TMI Blog2024 (4) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ird Schedule, the activities of packing or repacking of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of the retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer have been considered as amounting to manufacture even if the said activities do not fall under main part of Section 2(f). Modems are specified at Sl.No.81A of the Third Schedule to the Central Excise Act, 1944. A careful analysis of the activities undertaken by the appellant from the dealers premises, it reveals that the imported modems were not simply cleared as such but it has been opened, tested (for whatsoever reason); the purpose is not only visual inspection as a formality, but tested by qualified engineers which necessarily includes, if damaged or any manufacturing deficiency, to repair/remove the same, to put in saleable condition; the tested modems then repacked in the boxes and placed in bigger cartons along with other modems, accessories which would make the modems marketable, procured and supplied along with the modems after affixing the logo and labelling the modems with appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , would result in availing and utilising cenvat credit twice on the same amount of CVD and other duties relating to imported modems, that is, once mentioning in the dealer s invoice and second time in the manufacturer s invoice while clearing the manufactured goods from the manufacturing premises. The said excess credit has been subsequently paid by the appellant by debiting their PLA account with interest and the ld. Commissioner has rightly appropriated the same in the order. Whether the Appellant contravened Rule 8(3A) of the Central Excise Rules, 2002 in discharging the duty by utilising the credit from their manufacturing unit situated at 29B/1? - HELD THAT:- As contended by the Ld. Advocate for the Appellant since Rule 8(3A) of the Central Excise Rules, 2002 has been held to be ultra vires of the rule making power by the Hon ble Gujrat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT] , therefore, the findings of the learned Commissioner on this count also cannot be sustained. Levy of penalty - HELD THAT:- The issue involved in the present case is interpretation of law, and consequent actions of debiting the duty fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. in their own brand name falling under Chapter heading 851762 of the Central Excise Tariff Act, 1985 (CETA, 1985, for short). They avail cenvat credit on inputs used in manufacturing of finished goods under CENVAT Credit Rules, 2004. After visit of their trading premises by the Officers in March 2010, it was opined by the Department that the activities carried in their trading premises on imported modems amounts to manufacture, the appellant availed cenvat credit of the CVD and other admissible duties/cess paid on the modems at the time of its import amounting to Rs.5,88,26,035/-in the cenvat credit register maintained in the manufacturing premises. Later, the liability calculated on the manufactured modems at trading premises that is, 4,66,90,550/-, and was debited from the cenvat account. Also, an amount of Rs.1,16,79,843/- was debited from the said credit amount of for clearance of manufactured goods. Alleging that the appellant are not entitled to avail cenvat credit pertaining to their trading premises, show cause notice was issued for recovery of the amount 4,66,90,550/- debited towards duty on traded modems and also for recovery of Rs.1,16,79,843/- utilised in discharging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndigenously procure certain accessories such as AC power chord, DC cable, RJ45 to Roset Box Cable etc. which accessories are also supplied as such, along with the imported Modems. The individual modems are affixed with stickers depicting before clearance of the same to their respective customers.: (a) Name of the manufacturer (which is the overseas supplier), (b) imported and marketed by MRO-TEK Limited (c) And other requirements such as MRP, quantity etc., as stipulated under SW M Act; Along with such accessories, the required number of modems as per customer order is packed in carton boxes. 3.3. She has submitted that the modems are specified under the Third Schedule of the Central Excise Act, 1944 referred to under Section 2(f)(iii) of the Central Excise Act, 1944 and w.e.f. 24/01/2008, brought under MRP based assessment vide Notification No.5/2008-CE(NT) dt. 24/01/2008. From 24/01/2008, the appellant imported modems on payment of appropriate import duties including CVD on the declared MRP and also discharged Special Additional Duty(SAD). Since the appellant was of the impression that activities undertaken in respect of the imported modems do not result into manufacture, they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport, she placed reliance on the judgment of the Tribunal in the case of Velere Power India Pvt. Ltd. Vs. CCE, Bangalore-I [2011(265) ELT 156 (Tri. Bang.)]. 3.6. She has submitted that the impugned order wrongly held that the appellants undertake repacking of the imported modems in unit containers, whereas they repack the required number of modems in a carton box which is not repacking in unit containers as laid down under Section 2(f)(iii) of the Central Excise Act, 1944; hence the activity cannot be considered as amounting to manufacture. 