Custom, Excise & Service Tax Tribunal
Riddhi Corporation vs Ahmedabad-I on 13 May, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
REGIONAL BENCH - COURT NO. 03
Excise Appeal No. 10783 of 2015
[Arising out of OIO-AHM-EXCUS-001-COM-005-14-15 passed by CCE-AHMEDABAD-I]
M/s Riddhi Corporation .....Appellant
55-2a, Phase-i, GIDC, Vatva,
AHMEDABAD, GUJARAT.
VERSUS
C.C.E. -Ahmedabad-i .....Respondent
C. EX BHAVAN, NR PANJRAPOLE & POLYTECHNIC, AMBAVADI, AHMEDABAD, GUJARAT-380015 WITH Excise Appeal No. 11267 of 2016 [Arising out of OIO-AHM-EXCUS-001-COM-016-017-15-16 passed by CCE-
AHMEDABAD-I]
C.C.E. -Ahmedabad-i .....Appellant
C. EX BHAVAN, NR PANJRAPOLE & POLYTECHNIC,
AMBAVADI, AHMEDABAD, GUJARAT-380015
VERSUS
M/s Riddhi Corporation .....Respondent
55-2a, Phase-i, GIDC, Vatva,
AHMEDABAD, GUJARAT.
APPEARANCE:
Sh. Anil Gidwani, Consultant for the Appellant
Sh. Sameer Chitkara, Authorized Representative for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU FINAL ORDER NO.A/ 10843-10844 /2019 DATE OF HEARING: 01.03.2019 DATE OF DECISION: 13.05.2019 PER: RAMESH NAIR The present appeals have been filed by M/s Riddhi Corporation (RC) and also by the Revenue. Appeal No. E/10783/2015 against OIO No. AHM-EXCUS-001-COM-005-14-15 dated 23.01.15 for the period 2009-10 to 2013-14 has been filed by M/s RC whereas the Appeal No.
2|Page E/10783/2015 & E/11267/2016-DB E/11267/16 against OIO No. AHM-EXCUS-001-COM-016 dated 11.03.2016 has been filed by the Revenue covering period April to September 2014. The brief facts of the case are that M/s RC are engaged in the manufacturing of Front Guard Assy - Black, Front Guard
- Kit, Leg Guard, Footrest Step, Round R R Guard, Kit- Guard Activa, Rear Guard with W Fitting, Side Panel, Front Bumper with nuts and parts for M/s Honda Motors India Pvt. Ltd (HMIPL) and M/s India Yamaha Motors Pvt. Ltd (IYMPL) and M/s Jit Industries. The Appellant after manufacturing of such goods are clearing to the above buyers without affixing any MRP and assessing the same in terms of Section 4 of Central Excise Act. The buyers in turn affix MRP on said items and pay appropriate duty in terms of section 4A. The goods manufactured by M/s RC have been classified by them as accessories of two wheelers under chapter sub heading 8714 1090. The Appellant during the manufacture of such goods, is also getting some of the processes done from the job workers, for which they are sending the inputs on challans to the job workers. Based on the investigation, M/s RC were issued show cause notice dated 29.05.2014 wherein it was alleged that the goods are parts of the two wheelers and the valuation of the same for the purpose of payment of duty has to be done under Section 4A of the Central Excise Act, 1944 and in terms of Serial No. 108 of Notification No. 49/2008-CE (NT) dated 24.12.2008. The Show cause notice proposed to demand duty of Rs. 3,53,79,488/- on account of differential duty. The show cause notice also alleged that the goods shown to have been removed on in - complete challans and were not found to have been received back and, thus duty of Rs. 1,08,90,349/- is payable by M/s Riddhi Corporation as the goods were cleared without proper invoices. A demand of Rs. 48,56,578/- was also proposed to be recovered being the
3|Page E/10783/2015 & E/11267/2016-DB amount of cenvat credit on the inputs used in clearance of semi- finished goods cleared for job workers alleging that the same were cleared without payment of duty. A demand of Rs. 7,59,76/- was also proposed on the ground that the goods valued at Rs. 12,97,709/- were being cleared on invoices not to found to have been accounted for in the RG-1 Register. The said goods were also proposed to be confiscated on the ground that the same were in process of being removed under the cover of invoice no. 55 and 56 but were not accounted in stock record and were being cleared without assessment under Section 4A. The adjudicating authority vide impugned order dated 23.1.2015 confirmed demands as proposed along with penalty and also ordered for confiscation of seized goods. M/s Riddhi Corporation is in appeal before us against the said order.
