004 to August 2004 Rs.1,34,812/-
E/83/2008 No.47&48/2007 (H-III)CE dt. 22/11/2007 September 2004 to July 2006 Rs.4,21,003/-
E/740/2008 No.44/2008 (H-III)CE dt. 25/06/2008 August 2006 to July 2007 Rs.1,92,394/- and penalty of Rs.1,92,394/- under Section 11AC of the Central Excise Act, 1944
2. The brief facts of the case are that M/s. NCL Alltek & Seccolor Ltd., the appellant, is a manufacturer of surface coating materials, adhesives, glues and paints. The appellants have been clearing Superfine Spray Plaster packed in 25 kg. PP bags to M/s. NCC Maytas (JV), Pocharam at the rate of Rs.175/- per bag as per the Purchase Order. The appellants had paid excise duty on the transaction value in terms of Section 4 of the Central Excise Act, 1944(CEA for short) on the goods sold in bulk for captive consumption by the construction industry. The appellants vide letter No.ACPC/3983/2003-04 dt. 30/12/2003 informed the Assistant Commissioner of Central Excise, Nalgonda Division that they had received Purchase Order for supply of Superfine Spray Plaster in bulk from NCC-Maytas for their consumption in construction and that they intend to supply the same packed in 25KG bags, on payment of excise duty under Section 4 of the CEA on the transaction value of Rs.175/- per bag. However, a show-cause notice dated 25/01/2005 was issued to appellant proposing that the goods have to be assessed on the basis of Retail Sale Price in terms of Section 4A and not on the basis of transaction value in terms of Section 4 of the CEA, 1944. Adjudicating authority vide Order-in-Original No.41/2005 dt. 27/09/2005 accepted the contention that the goods were to be assessed in terms of Section 4; however, the said authority disallowed the deduction of Rs.10/- per bag as forwarding charges or freight charges and confirmed duty of Rs.35,923/- along with interest. The Department challenged the above order before Commissioner(Appeals) who passed Order-in-Appeal dated 31/10/2006, allowed the appeal and set aside the order of the lower authority, holding that the goods cleared do not come under exemption under Rule 34 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 since (i) there is no marking on the packages that the goods were specially packed for exclusive used of M/s.NCC; that the marking made by the respondent assessee that the goods are not for retail sale does not serve the legal requirement, (ii) goods having been used in the industry is not sufficient, but the goods should be of the nature of raw material and the subject goods are finished products and not raw material. Lower authorities have thereafter followed the above order of the Commissioner(Appeals) for the subsequent period confirming the demand of differential duty. On appeal, the Commissioner(Appeals) rejected the appeals relying on the earlier Order-in-Appeal dt. 31/10/2006. Hence appeal No.E/83/2008 for the period from September 2004 to July 2006 and appeal No.E/740/2008 for the period from 01/08/2006 to 31/07/2007.
3.1. During the hearing the Ld. Advocate Mr. M.S. Nagaraj made the following main submissions:
a. There is no dispute with respect to supply of Superfine Spray Plaster packed in 25 kg. / 30 kg. bags to M/s. NCC-Maytas (JV), Pocharam under invoices. The HDPE/PP bags were marked NOT FOR RESALE . The Adjudicating Authority in para 10 of Order-in-Original No.41/2005 dt. 27/09/2005 has clearly recorded that M/s.NCC-Maytas was not selling the goods to anybody but was using it themselves in the construction activity.
b. The exemption under Rule 34(1)(a) applies to any package containing a commodity if the markings on the package unambiguously shows that the goods have been specially packed for the exclusive use of any industry as a raw material or for the purpose of servicing any industry. In the instant case, the appellants have sold the Surface Coating Material to M/s. NCC-Maytas(JV) for their own use in their construction industry. The use of Surface Coating Material in the construction industry satisfies the condition of use of the goods as raw material or servicing of construction industry. The lower authorities have erred in not understanding that use of Surface Coating Material in construction industry is use of the said material as raw material.