3.7 She has further submitted that the credit of Rs.5,88,26,035/- availed on the imported modems at their manufacturing premises have been utilised to the extent of Rs.4,66,90,550/- for payment of duty on the imported modems; the balance credit of Rs.1,21,35,485/- stands utilised in the clearance of manufactured goods. Referring to the judgment of Hon ble Supreme Court in the case of CCE Vs. Narmada Chematur Pharmaceuticals [2008(229) ELT 485 (SC)] that where the amount of Cenvat/Modvat credit wrongly availed is equivalent to the amount of excise duty paid by not availing the exemption, the consequence is revenue neutral; hence the demand is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of alleged violation of Rule 8(3A) of Central Excise Rules, 2002, she has submitted that the said rule is applicable only in those cases where the assessee has defaulted in payment of duty beyond 30 days from the due date. In such circumstances, the assessee is required to pay excise duty for each consignment at the time of removal without utilising cenvat credit till the amount is paid with interest. The submission of the learned advocate is that the entire case of the Department rests on the question whether cenvat credit availed by the appellant on the imported modems is irregular or otherwise. It is her contention that the cenvat credit was availed after due intimation and directions from the Department and cannot be treated as irregular. Hence, there is no question of vilation of the said Rule 8(3A) as they had not defaulted in payment of duty payable during the month. Also, she has submitted that Rule 8(3A) of the Central excise Rules, 2002 has been held to be ultra vires by the Hon ble Gujarat High Court in the case of Indsur Global Ltd. Vs. UOI [2014(310) ELT 833 (Guj.)]. 3.11. Further, she has submitted that the demand notices issued on 17/02/2011 demanding duty fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ixed on the cover of the modem and also sticker/label as Marketed by MRO-Tek, Bangalore . Also, the Appellant procure indigenously accessories like AC power chord, DC cable,RJ45 Roset Box cable etc. supplied/packed along with the imported modems. Modem is notified under the Third schedule to the CEA,1944, accordingly, these activities have been considered by the Revenue as deemed manufacture as specified under Section 2(f)(iii) of the Central Excise Act, 1944. To examine the said allegation, the relevant provision is reproduced below:- Section 2(f) manufacture includes any process (i) .. . (ii) . (iii) Which, in relation to the 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; 8. A plain reading of the extended meaning of manufacture , it is clear that for the goods specified in Third Schedule, the activities of packing or repacking of such goods in a unit container or labelling or relabelling of containers including the decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the point of end consumer as held by the Hon ble Supreme Court in the case of Air Liquide North India Pvt. Lt. Vs. CCE, Jaipur 2011(271) ELT 321(SC) It is observed by their Lordships as: 18. It is also pertinent to elucidate on the phrase marketable to the consumer . The word consumer in this clause refers to the person who purchases the product for his consumption, as distinct from a purchaser who trades in it. The marketability of the product to the purchaser trading in it is distinguishable from the marketability of the product to the purchaser purchasing the same for final consumption as in the latter case, the person purchases the product for his own consumption and in that case, he expects the product to be suitable for his own purpose and the consumer might purchase a product having marketability, which it did not possess earlier. 19. Therefore, the phrase marketable to the consumer would naturally mean the marketability of the product to the person who purchases the product for his own consumption . Hence, the argument of the appellant that as the product was already marketable, the provisions of Chapter Note 10 of Chapter 28 of the Act would not be attracted, will have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secondary and Higher Education Cess and additional duty paid up to 28/02/2008 and Rs.1,16,38,131/- being duty paid on imports from March 2008 to 28/02/2010. Also, they have informed that they would be debiting an amount of Rs.4,45,73,347/- being the duty paid in respect of modems removed by them by way of sales during the period 24/01/2008 to 28/02/2010. Thereafter the appellant availed the credit at the manufacturing unit and debited the amount payable on the modems sold earlier as such without considering the same as manufacture within the scope of definition of 2(f)(iii) of the Central Excise Act, 1944. 15. We find that the Commissioner in the impugned order no. 36/2011(Appeal No.546/2011) has not discussed the correctness of the amount of CENVAT credit equal to the admissible duties paid on the imported modems, which later subjected to various processes and found to be resulted in deemed manufacture, but did not accept the payment of duty by debiting the CENVAT account maintained at the manufacturing unit involved on the said modems, observing that the appellant had not complied with the procedure of amending the Central Excise registration of the manufacturing premises and mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issuing dealer s invoice. Now, availing the same credit again and utilising it for clearance of indigenous modems and other goods manufactured in the manufacturing premises, would result in availing and utilising cenvat credit twice on the same amount of CVD and other duties relating to imported modems, that is, once mentioning in the dealer s invoice and second time in the manufacturer s invoice while clearing the manufactured goods from the manufacturing premises. The said excess credit has been subsequently paid by the appellant by debiting their PLA account with interest and the ld. Commissioner has rightly appropriated the same in the order. 17. The next issue is whether there has been any violation of Rule 8(3A) of the Central Excise Rules, 2002. As contended by the Ld. Advocate for the Appellant since Rule 8(3A) of the Central Excise Rules, 2002 has been held to be ultra vires of the rule making power by the Hon ble Gujrat High Court in the case of Indsur Global Ltd. (supra), therefore, the findings of the learned Commissioner on this count also cannot be sustained. 18. We find that the issue involved in the present case is interpretation of law, and consequent actions of de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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