TMI Blog2024 (1) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... s. These are packed and consigned to the customer. The order is not placed unit wise or packet wise . The learned counsel for appellant has stressed on the word unit container used in Section 2 f (iii). It is argued by the counsel that unit container means container with predetermined quantity. The polythene bags used by appellant to repack are not designed to carry predetermined quantity. After goods are sold, it is packed in polythene bags and a label is fixed for identification. In the case of Lakme Lever Limited Vs CCE, Mumbai [ 2000 (10) TMI 96 - CEGAT, MUMBAI] it was held that if the product is marketable any amount of treatment to enhance its marketability would not amount to manufacture as per the definition - The Tribunal in the case of Lupin Laboratories Ltd. Vs. CC, and CE, Aurangabad [ 2001 (10) TMI 136 - CEGAT, MUMBAI] has taken similar view wherein the Tribunal held that since each product was marketable on its own, putting them all together did not confer them any attribute of marketability that the goods did not possess earlier. Thus, given by the facts of this case, the activity undertaken by the appellant of repacking from bulk into small packets in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied, the appellant clears SPVs without payment of duty by raising invoices showing 'nil' value for these clearances. However, the details of manufacture and clearance of these SPVs were not furnished / shown in the mandatory ER 1 returns filed by the Taxpayer. 4. Further it was noticed by Audit that the appellant was importing spares for the special purpose vehicles in bulk, packed in wooden cartons. These imported spares are bought by the appellant on payment of appropriate duty. The spares are received in wooden cartons in bulk as the unit packing is not done by the supplier. After import and receipt of the spares inside the factory, the bulk packages are opened and spares are taken out and placed unit wise in respective bins. At the time of sale of these goods (Spares), they are re-packed into individual polythene covers carton box / wooden case packing as per requirement, after marking the part number, description and labelling on them. These spares are then removed under the cover of an invoice/ packing list, but no central excise duty is paid on these clearances. 5. As per Section 2 (f) (iii) of the Central Excise Act, 1944, manufacture includes any pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onents for production as well as for spares. They maintain separate accounts for both. The trading location has separate premises and has a separate accounting system compared to manufacturing location. The re-labelling and packing of spares was done for the purpose of identification and transportation. They have list price and do not affix MRP on the spares sold by them. It was stated that they do not pay excise duty on the spares as these are meant for trading. The appellant does not avail any input credit. The appellant submitted that they do not manufacture vehicle parts / spares and do not charge duty on MRP basis. 11. However, it appeared to the department that the packing / repacking / labelling of parts and components of SPVs amounts to manufacture and appellant is liable to pay excise duty on spares / parts cleared from 27.02.2010 onwards, as per Section 4A of the Central Excise Act, 1944. 12. Again, as per Rule 3 of Legal Metrology Rules 2011, the provisions of the said chapter does not apply to packaged commodities meant for industrial consumers or institutional consumers. It was noted by the department that the SPVs mounted with concrete Mixers / Pumps are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. 14.5. In rare instances (Less than 5%) where the buyer drives-in his chassis to the Appellant's premises, the concrete mixer alone is kept on the chassis with temporary U -Bolt. In case of concrete pumps such as Line pumps and Boom pumps temporary U-Bolt is not required at all. It is to be noted that what is manufactured and cleared are only the equipment. 14.6. The Appellant purchases parts and components separately for manufacture of equipment and trading of spares. For this purpose, the Appellant imports the parts as well procures the parts locally/indigenously as well. The parts are classified as parts of the concrete handling equipment under Tariff Entry No: 8474 31 10 of the Central Excise Tariff. On import of such parts, the Bill of Entry also adopts the said classification. 14.7. The Appellant is a reseller or trader of the parts of this concrete handling equipment. These parts are sold to the customers on payment of Value Added Tax/Central Sales Tax, as the case may be. The trading of parts is undertaken from separate premises with separate accounting systems for catering to the after sales market. 