2. The appeal filed by the Revenue is against order dated 11.3.2016 wherein demand was set aside by the adjudicating authority and the same is also on the same issue as to whether the goods cleared by the Appellant are classifiable as parts of automobile, parts of two wheelers or accessories and whereas the valuation of the same would be in terms of Section 4 or Section 4(A) of the Central Excise Act along with serial No. 108 of Notification No. 49/2008- CE (NT) dated 24.12.2008. The adjudicating authority set aside the demands holding that the goods were assessable to duty in terms of Section 4 of Central Excise Act.
3. Shri Anil Gidwani, Ld. Consultant, appearing for M/s Riddhi Corporation submits that the impugned goods are accessories of the vehicles and not parts as they are not used in the manufacture of two wheelers. It is not a component of the vehicle nor it is cleared along with the vehicles by the two wheeler manufacturers. He explains the terms accessories, parts, components and assemblies to submit that
4|Page E/10783/2015 & E/11267/2016-DB "parts" and "parts & accessories" are two different identifiable goods. The Notification No. 49/2008 CE (NT) covers only "parts‟, and therefore, it cannot be read as applicable to the accessories. The accessories of two wheelers are manufactured and cleared as per specification and requirement of M/s HMIPL and M/s IYMPL on the price agreed upon between themselves and duty is paid on the transaction value. The word „component‟ mentioned in Notification No. 49/2008 is also akin to the word "assemblies". "Component" means a constituent part as held in Star Paper Mills Vs CCE 1989 (4) SCC 724 = 43 ELT 178 (SC). Similar view has been expressed in CBEC in its circular No. 666/57/2002/CX dated 25.9.2002. „Parts‟, „Components‟ and „Assemblies‟ used under Notification covers the „elements‟, which fall in the same family and the family in itself is a family of „parts‟. Whereas against the phrasal words, i.e. „parts‟, „components‟, and „assemblies‟, the word accessories carried altogether a different meaning and its different in its use and importance. Meaning of "Accessory" according to Webster Comprehensive Dictionary, International Edition is person or thing that adds subordinately an adjunct, appurtenance, and accompaniment." The Hon‟ble Tribunal in case of Siddharth Tubes Ltd Vs CCE - 2000 (120) ELT 679 (Tri) has expressed that an "Accessory" is an "extra" thing added to help something or more importance, sub-ordinate or non essential part of." The accessories manufactured by them are used after the manufacture of motorcycles whereas part, component and assemblies are used in the manufacture of motor vehicles. Only for the reason that the accessories are used for smooth and safe ride cannot lead to be treated as parts of automobiles. He relies upon the case of United Copiex India Pvt Ltd - 1997 (94) ELT 28 (SC) to state that in the said case, it was held that in the Central Excise Tariff Act, flaps have not
5|Page E/10783/2015 & E/11267/2016-DB been treated as „accessories‟ of a motor vehicle as the same are taxable under tariff item 40.12. If the flaps are treated as car accessories in market parlance, then there is no reason to treat it separately and independently as an item of rubber product under Chapter 40. The contention of the Revenue that under Sl. No. 108 of the Notification 14/2008, the word "any heading‟ implies that parts of automobiles falling under any heading of any chapter are covered under this notification is incorrect as „any heading‟ is limited only to chapter 87, which covers parts of automobiles. He submits that the Note 3 of Section XVII stipulates that reference in Chapters 86 to 88 to „parts or accessories‟ do not apply to parts of accessories, which are not suitable for use solely or principally with the articles of these chapters. The term "Accessory" has been defined in McGraw Hill Dictionary of Scientific and Technical Terms, as follows:
"Accessory (Mech Eng): A part, sub-assembly or assembly that contributes to the effectiveness of a piece of equipment without changing its basic function, may be used for testing, adjusting, calibrating, recording or other purposes." "Part (Eng) " An element of a sub-assembly, not normally useful by itself and not amenable to further disassembly for maintenance purposes."