c. Even otherwise, supply of Surface Coating Material to the construction industry for their captive use amounts to supply for the purpose of servicing the said construction industry. Therefore, supply of Surface Coating Materials to NCC-Maytas for their own consumption in construction industry was exempt under Rule 34(1)(a) of the Standards of Weights and Measures (Package Commodities) Rules, 1977, from declaration of Retail Sale Price among other declarations as required. Therefore, the appellants were not required to declare the Retail Sale Price on the goods sold to the Construction Industry and were not liable to assessment under Section 4A of the Central Excise Act, 1944. The payment of duty on the transaction value in terms of the CEA, 1944 was correct in law.
3.2. The learned Advocate further submitted that his arguments are supported by the judgments laid by the Honble Apex Court in Jayanthi Food Processing (P) Ltd. Vs. CCE, Rajasthan [2007 (215) ELT 327 (S.C.)] case; the appellant therein also specifically display on the packs of ice-cream supplied in bulk to catering industry that pack not meant for retail sale. Honble Apex Court held that that the words servicing any industry would be applicable to such packaging and it would have to be held that Section 4A will not apply. The ratio of this case has been relied on a number of decisions like LeGrand India Ltd. Vs Commissioner of Cus [2014(304) ELT 305(Tri-Mum)]. He also placed reliance on Grasim Industries Ltd 2004 (175) ELT 779 (Tri-Del) ] wherein Tribunal upheld the appellants contention that goods sold for servicing an industry remain exempt from the requirement of Rule 34 of SWM ( Packaged Commodities )Rules.
4. The Ld AR appearing for the Department, Mr. Arun Kumar reiterated the findings in the impugned order and to support his contentions relied upon the decision of Tribunal in the case of ITEL Industries V CCE Calicut [2004(163) ELT 219 (Bang)] wherein it was held that telephone instruments with MRP indicated therein sold in bulk by manufacturer to DOT/MTNL who lent the same to subscribers retaining their ownership will not get exemption from Rule 34 and should be assessed under 4A and not under Section 4 of the Central Excise Act,1944. He pointed out that the CBEC Board Circular dated 17.01.2007 was issued clarifying earlier circular dated 28.02.2002 that bulk sale of ice-cream in packages to hotel /catering industry is required to comply with the provisions of SWM(PC) Rules 1977 and accordingly assesee is required to declare retail price on such packages. The Ld AR also drew our attention to the Honle Supreme Court judgment in the case of CCE, Panchakula Vs. Liberty Shoes [2015 (326) ELT 422 (S.C)] where it was held that since footwear is an item which is specified under Section 4A which is covered by SWM(PC) Rules and MRP was affixed on the products supplied, which were not exempted under Rule 34 of the rules, the provision of Section 4A of the Act shall stand attracted. For these reasons Ld. AR vehemently argued that impugned orders are correct in law and do not call for any interference.
5. Heard both sides and have gone through the records.
6. On appreciating the facts placed before us, we find that the Honble Supreme Court in the Jayanthi Food Processing case cited supra has laid down the law in regard to a situation in which goods are supplied for purpose of supplying any industry ,etc to be eligible for exemption from affixation of MRP /Section 4A valuation. It is seen that the Apex Court has taken into consideration Circulars dated 28.02.2002 as well as the further clarificatory Circular dated 17.01.2007 relied upon by Ld. AR. The said Rule 34, though amended w.e.f. 17.07.2006 (new Rule 2A), has only further enlarged the scope of institutional consumer and industrial consumer for the purposes of exemption from affixing the MRP.
