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2015 (5) TMI 659 - CESTAT MUMBAI

2015 (5) TMI 659 - CESTAT MUMBAI - 2015 (330) E.L.T. 227 (Tri. - Mumbai) - Demand of duty - Manufacturing activity or not - Held that:- Appellant is engaged in the assembly of 114 components alongwith power supply, motherboard, LCD, keyboard which in our view clearly amount to manufacture. It is not that only on the basis that Ld. Commissioner has conceded that if the goods are incomplete or unfinished in terms of note 6 of Section XVI of Central Excise tariff act activity amount to manufacture .....

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nal and same could not perform as lottery terminal.

Section 2(f) manufacture includes any process incidental or completion of manufacture product that means even if a product is partly manufactured any activity incidental/ancillary to complete such product shall also be amounting to manufacture. In the present case input are more than 100 parts and even these parts in the form of components and not a manufactured good therefore assembly of all these parts converting to distinguished .....

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Jain, Member (T) And Ramesh Nair, Member (J),JJ. For the Appellant : Shri Sanjay Diwedi, Adv. For the Respondent : Shri V K Agarwal, Addl. Commissioner (AR) ORDER Per: Ramesh Nair: The appeal and stay applications are directed against the Order-in-Original No. Belapur/141/Belapur-I/R-IV/COMMR/KA/2013-14 dtd. 18/2/2014 passed by the Commissioner of Central Excise, Belapur, wherein Ld. Commissioner confirmed demand of Central Excise duty of ₹ 1,59,47,997/- and imposed penalty of equal amount .....

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o assemblies falling under tariff item no. 854210.90 of the First Schedule to the Central Excise Tariff Act 1984. The appellant is also engaged in the assembly of lottery terminal out of CKD kit supplied by M/s. Pan India Network Infravest P. Ltd. (hereinafter referred as M/s. Pan India) on job work basis however they cleared the said assembled lottery terminals without payment of excise duty. The detailed investigation has been carried out by the departmental officer and found that the appellan .....

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8/07 dated 27/7/2011 was issued to the M/s. Leo Circuit Boards Pvt. Ltd and its director and also to M/s. Pan India proposing demand of Central Excise duty and also proposing penalties. In the first round of adjudication Ld. Commissioner vide the order in original No. Belapur/44/Bel-I/R.IV/Commr/KA/12-12 dated 30/10/2012 confirmed the demand of duty and penalties. Aggrieved by the said order all three appellants filed appeal before this Tribunal wherein vide this Tribunal's order no. A/777-7 .....

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of Central Excise duty of ₹ 1,59,47,997/- and imposed penalty of equal amount under Section 11AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002, interest under Section 11AB was demanded, penalty of ₹ 25,000/- was imposed on Shri Sudesh Rao, Director of M/s. Leo Circuit Boards Pvt. Ltd. and penalty of ₹ 25,000/- on M/s. Pan India under Rule 26 of Central Excise Rules, 2002. Aggrieved by the impugned order all the three appellants are before us. 2 .....

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nt does not amount to manufacture. The goods were just required to be fitted by screw or by plugging into jags. The goods cannot be considered incomplete or unfinished merely for the reason that separate bills of entry were filed for the LCD monitor and keyboard. It is admitted position that lottery terminal as well as LCD monitor and key board were imported from same source as part of same consignment. Referring to HSN explanatory note it was submitted that meaning of word incomplete or unfinis .....

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s were not falling within the Section XVI or note itself did not exist during the relevant period. Had note 6 not exist today or had it not been applicable to the lottery terminals, adjudicating authority would have followed the decisions cited before him and would have consequently held that activity did not amount to manufacture. It was submitted that only question to be decided that whether merely by applying the note 6 the activity of assembling the lottery terminal undertaken by the appella .....

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t is submitted that in the present case lottery terminals is in disassembled condition which is akin to purchase of furniture such as sofa, cupboard, table or bed from the market, shopkeeper prepare the goods in disassembled condition and assembled it at the customers premises. This activity does not involved manufacture of sofa, cupboard etc at the customers premises. As regard assembly of various components, reliance was placed on the judgments in the case of Indian Xerographic Systems Ltd. [1 .....

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)]; (d) Dolphin Drugs Pvt. Ltd. vs. CC, Mumbai [2000 (115) RLT 552 (T)]; (e) Formica India Division vs. CCE, [1995 (77) ELT 511 (SC)] (f) Madhav Steel vs. UOI - WRIT PETITION NO. 2706 OF 2006 (g) Manglore Chemicals & Fertilizers Ltd. [1991 (55) ELT 437 (SC)] (h) Kamdeep marketing Pvt. Ltd. vs. CCE [2004 (165) ELT 206 (T) (i) Wooden Industries vs. CCE [2004 (164) ELT 339 (T) affirmed by Supreme Court at 2004 (170) ELT A 307] (j) Union Carbide Vs.UOI [1978 (2) ELT 1180 (SC)] (k) UOI vs. Delhi .....

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is no malafide intention on the part of the appellant hence the notices barred by limitation consequently penalty also not imposable 3. On the other hand Shri V.K. Agarwal, Ld Addl. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that appellant has carried out complete assembly of lottery terminals from various components imported by M/s. Pan India and the said activity of assembling is nothing but conversion of various and .....