The "accessories" are not cleared along with the motor vehicle at the time of their clearance from the manufacturer of "Motor Vehicle". The buyer of two wheeler may or may not buy the same as it is his option. The „accessories of two wheelers‟ are not used on motor vehicles as they are an independent item. It cannot be used other than mere attachment for seating comfort or safety item. It is only an adjunct or accompaniment of two wheeler. Therefore even if it is assumed without admitting that such accessories fall under the category of „parts or accessories‟ of automobiles, it may at best be termed as „accessory of automobile‟. Accessory of an automobile is not covered in the
6|Page E/10783/2015 & E/11267/2016-DB Notification No. 11/2006-C.E. (N.T.). Therefore, such accessories of two wheelers are not to be assessed on MRP. He places reliance on the following case laws:
Ranpur Inds Vs CCE, Ahmd - 1999 (108) ELT 495 (Tri) Indichem Vs UOI - 1996 (88) ELT 35 (Guj) Intel Design Sys, India Vs CCE -2008 (223) ELT 135 (SC) Qazi Noorul HHH Petrol Pump Vs Dy. Director -2009(240)ELT 481 (SC) CIT, Kerala Vs. Tara Agencies - 2007 (214) ELT 491 (SC) Amrit Paper Vs. CCE, Ludhiana -2006 (200) ELT 365 (SC) Goldstone Engg.Ltd Vs UOI -2005 (181) ELT 11 (AP) UOI Vs Kanunga Inds -2004 (178) ELT 19 (SC) Perfect Electric Concern Pvt Ltd 1997 (93) ELT 622 (Tri) Carrier Aircon Ltd -2006 (199)ELT 577 (SC) Ratan Melting & Wire Ind. -2008 (231) ELT 22 (SC) Pragati Silicon Pvt. Ltd vs CCE -2007 (211) ELT 534 (SC) GS Auto International vs CCE, Chandigarh -2003 (152) ELT 3 (SC) Escorts Ltd vs CCE, Delhi -2002 (142) ELT 379 (Tri,Del) United Copiex India Pvt Ltd vs Comm. of Sales Tax - 1997(94) ELT 28 (SC) Mehra Brother vs Jt. Commercial Officer -1991 (51) ELT 173 (SC) Eureka Forbes Ltd vs CCE, Chandigarh -2000 (120)-ELT 533) CCE, Delhi vs Carrier Aircon Ltd - 2006 (199) ELT 577 (SC)
4. They are not clearing any goods to retail customer for their use but the same is cleared to the industrial consumer who in turn clears the goods for retail sale. He also invites our attention to the statements of
7|Page E/10783/2015 & E/11267/2016-DB authorized signatories of HMIPL and IYMPL who in their statements has stated that they are affixing MRP on the goods and clearing the same after paying duty on MRP basis. The method adopted by them for assessment under Section 4 of the Central Excise Act, 1944 is correct, proper and legal. He also relies upon an RTI application filed by Shri Omprakash C. Khattar of Mumbai in response to which the Chief Public Information officer / the Assistant Director of Directorate General of Systems & Data Management, Customs & Central Excise, New Delhi informed vide letter No.IV(34)/78/RTI/2014-Sys/1018 dated 4.8.2014 that in respect of import of Bumper, Bumper Front Guard, Car Side, Cover Dust, Foot Rest, Front Guard, Grip Handle, Front Guard Side, Grip Handle Side, Guard Leg, all these were imported through various ports across the country and all the above items were assessed to ad valorem duty as „accessories of two wheelers‟ and none of them were insisted to make payment of additional duties of customs as per MRP / RSP valuation even at Custom side. The same ratio would apply to central excise assessment also. Therefore, the contention of the revenue that the accessories of two wheelers manufactured by the appellants are parts of two wheelers and thereby resorting to valuation on MRP / RSP basis is bad in law.