7. The decision laid in the case of ITEL Industries which is relied by department, is not applicable to the case on hand as the facts are distinguishable. The case involved bulk supply of telephone instruments with MRP indicated upon them to DOT/MTNL who lent the same to subscribers while retaining their ownership. It is not the case that such instruments were being supplied as raw materials or for the purpose of servicing any industry. The facts of the case in Liberty Shoes (supra) is also placed similarly. In fact the Liberty Shoes judgment draws upon the ratio of Jayanthi Food Processing case to distinguish that such supply of foot wear to institutional buyers by Liberty Shoes would not constitute sale in bulk for the pupose of servicing any industry etc. The relevant portion of the judgment in Jayanthi Food Processing (P) Ltd. is worth reproducing as below:
14.?It was tried to be suggested, relying on the language of the unamended Rule 2A, that the four litres pack of ice-cream would be appropriately covered under Rule 2A. Rule 2A before the amendment was as under :
2A.?The provisions of this Chapter shall apply to all pre-packed commodities except in respect of grains and pulses containing quantity more than 15 kg. It is true that if the unamended section is to be made applicable, the ice-cream pack of four litres would certainly be covered under Section 2A. However, Rule 3 explains that provisions of Chapter II would apply to packages intended for retail sale and expression package wherever it occurs in the chapter shall be construed accordingly. It is, therefore, clear that the package which was sold by the assessee could not be termed as retail package nor the sale thereof be termed as a retail sale and as such there was no requirement of mentioning the retail sale price on that package. All this has been completely missed in the order of the Tribunal.
15.?On the other hand the package in question would certainly come within the definition of wholesale package as defined in Rule 2(x)(ii) as it contained the commodity (ice-cream) and was sold to intermediary (Hotel) for selling the same to the consumer in small quantities. Then Rule 29 would apply to such package which does not require the price to be displayed on the package. What is required to be stated is (a) name and address of the manufacturer (b) identity of commodity and (c) total number of retail packages or net quantity. Shri Ravindra Narain is quite justified inrelying on Rule 2(x) and Rule 2(q). The Tribunal does not refer to these vital Rules.
16.?There is one more substantial reason supporting the appellant. Shri Ravinder Narain invited our attention to Rule 34 in Chapter V of SWM (PC) Rules which provides for exemptions. We have quoted Rule 34 earlier. The Rule has now been amended. However, under the unamended Rule there is a specific declaration that the SWM (PC) Rules shall not apply to any package containing a commodity if the marking on the package unambiguously indicates that it has been specially packed for the exclusive use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry. Learned Counsel points out that the package which is sold by the assessee mentions that it is specially packed for the exclusive use of the catering industry. Learned Counsel further argues that such package was for the purposes of servicing the hotel industry or catering industry as the case may be. Learned Counsel is undoubtedly right when he seeks to rely on Rule 34 which provides for exemption of the packages which are specially packed for the exclusive use of any industry for the purposes of servicing that industry. Shri Subba Rao supported the view expressed by the Tribunal that the words servicing any industry could not cover the present case and he further suggested that ice-cream cannot be a raw material for any industry. He is undoubtedly right that the ice-cream cannot be termed as raw material for any industry. However, the words or for the purposes of servicing any industry are broad enough to include the transaction in question, i.e., the sale of a pack of ice-cream to the retail industry. Hotel does not manufacture the ice-cream and is depended entirely upon the sale of ice-cream to it by the assessee for ultimately catering the commodity in the package, i.e. ice-cream to the ultimate consumer. In our view this can be squarely covered in the term servicing any industry. The word service is a noun of the verb to serve. This Court in Coal Mines Provident Fund Commissioner v. Ramesh Chander Jha [AIR 1990 SC 648] in a different context, observed as under :
The word service in Section 2(17)(h) must necessarily mean something more than being merely subject to the orders of Government or control of the Government. To serve means to perform functions; do what is required for. [Emphasis supplied] A hotel is a hospitality industry and undoubtedly supplies food and eatables to the consumers. Therefore, to supply the ice-cream to such a hotel would be doing what is required for the hotel. In that sense the supply by way of sale of ice-cream which is ultimately sold to the ultimate consumers would, no doubt, be covered in the term servicing the hotel industry. Even otherwise the word service as per Concise Oxford English Dictionary means :
(i) perform routine maintenance or repair work on (a vehicle or machine);
(ii) provide a service or services for;
It is an act of helpful activity - help, aid or to do something. It also includes supplying of utilities or commodities. In that view we are not prepared to give a narrow interpretation to the term service any industry. We, therefore, accept the arguments advanced by Shri Ravinder Narain that the package sold by the assessee to the hotel was, apart from being for the exclusive use of the hotel was, also for the purpose of servicing that industry. If that is so, then the SWM (PC) Rules would not apply at all.
