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Commissioner of Central Excise, Mumbai-IV Versus Dilip Chhabria Designs (P.) Ltd.

2015 (10) TMI 371 - CESTAT MUMBAI

Manufacture - SSI exemption - customization of the already built up motor vehicle - body building - exemption under Notification No. 3/2001 denied on the ground that the assessee availed the Cenvat credit of the input which is in violation of condition of said notification. - Held that:- They are doing cosmetic changes as per the requirement of the customer inside and outside of the vehicle. In our considered view these activity do not amount to manufacture for the reason that the original duty .....

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omization carried out by the respondent does not fall under the four corners of chapter note 3. - Decided in favor of assessee.

As regard the dropping of the demand on account of alleged removal of add on kits and parts and shortage found in the physical stock verification in Powai and Silvassa units, we find that there are serious conflicts between the allegation made in the show cause notices and Commissioner's findings in the impugned orders. The Ld. Counsel also made submissions t .....

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-WZB/EB - Dated:- 31-8-2015 - P.K. JAIN AND RAMESH NAIR, JJ. For The Appellant : Ashutosh Nath, Asstt. Commissioner (AR) For The Respondent : Rajeev D. Wagley and Ms. Anagha Gavade, Advs. ORDER Ramesh Nair, Judical Member - Revenue has filed these three appeals against orders in original No. 25/2003 dated 10/12/2003, OIO No. 26/2003 dated 10/12/2003 and OIO No. 27/2003 dated 10/12/2003 passed by the Commissioner Central Excise, Mumbai-IV, The details of all appeals, order in original and relevan .....

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/12/2003 Proceedings of SCN dropped. 2. E/329/05 (Powai Unit) DGCEI/WZU/204/12(4) 13/2002-Pt. V dated 1/1/2003 for ₹ 11,66,802/-on removal of add on kits from Powai unit to Silvassa unit 26/2003 dated 10/12/2003 Demand dropped except Penalty of ₹ 5,000/- on Shri B.D. Bajaj 3. E/339/05 (Silvassa unit) DGCEI/WZU/204/12(4) 13/2002 Pt. II dated 1/1/2003 for (i) ₹ 16,48,780/- denying exemption Notn. No. 3/2001-CE dated 1/3/2001 on Buses/Tempo Traveller(demand and equal amount of pen .....

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ed 2. The fact of the case is that M/s. Dilip Chabriya design Pvt. Ltd having three units i.e. Andheri, Powai and Silvasa. They are engaged in customization of motor vehicle falling under chapter heading 8701, 8702, 8703, and 8711 and manufacture of body building of Motor Vehicle falling under 8702. They are also engaged in manufacture of parts/sub assemblies of motor vehicles. In all the three adjudication orders five show cause notices were adjudicated. In the show cause notice summarily deman .....

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e excise duty demand on the removal of add on kits on the ground that either it was found short in the stock taking or removed under the cover of challan without issuing the invoices. (d) Excise duty demand by denying SSI exemption Notification No. 8/2001-CE dated 1/3/2001 during the period 2001-2002 on the ground that the aggregate value of the clearances during the year 2000-2001 exceeded threshold limit of ₹ 3 crores. 2.1 In the adjudication, the adjudicating authority dropped the proce .....

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er rule 209A for ₹ 5,000/- each on OIO No. 26/2003 and OIO No. 27/2003 both dated 10/12/2003. Being aggrieved by the three orders in originals dated 10/12/2003 the Revenue filed three appeals before this Tribunal to decide the following issues: Appeal No. E/225/05 (a) Whether after taking into consideration, the facts and circumstances as stated above, read with the show cause notice, the said order of the Commissioner, Central Excise, Mumbai-IV is legal and proper? (b) Whether by an order .....

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-CE dated 1/3/2001 in respect of clearances effected by it during the year 2001- 2002 and consequently, order recovery of Central Excise duty amounting to ₹ 1,71,131/- liable on such clearances. (iii) Impose penalty, as proposed under Show cause notice dated 1/1/2003 issued to M/s. DCDPL, Andheri, on all the notices and order recovery of interest on duty liable as above, under the relevant provisions of Central Excise Act, 1944 and the Rules made thereunder. (iv) Up-hold the proceedings in .....