5. In case of demand confirmed of Rs. 1,08,90,349/- on the ground that the goods were shown cleared for job work and the same were removed clandestinely he submits that for manufacture of accessories, they require MS Tubes, SS strips, MS Rods, SS Rods, Coating Powders, Plastic Bags, Gas for welding and the accessories are manufactured by carrying out the operations, development of designs, Cutting of MS Tubes, Bending of Rod / Pipes, Welding, Shot blasting, Power Coating (MS), Packing, he submits that the demand is without any basis . They
8|Page E/10783/2015 & E/11267/2016-DB do not have the facility for carrying out operations, viz. powder coating, metal polishing and therefore they are sending the raw materials / semi finished goods under delivery challan and after such process is carried out, the processed goods are returned back to the factory premises for its final clearance. All the inputs sent for job work were issued under challans and the same were returned under the cover of challan and invoice from the job workers. The payment of job-work charges is made to the job-worker by account payee cheques only. The preventive officers did not verify any such facts at the job workers end nor recorded any statement of job workers. Even the fact is that the job workers had informed the preventive officers that they had undertaken job work for the appellant but the same was not taken on record. The Appellant had accounted for all the goods cleared and received back from the job workers in the form and they had submitted a work sheet which showed that the goods were sent to job worker and the goods returned from the job worker were finally cleared on payment of central excise duty to our customers. The Adjudicating authority and the investigating officer have not adduced a single evidence that the appellant had removed excisable goods without payment of excise duties under the guise of delivery challans. There is not a single buyer of such goods or any corroborative evidence. The preventive officers had also visited the premises of various job workers who had informed the preventive officers that they were carrying out the job work of the appellant and the goods were returned back after the job work but these vital facts have not been appearing in the SCN. Therefore the demand of duty of Rs. 1,08,90,349/- is not sustainable.
6. As regards demand of cenvat credit of Rs. 48,56,578/- he submits that the same has been demanded on inputs alleged to have
9|Page E/10783/2015 & E/11267/2016-DB been removed under delivery challans, namely Pata, Pipe, Bolt, Nuts, Washer etc. and on which cenvat credit was availed. He submits that the said goods were removed under delivery challan and has no direct marketability and is meager in quantity and hence not attracting any commercial value. The said inputs were not cleared as such for sale, but were sent for job work on returnable basis. Rule 4 (5) (a) of the cenvat credit rules, provides a mechanism for reversal of cenvat credit, in case inputs are removed as such. The inputs / semi finished goods which were removed under delivery challan were removed for job work were received back in the appellant‟s factory and then cleared on payment of duty by raising invoices to the ultimate buyers. Therefore, the demand of Rs. 45,56,578/- is not legal.
7. As regards the confiscated goods wherein duty of Rs. 75,976/- has been demanded, he submits that the said goods were covered under invoice no. 55 dated 02.12.2013 and invoice no. 56 dated 04.12.2013, pending clearance from the factory after proper packing and were lying inside the factory premises only at the time of seizure. The goods which were properly accounted for and still lying within the factory of manufacture are not liable for confiscation and therefore, the detention and consequent seizure and demand of duty on the same is not at all sustainable. In view of above, he submits that the impugned Order being devoid of merits is liable to be set aside. In respect of appeal filed by the revenue for the subsequent period wherein demand on goods in terms of Section 4A and Notification No. 49/2008 was held to be not sustainable, he supports the findings of the impugned order.