14.8. Since the Appellant undertakes trading acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bel. [Para 21(iii)] The spares cleared by the taxpayer are used in the special purpose vehicle and fall under the Third Schedule of the CEA, 1944 and are liable to duty. [Para 23(iv)] Parts of stationary pump will not fall under parts, components and assemblies of automobiles under Sl. No. 100 of the Third Schedule of Central Act, 1944. [Para 24(iii)] Cum duty benefit granted [Para 27] Reversal under Rule 6 appropriated towards the demand. [Para 28] Liable to pay interest and penalty [Para 29 and Para 30] E/40624/2019; 01.12.2015 to 30.06.2017 Spares for these MPVs are also classified under Chapter 87. As long as the spares have been used only for such MPVs, it is immaterial where the chassis were mounted. [Para 9] Appellant is entitled to CENVAT credit. Credit cannot be denied to the Appellant on the inputs [Para 11] 16. The learned counsel appearing for appellant explained that the Appellant manufactures concrete handling equipment classifiable under Chapter 84. The spare parts supplied for these equipments are not covered under the ambit of Section 2(f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... automobiles. A.10 The Appellant also places reliance on the decision of the Larger Bench in M/s Action Construction Equipment Ltd (Spare Part Division) v. Commissioner, Central Excise Customs, Delhi-IV 2023-VIL-514-CESTAT-MUM-CE, wherein in the context of interpretation of the term automobiles in the Third Schedule to CEA,1944 it has been held that the word automobile has not been defined in the Central Excise Act, the Central Excise Tariff Act or the Notifications issued by the Central Government, it would be permissible to refer to the dictionaries to find out the general sense in which the word is understood in common parlance and it will not be appropriate to refer to the definition of the word 'automobile' occurring in the Air (Prevention and Control of Pollution) Act, 1981 or the Motor Vehicles Act, 1988. A.11 It is well-settled in classification disputes as to how a good is known in the trade and treated in the trade literature is relevant and significant and often decisive factor. In this regard, reliance is placed on the decision of the Hon ble Supreme Court in Collector of Customs v. Bhor Industries Ltd. 1988 (35) E.L.T. 346 (S.C.) A.12 Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... digarh, 2003 (155) E.L.T. 107 (Tri. - Del.) Commissioner Of C. Ex., Mumbai V. Shalimar Super Foods 2007 (210) E.L.T. 695 (Tri. - Mumbai) B.4 The Appellant also refers to the Chapter Note 5 to Chapter 4 of the Central Excise Tariff Act, 1985, defines the term 'unit container to mean a container whether large or small designed to hold a pre-determined quantity or number. B.5 The same size package may contain any number of units. For e.g., same size package may contain 5 units in respect of one customer and 10 in case of another customer. B.6 The Appellant further submits that as per the explanatory notes to Budget 2003-04, order to qualify as manufacture' the activity of packing, re-packing or labelling, re-labelling should be undertaken on a 'unit container'. In the present case, no such packing is done in a unit container and hence the activity undertaken by the Appellant does not amount to manufacture under Section 2(f)(iii) of CEA, 1944. B.7 The Appellant further submits that Appellant does not label any unit containers and hence the sale of spare parts by the Appellant does not qualify as manufacture under Section 2(f)(iii) of CEA, 1944. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to reverse proportional Cenvat credit in terms of Rule 6(3)(i) of CCR in terms of Order in Appeal No. 106/2014 dated 04.08.2014 in Appeal No. 22/2013(P). C.3 The Appellant submits that the Department cannot blow hot and cold while alleging the activity as trading in the Show Cause Notice No. LTUC/378/2012-ADC dated 31.10.2012 and at the same time alleging that the activity amounts to manufacture. C.4 Per contra, the Appellant submits that it has maintained the activity undertaken to be trading and was opting for reversal under Rule 6(3A) of CCR. C.5 Hence, on this ground alone the Impugned Order(s) demanding excise duty on the sale of spare parts are liable to be set aside. D. Without prejudice, assuming that the Appellant is liable to pay duty on clearance of spare parts, Appellant is eligible to avail CENVAT credit on such payment of duty. D.1. Without prejudice to the above submissions, the Appellant submits that Appellant did not avail credit of CVD/excise duty as the activity undertaken by the Appellant did not amount manufacture. D.2. The Appellant submits that if the activity undertaken by the Appellant amounts to deemed manufacture, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re then labelled. These activities amount to deemed manufacture as per 2 f (iii) of the definition of manufacture as per Central Excise Act, 1944. 17.2 The learned AR adverted to the discussions in para 21 and 22 of the impugned order and submitted that the parts and components of vehicles falling under Chapter 87 come under Sl.No.100 of the Third Schedule to Central Excise Act, 1944. Therefore, the activity of packing / repacking / labelling done by the appellant of such spares and parts of SPVs falling under Sl.No.100 of the Third Schedule amounts to manufacture and not trading as contended by the appellant. The appellant is liable to discharge excise duty on the spares cleared by them after repacking and labelling. 