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into consideration, the facts and circumstances as stated above, read with the show cause notice, the said order of the Commissioner, Central Excise, Mumbai-IV is legal and proper? (b) Whether by an order passed under Section 35C of the Act, the CESTAT should: (i) To hold that Central Excise duty is liable on the goods cleared by M/s. DCDPL, Powai to M/s. DCDPL, Silvassa, and consequently, order recovery of Central Excise duty amounting to ₹ 11,66,802/- liable on such clearance. (ii) Deny .....

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ovisions of the Central Excise Rules, and Rules thereunder. (v) Impose penalty as provided in Rule 209 A of Central Excise Rules, 1944 and Rule 26 of Central Excise Rules, 2001, viz a penalty not exceeding the duty on the excisable goods or Rupees ten thousand whichever is greater. (c) Whether the CESTAT should pass any such other order as may be deemed fit. Appeal No. E/339/05 (a) Whether after taking into consideration, the facts and circumstances as stated above, read with the show cause noti .....

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(iii) Which were removed under delivery challans, without the cover of Central Excise invoices by M/s. DCDPL, Silvassa, involving Central Excise duty amount to ₹ 21,917/- and consequently, order recovery of total Central Excise duty amounting to ₹ 6,16,837/- liable on aforesaid clearances. (iv) Deny the exemption availed by M/s. DCDPL, Silvassa under the provisions of Notifications No. 08/2001-CE dated 1/3/2001 in respect of clearances effected by it during the year 2001-2002 and co .....

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nd order recovery of interest on duty liable as above, under the relevant provisions of central Excise Act, 1944 and Rules made thereunder (vii) Impose penalty, as provided in Rule 173Q & 209A of the Central Excise Rules, 1944 and Rules 25 and 26 of Central Excise Rules, 2001, viz. a penalty not exceeding the duty on the excisable goods or Rupees ten thousand whichever is greater. (c) Whether the CESTAT should pass any such other order as may be deemed fit. In an another proceeding the appel .....

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nt by extending benefit of notification no. 3/2001 -CE dated 1/3/2001. Against the said Tribunal order, revenue field appeal before Hon'ble Bombay High Court which was allowed by the Hon'ble High Court vide order dated 12/3/2015 wherein the Hon'ble High Court reversed the Tribunal's by upholding the demand but the penalty was waived. The order of the High Court then attained finality. Aggrieved by the impugned orders the Revenue filed these three appeals. 3. Shri Ashutosh Nath, L .....

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tly amounting to manufacture. Therefore even though customization was carried out by the respondent on the duty paid motor vehicles but by virtue of Chapter Note 3 of chapter 87, the activity of customization is amounting to manufacture. He placed reliance on the following judgments:- (a) CCE v. Satguru Auto Builders 2006 (199) ELT 386 (SC) (b) Kamal Auto Industries v. Collector of Central Excise 1996 (82) ELT 558 (Trib. - Delhi) (c) Maruti Udyog v. CCE E/2524/2001-B and E/38/2002-B 332-333/2002 .....

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i unit, it amounts to revenue neutral which is not as per statute. The Powai unit is independently registered and whatever goods manufactured and cleared are liable for duty irrespective whether duty is available as Modvat credit to the Silvassa unit. He further submits that Ld. Commissioner observed that goods transferred from Powai unit to Silvassa units were accounted for by the later, the excise duty would have been discharged at the time of their further clearance of Silvassa unit therefore .....

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as found so as to assumed that duty would be paid on its further clearance from Silvassa unit. He also submits that no evidence was produced regarding duty paid clearance from Silvassa unit of the goods said to have been transferred from Powai unit. Therefore the demand of duty amounting to ₹ 11,66,802/- raised in the show cause notice dated 1/1/2003 was liable to confirmed. In regard to OIO No. 27/2003 dated 10/12/2003 he submits that demand of ₹ 16,48,750/- though dropped by the tr .....

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ropped the demand on the basis that the stock taking was carried out for individual item whereas accounting was done as per kit and one kit consist of number of parts. He submits that there was no dispute at the time of panachanama drawn therefore whatsoever shortage was recorded at the time of panachanama the same cannot be disputed at later stage. As regard SSI exemption Notification No. 8/2001- Cus claimed by the respondent and allowed by the Ld. Commissioner, he submits that there is apparen .....

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during the year 2000- 01. In view of this undisputed facts the total aggregate value during the 2000-01 comes to ₹ 3,49,63,118/-(Rs. 2,46,58,245/- + 1,03,04,873/-). In view of this the respondent is not eligible for SSI exemption during the period 2001-02. Therefore dropping of demand by Ld. Commissioner extending the benefit of SSI exemption in all the three impugned orders are apparently incorrect. As regard the penalty on Shri B. D. Bajaj of ₹ 5,000/- each in impugned Order Nos. 2 .....

