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TMI Blog2024 (2) TMI 1479X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the intendment of section 3 of Central Excise Act, 1944 for levying duty on manufacture, i.e., the subsuming of 'inputs' by a transforming process within the 'output', in order [order-in-original no. 02/RKM/ADG/Michelin/2022-23 dated 19th May 2022] of Additional Director General (Adjudication), Directorate General of GST Intelligence, Mumbai upon determination that the impugned activity has been deemed by law as manufacture. The crux of the dispute pertains to the strapping together of 'tyres', 'tubes' and 'flaps', referred to as 'TTF', at the premises of another for despatch of this particular combination of goods to dealers for catering to replacement market for bus/lorry operators. 2. M/s Michelin India Pvt Limited, aggrieved by the burden entailed on the impugned activity carried out between February 2014 and June 2017 at 'distribution centres (DC)', belonging to their logistics service providers, M/s DHL Ltd, M/s CFC Carriers (P) Ltd and M/s Ceva India (P) Ltd, as manufacture on their behalf, has filed these several appeals which, though impugning a single order, correspond to each of the locations and on identical cause of action prompting disposal by us in common o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices. The machines for strapping are provided in various premises of DHL by MIPL to make TTF kits. The straps containing Michelin Brand and logo are used to make TTF kit. Further, the software for issuance of invoice is provided by MIPL and instructions about deliveries of the TTF kits are also given by MIPL. Further, MIPL provides warranty to their customers if they purchase TTF kits and no warranty is provided if these products sold in loose form. xxxxxx 5.9 The Noticees had entered into an agreement with DHL Logistics Private Limited for the purpose of logistics and warehousing [RUD 16]. The said agreement was for the purpose of logistics and warehousing' only. The Schedule-1 to the said agreement clearly spells out the activities to be carried out by DHL. There are 16 activities to be carried out by DHL. None of the activities is related to 'kitting of TTF' sets. Mainly the activities refer to loading-unlading of tyres, etc. keeping records of goods received and dispatched, MIS reports and other confidentiality clauses. Secondly, DHL have been referred to as 'service providers' and as mentioned earlier no activity related to kitting is specifically me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the same. All the three items are essential items as far as usage of tyre is concerned. The tyre alone cannot be put to use without putting tube inside it and the flap is used to provide protection to the tube while placed inside the tyre. Therefore, it may be seen that tube and flap are essential to put tyre to use. I find that the main part is tyre which can be put to use with the help of tube supported by flap. Therefore, the classification of TTF kit would be the classification of the tyre as per Rule-4 read with Section-5(2) of Central Excise Tariff (Amendment) Act, 2004. Therefore, I find that the classification of TTF kit will be Ch.Head- 4011. and for resort to default valuation provision with the finding that '6.4.1 It is clear that TTF kit is covered under the Parts, components, accessories and assemblies of vehicles falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716 and accordingly, its valuation to be done as per entry no. 100 of the Third Schedule to the Central Excise Tariff Act, 1985. Further, the manufacturer is legally obliged to print the MRP on the packages of the goods, under the provisions of the Legal Metrolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity with 'manufacture' as deemed, by '(iii) ..., in relation to the goods specified in the Third Schedule, involves packing and repacking of such goods in a unit container or labelling of 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...' in section 2(f) of Central Excise Act, 1994, without transposing it to the framework which levies '(a) a duty of excise, to be called Central Value Added Tax (CENVAT) on all excisable goods...which are produced or manufactured in India as, and at the rate, set forth in Schedule I to the Central Excise Tariff Act, 1985; ' in section 3(1) of Central Excise Act, 1944 has placed the propriety outcome in jeopardy. Thereafter, the adjudicating authority proceeded to determine the rate of duty to be fastened on the so-called 'unique' product emerging from the assembly of 'tyres', 'tubes' and 'flaps' which begs the question of whether duty liability was determined for 'manufacture' of the goods or arose from 'deeming' of manufacture. The distinction between the two mutually exclusive events is the nature, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the thrust of the case of Revenue is leviability of duties of central excise once again, after the uncontested duty liability, arising out of manufacture, upon clearance of the very same goods from the respective factories, merely owing to aggregation. With such duty liability having been discharged at undertakings of the appellant, the present attempt at fastening of the further impost, by invoking the deeming provision, on activity devolving contractually on the 'logistics service provider' by reference to another provision is a chasm that has not been adequately bridged either in the impugned order or in submissions on behalf of respondent. This is of particular relevance as section 2(f) of Central Excise Act, 1944 also construes 'manufacturer' for the purposes of the statute. Between these two conundrums, and from the dovetailing of the two, lies the answer to the controversy before us. 7. Learned Senior Counsel informed that the commercial model, devised even when the appellant was solely in the business of trading in imported goods, continued after commencement of their own manufacturing activity in India and, furthermore, that the affixing of 'Michelin hologram' on the out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory, trade practice for which reliance was placed on record of proceedings before the Designated Authority for imposition of 'anti-dumping duty' under section 3 of Customs Tariff Act, 1975. 10. It is of interest to note the circumstances in which 'manufacture' did, for the purpose of the levy, get expanded. The definition underwent change, and coinciding with the adoption of the new and comprehensive tariff, by section 4 of Central Excise Tariff Act, 1985 with effect from 28th February 1986 thus '... (f) "manufacture" includes any process- (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter Notes of the Fourth Schedule as amounting to manufacture;' in section 2 of Central Excise Act, 1944 to validate levy on manufacture deemed by notes in Schedule to Central Excise Tariff Act, 1985. Thereafter, to enable the Central Government to deem manufacture, section 132 of Finance Act, 2002 incorporated such empowerment thus '2. ..... (f) "manufacture" includes any process- (i) xxxxxxx (ii) which is specified in relation to any goods in the Section or Chapter Notes of the Fourth S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oves us, in circumstances of objection from the assessee and 'marketability' aspect set forth by the respondent, to adjudicate the validity of the contrary claims. 12. To contend that the 'tyres', 'tubes' and 'flaps' have been rendered marketable by 'inspection' at premises of 'logistics service provider' is to imply lack thereof at prior stage. That was an aspect which Learned Special Counsel, after making the proposition, chose to gloss over and his submission was restricted to 'non-marketability' occurring after clearance and restoration of 'marketability' after quality check. Surely, it cannot be the case that it was the act of inspection that did render the goods to be 'marketable' and from the description of post inspection rectification, it would appear that there were products that did not have to undergo such correctives. Therefore, at best the transition from 'marketable' to 'non-marketable' and back to 'marketable' may, at best, be attributed only to such that had suffered damage. The proceedings have not been limited to such distinguishable goods and, indeed, in the absence of such segregation as well as proposition in the show cause notice, the charge that 'inspection ..... X X X X Extracts X X X X X X X X Extracts X X X X
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