17.3 The Board vide Circular dated 16.12.2008 has clarified the meaning of automobiles. As the concrete pumps and concrete mixers are mounted on chassis and cleared by adopting classification under CTH 8708 availing the benefit of notification, 12/2012 CE dated 17.03.2012, the clarification issued by the Board would apply and the parts are to be considered as parts of automobiles. They are then to be classified under Chapter 87 as parts of automobiles. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spares of SPVs. 19.4 The allegation in para 2 of the Show Cause Notice dated 27.2.2015 reads as under: 2. As the Trading activity has become an exempted service from 1.04.2011 as per Explanation to Rule 2 of CCR, 2004 inserted by the Notification No.3/2011 CE (NT) dated 1.3.2011, the taxpayer filed the option to follow the Rule 6 (3A) of CENVAT Credit Rules, 2004 as amended for computing the reversal of CENVAT Credit utilized for taxable and exempted services from 1.4.2011 on 24.05.2011 for sale of spares (trading activity). 19.5 The appellant has asserted that they clear concrete pumps and concrete mixers as such and these are to be classified under 84134000 and 84743110 respectively. The learned counsel for appellant has furnished images of the impugned product sold as such (then fitted to ground or any other surface) and also the images of the impugned product fitted on chassis. For ease of understanding the images are reproduced as under: 19.6 It is very much clear from the above images that concrete pumps / mixers can be sold / cleared without being fitted to vehicle chassis. In some case, these are used on static platforms, rigs etc a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d excise duty on this amount. The chassis having been supplied by the customer, the appellant has not collected any amount towards value of chassis. The appellant has not collected even charges for fitting the concrete mixer to chassis. It is explained by the learned counsel that the fitting is done by a simple mechanisms of U bolt fitting and the mixer can be removed from chassis and used. We have perused many other invoices. All these documents establish that the appellant has cleared the impugned products as it is without being fitted to chassis and has not collected any value towards chassis or fitting of the concrete mixer on chassis. The documents establish that the concrete mixtures / pumps can be used as it is and need not be necessarily fitted to chassis as alleged by department. 19.9 We have to say, that the transportation of the impugned products may be by trucks. But whether the goods are transported by trucks or other means is not the test to decide whether the impugned products are SPVs or not. The test is whether the impugned products can be solely and principally used only by mounting on a truck. The evidence placed before us establish that the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarification in the Tariff. Hence, the term parts, components and assemblies' of automobiles includes items like batteries, brake assembly, tyres tubes and flaps, IC engines, ball bearing, etc. 20.2 The clarification issued by Board is that those pars / components sold in the market as automobile parts would fall within Sl. No. 100. In the present case, these items are not sold as parts of automobiles. These are sold as spares / parts of concrete mixers and pumps. The Board Circular is not applicable to the facts. 20.3 The demand of duty is on the spares sold by appellant on the basis that the concrete mixers / pumps can be used only with chassis and that these are spares of SPVs. As we have already found the allegation that impugned products can be used only mounted on chassis to be incorrect, the discussions on the issue as to whether the activity of repacking from bulk to small packets and labelling amounts to manufacture may be a futile exercise. However, for completeness we proceed to examine this issue also. 20.4 Section 2 (f) reads as under: SECTION 2. Definitions . In this Act, unless there is anything repugnant in the subject or context, - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts as required in polythene bags and paste the label of the part name / code. That this is after the sale of the spares and the activity of packing or labelling is only for transportation and identification. The learned AR has countered this submission by stating that the label mentions the logo of the appellant company and therefore the activity renders the spares marketable. We have perused the images of labels and we find that there is no commonality, except for the logo. The label on each packet mentions different numbers of the spares. On perusal of Invoice no.85157799 dated 31.12.2023 issued to M/s. Axon Constructions (P) Ltd, there are 4 items of spares supplied. These are valve cartridge