8. On the other hand Shri Sameer Chitkara Ld. Additional Commissioner (AR) appearing for the Revenue submits that the goods viz. rear guard with W fitting, side panel, front bumper / front guard 10 | P a g e E/10783/2015 & E/11267/2016-DB assembly, nuts & bolts for fittings are integral part of two wheelers and constitute the safety parameters of two wheelers. The goods are indispensible to the two wheelers and therefore, are in the nature of parts. They are manufactured by the assessee as per drawings and specifications provided by M/s HMIPL and therefore, automatically become parts of two wheelers. Therefore, the goods manufactured by the assessee are liable to be valued under Section 4 (A) of the Act in terms of Notification No. 49/2008-CE (NT) dated 24.12.2008. The goods manufactured and cleared by the assessee were intended for retail sale to the ultimate consumer and were not meant for consumption by HMIPL. They were merely carrying out the process of re-packing and labeling of the goods for further sale to the distributors, dealers and ultimate consumers, at best be referred as agencies or other intermediaries for the sale to be termed as retail sale. The Appellant is not intermediary. M/s HMIPL is a principal manufacturer rather than an intermediary. The goods cleared by the assessee are standard package. He submits that as per Rule 2 (j) of Legal Metrology (Packaged Commodities) Rules (LMPRC-2011) the „retail package‟ means that packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and include the imported packages‟ and as per Rule 2 (k) „retail sale‟ in relation to commodity means "sale, distribution or delivery of such commodity through retails sales shops, agencies or other instruments for consumption by an individual or a group of individuals or any other consumers". The goods were intended for retail sale to the consumer and were not clearly meant for consumption by HMIPL or YMIPL whose identity is of a principal manufacturer and not intermediary and hence the package cannot be termed as „Wholesale package". As per chapter 3 11 | P a g e E/10783/2015 & E/11267/2016-DB of Legal Metrology (Packaged Commodities) Rules (LMPRC-2011), the wholesale package should bear details and the number, quantity, weight, measure, number of commodity contained in the wholesale package, whereas the goods packed by the appellant does not bear such details, hence the goods cannot be termed as wholesale package. The Board vide circular No. 625/16/2002-CE dated 28.2.2002 clarified that in case of dispute regarding requirement of declaring RSP, clarification should be obtained from the Metrology Dept or the State Govt. However, the Metrology Dept could not provide any clarification in absence of wrapper / package, but opined that wholesale packages are exempted from declaration of RSP in views of Rule 24 of LMPCR- 2011. Thus, the adjudicating authority could not obtain a definite view of the Metrological department on the issue. The general opinion of the Metrology Department is extraneous and has no bearing.
9. He also submits that the demands against the Appellant in respect of Order-in-Original dated 23.01.2015 has also been raised as the Appellant cleared semi finished goods and inputs on challan to job workers but the same were not received back. Also the demand of Rs. 75,976/- is sustainable as the goods were not accounted for in the stock records but were to be removed under invoices. He also supports the confiscation of said goods on the same ground. In regard to other demands he submits that since the goods were cleared on challan, the duties are applicable.
10. Heard both the sides and perused the records. As far as valuation of goods for the purpose of assessment, the assessees‟ contention is that the goods being accessories of two wheelers are liable to duty under section 4 i.e. on transaction value whereas the revenue is demanding duty under Section 4A i.e. on MRP basis that the goods are 12 | P a g e E/10783/2015 & E/11267/2016-DB parts of two wheeler and hence liable to MRP based duty in terms of Notification No. 49/2008- CE (NT). The impugned goods, i.e. Front guard Assy - Block, Front guard - Kit, Leg Guard, Footrest step, Round RR Guard, Kit-guard Activa, Rear guard with W fitting, Side panel, Front bumper with nuts and parts are being cleared by M/s RC to M/s HMIPL and IYMPL or Jit Industries on payment of duty under Section 4 of Central Excise Act without affixing any MRP. The buyers in turn are clearing these goods to their dealers after affixing MRP, who in turn sell these goods to the customers as per the choice and willingness of the customers. It is also a fact that the impugned goods are not cleared by M/s HMIPL/ IYMPL and M/s Jit after putting them on Two Wheelers as they are not manufacturers of two wheelers. It depends upon the requirement of these dealers to whom such goods are cleared to decide as to what quantities of goods are to be consigned to them. Also it is not mandatory for the Two Wheeler manufacturers to install the impugned goods on the Two wheelers and it depends on the choice of the customer as to which of these impugned goods he wants to fix on his Two Wheeler when these goods are available at the dealers‟ shop. M/s RC were manufacturing the goods as per the specification provided by the industrial consumers, i.e. HMIPL, IYMPL.
