By TIOL News Service

NEW DELHI, JUNE 19, 2018: PURSUANT to investigation, the Department concluded that both M/s TAPL as well as M/s 3D have-

(i) Imported various goods bearing their brand name on which the MRP was not marked. Such goods, after importation were affixed with MRP sticker and sold in the local market;

(ii) Some consignments were imported on which MRP stickers were already affixed but post importation new MRP stickers were affixed and goods were sold in the local market;

(iii) Goods were procured from indigenous manufacturers, the MRP was changed and such goods were also sold at the enhanced MRP;

The goods imported and traded by M/s TAPL as well as M/s 3D during the impugned period are covered under Third Schedule of the CEA.

It is, therefore, the allegation of Revenue that the activity of changing the MRP/ affixing MRP stickers in their godown will fall within the deeming provision of 'manufacture' in Section 2(f)(iii) and consequently, Central Excise duty is required to be discharged in terms of Section 4A of the CEA, 1944.

The order-in-original confirmed the CE duty demand made in the SCDN.

Incidentally, goods imported through M/s TAPL as well as M/s 3D have been separately tabulated by the Revenue and demand was also tabulated on that basis but the value of clearances was finally clubbed for purposes of determining the entitlement to SSI exemption. So also, the CE duty has been demanded jointly and severally against both the appellants M/s TAPL & M/s 3D.

The appellants are before the CESTAT.

It is pertinent to note that the appellants are not challenging the stand taken by Revenue that the activity of fixing MRP stickers will amount to manufacture in terms of Section 2(f)(iii) and Central Excise duty will be liable to be paid.

Nonetheless, they submit that demand cannot be made jointly and severally from two persons as has been held by the Tribunal in the case of Futura Travels Ltd. -  2017-TIOL-4206-CESTAT-DEL. So also, as both M/s TAPL as well as M/s 3D have separate existence in the eyes of law, the value of clearances of the two cannot be clubbed and both will be separately entitled to the SSI exemption notification; that CVD paid at the time of import should be allowed as CENVAT credit. It has also been argued that no evidence has been disclosed in the show cause notice for such activity undertaken prior to June 2012.

The Bench considered the submissions and after perusing the voluminous records observed –

++ From the appeal record, we find that both TAPL as well as 3D have separate existence in the eyes of law. The former is a Private Limited company whereas the latter is a Partnership firm. The goods were imported under both names and have also been sold under both names, inspite of the fact that the goods were mixed up at the godown and have been sold on the basis of price list circulated by TAPL.

++ It is settled position of law that in the absence of mutuality of interest and financial flow back from one firm to another, clubbing of clearances is not permissible merely on the ground that both firms are in the common premises and affairs of all firm are looked after by one person.

++ We are of the view that since TAPL as well as 3D have separate existence and have separate registration for VAT, Income Tax etc., each one will be entitled to the benefit of SSI exemption separately.

++ It is well settled that demand cannot be made jointly and severally. The demand can only be made from that entity which has manufactured the goods in question.

While upholding the view that the activity carried out by TAPL as well as 3D will amount to 'manufacture' as per Section 2(f)(iii) of the Act and hence, Central Excise duty is required to be paid on the basis of MRP but such Excise duty payable is required to be computed after extending the benefit of SSI exemption separately to TAPL as well as 3D; that the demand made jointly and severally from two parties cannot be upheld but has to be computed separately, the CESTAT remanded the matter to the adjudicating authority.

(See 2018-TIOL-1879-CESTAT-DEL)