press relief valve 2 nos., O Ring 14 x 2 5 nos., Ring D14 x 2.5 x 2.3 5 numbers, spring cover 2 nos. These are packed and consigned to the customer. The order is not placed unit wise or packet wise . The learned counsel for appellant has stressed on the word unit container used in Section 2 f (iii). It is argued by the counsel that unit container means container with predetermined quantity. The polythene bags used by appellant to repack are not designed to carry predetermined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of containers intended for a consumer; repacking from bulk pack to retail pack obviously results in or facilitates sale of the product to the retail consumer. The adoption of any other treatment referred to in each of these notes would be such treatment that would render the product marketable to a consumer. It is therefore not possible for us to uphold the finding of the Commissioner (Appeals) that a new product has emerged which was not entitled to benefit of either of the notification. 21.3 The above decision of the Tribunal has been maintained by the Hon ble Apex Court as reported in Commissioner Vs. Lupin Laboratories (P) Ltd. 2004 (164) E.L.T. A 116 (S.C.) 21.4 The Tribunal in the case of Taxchem Vs CCE, Mumbai considered the issue whether painting on the drums / container, the name of the goods, the name of the consigner and consignee would amount to labelling / relabeling. It was held that labelling requires furnishing information as to the name of the product, its ingredients, its price etc. Mere putting, name, address and such details does not amount to labelling as per Section 2 f (iii). This decision was maintained by Hon ble Apex Court as reported in 2006 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em, it is intended to cover articles such as sausages, meat extracts and meat juices, prepared or preserved fish, soups and brothes, bottled or canned fruits and vegetables, sauces, jams, fruit syrups and juices, corn flakes, dehydrated peas and dehydrated vegetables, skimmed milk powder, condensed milk, preparations with a basis of flour, starch, or malt extract, and milk foods. It is a matter of everyday experience that these are the kinds of goods which are sold in provision stores, chemists shops, general stores, departmental stores and so on. They are literally sold off the shelf . Normally the customer knows the article that he wants: and often he has a preference for a particular brand. Normally also the goods are in standard packs (it may be bottles, cans, carboard cartons etc.), and are prominently labelled to show the nature of the contents, the quantity, the date of manufacture and date of expiry (where applicable), the maker s name, the recommended maximum retail price, and so on. There are often two or three different sizes of packs for the same product. For instance, in the case of instant coffee it could be 50 gms, 200 gms and 500 gms. The standardised nature of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istent with the general experience and practice as mentioned above. General experience would certainly show that prepared and preserved foods and the like, as they are ordinarily sold in the market, are packed in containers which contain a specific and clearly marked quantity of the goods. The quantity may vary according to the product and the manufacturer, but even then there are many standard quantities common to different manufacturers, such as 100 gms, 500 gms, 1 kg, 100 ml, 200 ml and 500 ml. Such products are sold in what may appropriately be called unit containers which can conveniently contain that particular quantity. It is also a matter of common knowledge and experience that in such cases the container is normally nor returnable, and in many cases not durable. 47. In the light of the above discussion, it would be clear that the apple juice concentrate sold by the respondents in carboys containing varying quantities as required by the buyers in each particular case cannot be considered as prepared or preserved foods put up in unit containers within the meaning of Tariff Item IB. They would therefore fall under Item 68. 21.7. From the above, discussions we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the cost of goods sold, whichever is more. Hence, as per the details obtained from the taxpayer, it appears that the value to be adopted for the purposes of Service Tax is Rs.8,16,93,379/-. Accordingly, it appears that an amount of Rs. 40,84,669/- the amount equal to 5% of the value of exempted services rendered [detailed below) is hable to be recovered along with interest in terms of Rule 14 of the CENVAT Credit Rules, 2004 read with Sections 73 and 75 respectively of the Finance Act, 1994. Branch Value for the purpose of Rule 6 (3) of CCR 2004 Rs. Amount to be paid as per Rule 6 (3) of CCR 2004 viz 5% of Col (2) Rs. (1) (2) (3) Ahmedabad 8989417 449471 Bangalore 4064719 203236 Chennai 24627267 1231363 Cochin 2187395 109370 Delhi 12747259 637363 Hyderabad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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