11. However, the fact remains that these goods when bought by the individual customers were at their own option and the Two Wheeler manufacturers were not mandatorily required to fix these goods on the two wheelers at the time of sale of two wheelers to their customers. The Revenue has not brought any evidence on record to show that the Two Wheelers may not run without the impugned goods or it is mandatory to fix these goods at the time of clearance of the two wheelers from the two wheeler manufacturers‟ factories. The impugned goods are attached 13 | P a g e E/10783/2015 & E/11267/2016-DB to the two wheelers for the convenience and safety of the vehicle as well as of the rider. In Notification No. 49/2008-CE (NT) dated 24.12.2008, as amended by notification No. 9/2010-CE(NT) dated 27.02.2010, the Sr. No. 108 reads, as under :
(1) (2) (3) (4) 108 Any chapter Parts, components and assemblies 30 of vehicles (including chassis fitted with engines) falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716
12. We find that the above Notification covers parts, components and assemblies of vehicles, whereas looking to the use of the impugned goods, they are neither parts or components or assemblies of vehicle as they are not required in the functioning of the two wheelers. Only for the reason that the Tariff Entry 8714 covers parts and accessories of vehicles, it cannot be said that the parts and accessories are one and the same. Both the terms denote a separate meaning. Whereas the term „parts‟ means a piece of segment of something which combined with others make up the whole or component of machine and the word „accessories‟ means a thing which can be added to something else in order to make it more useful, versatile or attractive. Normally, the function of „parts‟ is different from „accessories‟ and the two cannot be equated under the subject notification No. 49/2008. Since only „parts, components, and assemblies‟ of a vehicle are covered under the Notification and hence it has no application in case of accessories. It is also a fact that M/s RC are clearing the goods to the parties who are not retail customers nor they are manufacturers of Two Wheelers, but are engaged in the marketing of accessories of two wheelers after removing the same from bulk pack i.e. packing of four or six and then after affixing MRP are clearing for retail sales to dealers who as per the 14 | P a g e E/10783/2015 & E/11267/2016-DB customer order are putting it on two wheelers. Clearly when the accessories are not being cleared with two wheeler nor are required to be put on vehicle and it is only customer to customer choice that the same are put on vehicles, these items do not qualify as parts/ components or assemblies. Thus it is a fact that the two wheelers are capable of functioning without these accessories. The Hon‟ble Supreme Court in case of Pragati Silicon Pvt Ltd - 2007 (211) ELT 534 (SC) held in para 12 of the order, as under :-
"Para 12.The Tribunal has answered the above question in the negative. Significantly, the Tribunal has only examined whether the name plates can be considered „parts‟ of motor vehicles. It has not at all considered whether these name plates can be considered „accessories‟ of motor vehicles. The relevant portion of the judgment of the Tribunal is reproduced below:
According to Sarkar‟s „Words and Phrases of Excise & Customs‟, Second Edition, part is "an element of a sub-assembly, not normally useful by itself and not amenable to further disassembly for maintenance purpose". In common parlance parts are used in the manufacture of the final product and without which the final product cannot be conceived of. A motor vehicle is a complete vehicle without affixation of emblems or name plates and we agree with the submissions of the learned DR that it cannot be treated as a part without which the motor vehicle is not complete .... A name plate can certainly be used only in respect of the product whose name it carries but it does not make it a part of the motor vehicle on this ground. Heading 39.26 specifically covers articles of plastics and as it is not in dispute that the impugned goods have been made of plastics they would be classifiable under heading 39.26 only."
13. It is apparent from the above that there is clear difference between the parts and accessories and they cannot be equated with each other. Section 4A of the Central Excise Act, 1944 covers only those excisable goods which are required to declare the retail sale price under the provisions of legal Metrology Act, 2009. Even if the goods are presumed to be listed under Notification 49/2008, the same would not be covered under the provisions of Section 4A of the Central Excise Act, if these are not covered by the provisions of the legal Metrology Act, 2009 and the Rules framed therein. As per provisions of the Legal 15 | P a g e E/10783/2015 & E/11267/2016-DB Metrology Act, 2009 and the Legal Metrology (Packaged Commodities) Rules, 2011 (LMPCR), to the goods manufactured and cleared by the Appellant, the term „retail package‟ is defined at Rule 2 (j)(i) of the LMPCR, 2011 to mean:
"packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages. Provided that for the purposes of this clause, the expression „ultimate consumer‟ shall not include industrial or institutional consumers."