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s classifiable as complete machine in custom therefore the same shall be applicable in Central Excise to interpret term "manufacture". It is his submission that the appellant misinterpreting that they have imported lottery terminal in complete form. It is clear from the packing list, bill of entry submitted by the appellant that lottery terminal is not complete while importing but is in various components in complete knockdown condition therefore assembly of imported components and bri .....

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ls etc. to co-relate with the goods manufactured and cleared by the appellant, therefore it is clear that goods manufactured by the appellant have not been exported and cleared for home consumption. As regard the time bar and imposition of penalties, he submits that the activity of manufacture of 1500 lottery terminals and clearance thereof was never declared by the appellant to the department despite the fact that at earlier occasions they cleared the same product on payment of excise duty ther .....

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pellant through out in the defence took a stand that they have imported complete lottery terminal and power supply, motherboard, LCD display and key board and assembly of these items by screw driver technology does not amount to manufacture. On carefully going through the bill of entry packing list and other records, we find that the appellant M/s. Pan India has imported playwin DMX lottery terminals in knockdown kits LCD display, keyboards, dist and supplied the same to the appellant M/s. LEO C .....

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keyboard which in our view clearly amount to manufacture. We do not agree with the submissions of appellant that only on the basis that Ld. Commissioner has conceded that if the goods are incomplete or unfinished in terms of note 6 of Section XVI of Central Excise tariff act activity amount to manufacture and else it will not amount to manufacture. The submissions is misleading that in the present case it is not the question whether the goods imported is incomplete or unfinished. Lottery termin .....

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taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or failing to be classified as complete of finished by virtue of this Rule), presented unassembled or disassembled. In view of the rule 2(a), if CKD parts in complete set are imported, for the purpose charging cus .....

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to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) which, in relation to any goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration 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 "manufacturer" shall be construed accordingly and s .....

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00 parts and even these parts in the form of components and not a manufactured good therefore assembly of all these parts converting to distinguished product which is called as lottery terminal. Therefore the activity from conversion of various components of lottery terminal into complete unit of lottery terminal is undoubtedly amounting to manufacture and correctly chargeable to excise duty under chapter heading 84709010. The identical issue has been dealt in the following case laws:- PRADEEP @ .....

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the purpose of charging customs duty vide order-in-original dated 5.9.1987. The said order was taken up under the Kar Vivad Samadhan Scheme, 1998 and as per the said scheme, he has discharged the duty liability at 50% of the dues adjudged. Since he has paid Customs duty as per the provisions of law as mentioned above on the imported goods as motor cars, he is not liable to pay any excise duty on the assembly of car thereafter. The above argument of the appellant is totally misplaced. The taxabl .....

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cted and notwithstanding the fact that the appellant might have paid Customs duty on the imported components, he is liable to pay excise duty on the activity undertaken by him. In the instant case, the product is motor cars of Honda brand and motor cars were specified in Item no. 34 of the Central Excise Tariff as it stood at the relevant time. Assembly of cars from various components brings into existence an excisable item namely, car, which is distinct and different from the parts from which i .....

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ct and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinctiveness of the aspects". In the instant case, the Customs duty was levied from the appellant for the import of aut .....

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tivities, such levies cannot be said to be invalid or illegal. Therefore, the argument that since they have paid customs duty on the parts imported in a CKD condition as a car, they are not liable to pay excise duty on the assembly of those parts into a car has no merit and accordingly we reject the arguments made by the appellant in this behalf. MAJESTIC AUTO LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT [2001 (130) E.L.T. 551 (Tri. - Del.)] 7.1 We have considered the submissions of both t .....

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hat theywere classified as motor cycles by the Customs for the purpose of levy of duty will not take away the fact that these were only components and the process of assembly has been undertaken by the Appellants for bringing into existence motor cycles. The product has been classified for the purpose of levy of customs duty as motor cycle by virtue of Rule 2(a) of the Interpretative Rules. As far as the provision of Central Excise Act and Rules are concerned a manufacturing activity has been un .....

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rt, and which can only be used, other than in exceptional cases, for completion into the finished article or part), into complete or finished article shall amount to 'manufacture'." 7.2 It is apparent from the wordings of this Note that if a product which is incomplete or unfinished is completed or finished, the process for making it complete or finished will amount to manufacture. According to Webster IXth New College Dictionary, conversion means "something converted from one .....

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d in relation to any goods in the Section or Chapter Note of the Schedule to the Central Excise Tariff Act as amounting to manufacture. Such a definition was not in existence at the relevant time for deciding the matter in the case of Indian Xerographic System Ltd. Similar was the situation in the case of Walchand Nagar Industries as the goods were manufactured and cleared during the period August, 1984 to January, 1986 when the definition of manufacture under Section 2(f) of the Central Excise .....

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in the case of Wipro G.E. Medical Systems Ltd. v. C.C.,Bangalore, 1999 (106) E.L.T. 169. In that case the Appellants therein had imported two sets of CAT Scan System in SKD/CKD condition and the Tribunal observed that Central Excise Department has correctly levied duty on the System after they are fully manufactured as what was imported was merely deemed to be a system though for "practical purpose" were component parts. The Tribunal also observed that the Appellants therein had to es .....

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lso provided that the Appellants shall conduct production operations namely pre and final assembly, finishing, testing and final work for shipment of motor cycle or direct delivery to customers. The Agreement also provided that the Appellants shall at their own risk and expenses provide premises, facilities, equipments, machines and tools required for the production operations in India and both the production operations and standard of the assembly motor cycle shall comply in full with BMW requi .....

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