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ustomization of the cars the respondent is carrying out only restyling of interior body of the duty paid cars. They are not fabricating completely new body and mounting on chassis. The Revenue in their appeal has mainly emphasized on the Chapter Note 3 of Chapter 87 that since the respondent had customized the vehicle as per requirement of the customer, the activity falls under the said Chapter Note 3 and accordingly it amounts to manufacture and liable for duty. He submits that as per the Chapt .....

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Note 3 of Chapter 87 of Central Excise Tariff Act. He submits that in view of this fact, the judgments relied upon by the revenue are not applicable as those judgments are related to the issue where the independent body was fabricated. He further submits that as regard the SSI exemption, the respondent was of bona fide belief that clearance of bus/tempo traveller was under exemption notification no. 3/2001 dated 1/3/2001 and accordingly the value of said exempted goods were not liable to be adde .....

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nd once the Tribunal has allowed it and subsequently the Hon'ble Bombay High Court has reversed the order of the Tribunal. In these circumstances, the respondent had bona fide belief that they were entitle for SSI exemption, hence there is no suppressions of facts or misdeclaration on the part of the respondent, accordingly the demand as related to SSI Exemption is time bar in respect of clearances made beyond one year from the date of show cause notice. As regard the demand of ₹ 11,66 .....

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ow cause notice was issued after one year i.e. on 1/1/2003. As regard shortage of stock in Silvassa unit, he submits that the shortage in statutory register as against physical verification of stock were on account of fact that kits received from Powai unit were lying in factory and not accounted in statutory record and only stock of finished kits were entered in the statutory register. It is his submission that had all the loose kits would have counted there would not have been any shortages. H .....

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d by the Ld. Commissioner on page 8 of OIO number 27/2003 therefore duty at the most can be demanded only on ₹ 1,59,005/- and not on ₹ 6,35,270/-. As regard duty demand ₹ 21,917/- he submits that this demand was raised on the allegation of clandestine removal whereas no positive evidence was produced therefore the Ld. Commissioner rightly dropped the demand. He further submits that if at all any demand arises the value should be considered as cum duty value and abatement on acc .....

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n kits and parts from Powai and Silvassa units are correct. (c) Whether the Respondents are entitle for SSI Exemption notification No. 8/2001-CE dated 1/3/2001 during the year 2001-2002. (d) Whether personal penalty imposed for ₹ 5000/- each in two OIO on Shri BD Bajaj is correct or to be increased to ₹ 10,000/- each. As regard demand of duty on customization of motor vehicle we find that the respondent is carrying out the activity of cosmetic changes on the duty paid cars and vehicl .....

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ppeal mainly emphasized on chapter Note 3 of Chapter 87 which is reproduced below:- "for the purpose of heading Nos. 8701 to 8705 building a body or fabrication or mounting or fitting of structures or equipment on the chassis would amount to manufacture of motor vehicle" The Revenue contended that any activity of fabrication if undertaken on the chassis of old vehicle and also the activity of mounting or fitting of any equipment on such chassis shall amount to manufacture of a motor ve .....

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he activity of customization carried out by the respondent does not fall under the four corners of chapter note 3. Considering this undisputed position Ld. Commissioner has correctly held that customization of the Completely built up vehicle does not amount to manufacture even in terms of Chapter Note 3. We do agree with the findings of the Commissioner. As regard the judgments cited by the revenue, we find that in all those judgments the activities were of fabrication of complete body and mount .....

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ween the allegation made in the show cause notices and Commissioner's findings in the impugned orders. The Ld. Counsel also made submissions that due to claim of SSI Exemption demand is not sustainable and also it is time bar. We therefore find that as regard demand of excise duty on alleged removal of add on kits and parts from Powai and Silvassa units needs re-consideration. Therefore for this part of the demand we remand the matter to the Original Adjudicating Authority for passing a fres .....

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ccount therefore aggregate value remained below ₹ 3 Crores, accordingly extended the benefits of SSI Exemption Notification No. 8/2001 -CE dated 1/3/2001. We find that there is no dispute particularly when the Hon'ble Bombay High Court in the appellant's own case held the clearances of buses/tempo traveller as dutiable denying the exemption Notification No. 3/2001-CE dated 1/3/2001, the value of the same i.e. ₹ 1,03,04,873/- is includible in the threshold limit of ₹ 3 c .....

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