Rule 2 (k) of the said rules defines „Retail Sale" to mean -
" retail sale "in relation to a commodity, means the sale distribution or delivery of such commodity through retail sales, shops, agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer."
Rule 2 (1) of the said rules defines „Retail Sale Price‟ to mean:
"the maximum price at which the commodity in packaged form may be sold to the consumer and the price shall be printed on the package in the manner given below."
14. As per explanation of above Notification 49/2008-CE (NT), retail sales price means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight charges, commission payable to dealers and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be, and sale price is the sole consideration for such sale. Thus it can be seen that the retail sale price is defined with reference to sale to the ultimate consumer only whereas the industry or institutional consumers are not ultimate consumers. As per the agreement between the RC and the buyers, RC is barred from selling these goods to the dealers of HMIPL or IYMPL or Jit Industries and it cannot sell these goods to any other person. The design and specifications supplied by the buyers and the sale is exclusively to them. M/s RC cannot sell these goods even to the retail buyers or dealers, 16 | P a g e E/10783/2015 & E/11267/2016-DB which clearly indicates that sale of the said goods by M/s RC is not a normal sale transaction but a controlled transaction strictly in terms of the agreement. The goods are not consumed by the buyers but are cleared to the ultimate consumer after affixing the MRP. Even, the goods are not sold by the buyers to the ultimate consumers, but to the dealers, who in turn sell it to the customers who the ultimate consumers. There is no dispute about the fact that the Appellants are selling the goods in bulk pack, wherein per box includes 5 / 6/ 10 pieces per box. It is, thus, absolutely clear that the goods when cleared by the Appellant are not intended for retail sale at the end of M/s RC.
15. It is also a fact appearing on record that when the Revenue sought opinion from the Controller, Legal Metrology & Director Consumer Affairs, Gandhi Nagar, the said agency vide letter No.CLM/4554 dated 24.4.2014, even though could not give a report for want of wrapper / package had opined that as per Chapter 3, Rule 24 of the Package Commodity Rule, 2011, retail sale price is not required to be declared on the wholesale package, as defined in the said rules. It is a fact that the buyers of the goods are opening the bulk pack cleared by M/s RC and putting MRP on the same as well as repacking these goods, if required. The said activity of packing / repacking as well as labelling / re-labelling amounts to manufacture in terms of Section 2 (f) (iii) of the Central Excise Act, 1944 and they are liable to pay central excise duty in terms of impugned notification and provisions of Section 4A. The goods cleared by M/s RC are neither a retail pack nor are meant for retail sale, as defined under Rule -2 of LMPCR, 2011 and, hence, were not covered under the Legal Metrology Act, 2009 and the rules framed therein; they are also out of the purview of Section 4A of the Central Excise Act. 17 | P a g e E/10783/2015 & E/11267/2016-DB Coming again to the issue as to whether the goods were covered under the term of components or parts, it is pertinent to observe that vide Notification No. 12/2016-CE (NT) dated 1.3.2006 the Notification No.49/2008-CE (NT) dated 24.12.2008 was amended so as to change the description of the goods covered under Sl.No. 108 of the Notification No. 49/2008. By the said amendment, the entry was amended to read as " parts, components, accessories & assemblies" whereas before this date, the entry read as only „parts/components and assemblies‟. It is, thus apparent that before 2016, the accessories were not covered under the subject notification. If the contention of the revenue that parts/components/assemblies cover accessories, then there was no need to add accessories by above amendment. The amendment of entry itself recognise the accessories different from the terms parts, components and assemblies. Therefore with the aforesaid amendment, the entire contentions of the revenue clearly fails.