17.?The Tribunal has given very narrow meaning to Rule 34 by firstly holding that ice-cream is not a raw material. There the Tribunal was right but the Tribunal was not right by holding that the words servicing any industry were not applicable to such package. We, therefore, accept the arguments of the learned Counsel and reject the contention raised by Shri Subba Rao. If that is so, the appeal would have to be allowed and it would have to be held that Section 4A will not apply to the ice-cream sold by the assessee.
8. It is interesting to note that the issue whether construction industry is a service industry was analysed by the Honble High Court of Karnataka in the case of CCE, Bangalore Vs. Mysore Cements Ltd [2010 (259) ELT 30 (Kar)]. The relevant portion of the judgment is extracted below:-
2. ..
The Tribunal relying on the Notification as well as the decisions of the co-ordinate Bench in the case of M/s. Grasim Industries Limited v. CCE, Jaipur reported in 2004 (175) 779 (Tri.-Del), which was followed by the Tribunal in the case of M/s. Chettinal Cement Corporation Limited v. CCE, Trichy reported in 2009-TIOL-139-CESTAT-MADRAS, where it was held that, Construction is treated as an industry under the various statutes and it in feet, is one of the biggest industries in any Country, the construction industry is a service industry and therefore, the assessee is entitled to the concessional rate of excise duty and therefore, it set aside the order passed by the adjudicating authority and held that, the assessee is entitled to the benefit of the Notification. Aggrieved by the said order, the revenue is in appeal.
3.?The learned counsel for the appellant assailing the impugned order contends that, the construction industry is not a service industry. Only when cement is sold in not packed condition, the assessee would be entitled to the benefit of concessional rate of Rs. 400/- per metric tonne. When admittedly, the cement is sold in packaged condition of 50 Kgs bags, the assessee is not entitled to the said benefit and therefore, he contends that the impugned order requires to be quashed. From the material on record, it is clear that, there is no dispute as regards the fact that clearances are made to the institutional consumers by the assessee. Among these institutional consumers, one is construction industry. If the construction industry is held to be a service industry, then the assessee is entitled to the benefit of the Notification. The construction activity has been considered as a service industry by the Finance Ministry. In the foreign trade policy of Government of India in the list of services as enumerated in the Appendix 10, construction and related engineering services in particular, general construction work for building, general construction work for civil engineering installation and assembly work building, completion and finishing work and assessee is treated as a service industry.
9. The case of Grasim Industries relied upon by the appellant is also on all fours with the issue at hand.
10. From the foregoing discussions by applying the ratio laid in the cases of Jayanthi Food Processing case, Mysore Cements case and Grasim Industries case, we are of the considered opinion that the clearances of surface coating material supplied by the appellant in 25 kg PP bags to NCC-Maytas will fall under the ambit of exemption from affixation of MRP as envisaged in Rule 34 /amended Rule 2A of SWM (PC) Rules.
11. In view thereof, the impugned orders are set aside and appeals are allowed with consequential benefits, if any, as per law.
(Operative part of this order was pronounced in court on conclusion of the hearing) (MADHU MOHAN DAMODHAR) MEMBER(TECHNICAL) ( SULEKHA BEEVI, C.S.) MEMBER(JUDICIAL) Raja..
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