16. In view of our above observations we hold that the impugned goods are not components, parts or assemblies of the Two Wheeler but are accessories of two wheelers and hence not liable for valuation in terms of Section 4A and Notification No. 49/2008 - CE (NT). Further that the goods were at the time of clearance from the factory of M/s RC were not intended to be sold to the ultimate consumer in retail but were intended to be cleared in wholesale package to the industrial customer and hence not liable to duty in terms of Section 4A and Notification No. 49/2008 - CE (NT). We therefore hold that the demand made against M/s RC in terms of Section 4A and in terms of Notification No. 49/2008
- CE (NT) is not sustainable.
18 | P a g e E/10783/2015 & E/11267/2016-DB
17. In case of Appeal No. E/10783/2015, we find that apart from demand of duty on MRP basis, the demand has also been raised on the ground that the goods were removed to job worker on challans and were not received back in the factory. We find that a demand of 1,08,90,349/- has been confirmed against M/s RC on the ground that they have cleared goods under delivery challans during the period 2010
- 11. The adjudicating authority has held that some of the goods were cleared under job work to M/s Bapa Sitaram which is an ice factory and it is not possible to do job work as no activity can be undertaken at ice factory. Further that some goods were cleared to Riddhi Industries which is owned by daughter of proprietor of M/s RC. Also that act of raising challans without full address gives rise to suspicion and that there were some job workers who did not have entries against their name in ledger books of RC. Similarly in case of demand of Rs. 48,46,578/- the adjudicating authority has held that the inputs has been cleared without reversal the amount equal to credit or without payment of duty under the cover of delivery challans and the same is recoverable. We find that the show cause notice and the impugned order has proceeded to demand aforesaid amounts only on the basis of delivery challans holding that the challans were incomplete and that the goods were cleared for job work but were not returned to the factory. We find that M/s RC has cleared semi finished goods or inputs under challans for job work which is an undisputed fact. The show cause notice has not adduced single evidence that the goods were diverted elsewhere. The Appellant has removed all the finished goods on invoices and there is no evidence to suggest removal of inputs or semi finished goods without legitimate invoices. There is no mention in the show cause notice or the impugned order to show that if the semi finished 19 | P a g e E/10783/2015 & E/11267/2016-DB goods after job work were not received back in the factory then where else the same were cleared.
18. We find that if the investigating officers had any doubt about the job work activities or the job worker they should have investigated the some further. The charges of clandestine removal has to be investigated and proved and cannot be merely alleged on the basis of incomplete challans or records. No buyer of such goods which were inputs or semi finished goods has been found. No statement of any job worker is appearing on record and no evidence except job work challans are appearing on record. In absence of any buyer and receipt of any consideration it cannot be said that any goods were removed by RC. No discrepancy in stocks has been shown to have occurred. The allegation lacks any corroborative evidence and hence the demands are not sustainable. In case of demand of Rs. 75,976/- and confiscation of goods we find that the same has been ordered on goods which were to be cleared under invoice no. 55 dated 02.12.2013 and 56 dated 04.12.2013. The adjudicating authority has held that the said goods were not accounted in the records and were also cleared without assessing the same under section 4A. We find that at the time of the visit of the officers the invoice for clearance of goods were found to have been prepared. There is no allegation that the goods were to be removed on duplicate invoices. The only lacuna which can at the most be pointed out that the finished goods register was not maintained till date. However only for irregular maintenance of finished goods record the goods cannot be made liable for confiscation especially in the light of fact that there is no dispute about the genuineness of the invoices by which the goods were intended to be removed. There is no allegation that M/s RC intended to clear the goods without payment of duty. 20 | P a g e E/10783/2015 & E/11267/2016-DB
19. Hence, we are of the view that the goods are not liable for confiscation and the duty is payable only on removal. As far as reasoning given by the adjudicating authority that the goods were being cleared without complying with the provisions of Section 4A, we hold that since the valuation of goods in terms of section 4 i.e. assessment of duty on transactional value under section 4 is correct, therefore the confiscation of goods is not sustainable.
20. In view of our above findings and observations we allow the appeal filed by the assessee M/s RC and reject the appeal filed by the revenue.
(Pronounced in the open court on 13.05.2019) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Seema