By TIOL News Service

MUMBAI, AUG 08, 2013: WE had reported the following in DDT 2109 -

Putting electrolytes and charging batteries of two-wheelers before delivery to customers prima facie does not amount to manufacture of TWO-WHEELERS

FOR a moment, we were STUNNED & shocked when we read the case.

But then, this is not SURREAL but reality for three "dealers" of two-wheelers in Nagpur who have demands confirmed them against them by the Commissioner of Central Excise, Nagpur on the ground that what the dealers were doing surreptitiously was   MANUFACTURE of a two-wheeler.

The facts - The applicants are dealers of two-wheelers. The applicants are purchasing duty paid two-wheelers from the manufacturer and before supplying to their customers the appellants are putting electrolytes in the batteries and charging the same. The case of the Revenue is that this activity amounts to manufacture of two-wheelers.

The Bench took up the stay applications filed by all the three ‘dealers' against whom demand of Central Excise duty was confirmed one after the other last December.

The Bench observed -

"3. We find that the applicants are only dealers of the two-wheelers and only putting electrolytes and charging the batteries. Prima facie this activity cannot be considered as manufacture of the two-wheelers. In view of this, the pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeals. Keeping in view the nature of the issue, the Registry is directed to list these appeals for regular hearing…"

DDT is curious to know (like everyone who will read this) as to whether the two-wheelers of the customers have been impounded by the Nagpur Commissionerate for being clandestinely removed without payment of duty and whether the customers themselves have been made co-noticees in these proceedings for imposition of penalty!

Is the Board aware of this   ELECTRIFYING case?

See 2013-TIOL-762-CESTAT-MUM

And this in DDT 2118 -

Prima facie putting electrolytes and charging battery of two-wheeler does not amount to manufacture of TWO-WHEELERS

WHEN we reported the case   2013-TIOL-762-CESTAT-MUM in   DDT 2109, we received many calls asking what the case was all about. We had a hard time explaining that the case was what was mentioned in the caption and nothing more. Then we had a call asking whether we had a copy of the Order-in-original or for that matter the SCN. We expressed inability on both counts but curiosity lead us to asking the caller as to what purpose would the SCN/O-in-O serve.

The sonorous voice on the other end answered -   I am in the Headquarters (Preventive) and would like to book a similar case against such "dealers" in my jurisdiction!

Let aside that we wouldn't have shared even if we had it!

Be that as it may, one more similar case came to our notice and this too owes its origin to the fluidic pen of the   CCE, Nagpur. It seems he started the New Year 2013 by confirming a demand alleging the same deemed ‘manufacture' concept and he started with a BANG - the demand confirmed is of Rs.2.15 Crores, interest and penalty.

And when the application filed by the dealer was heard, the same Division Bench had no hesitation in allowing the Stay petition by taking the prima facie view that ‘ charging the battery by putting electrolyte cannot be considered as manufacture of motorcycle'.

We hope that the Board reads this, at least!

See 2013-TIOL-818-CESTAT-MUM

By the way, for the benefit of all netizens let us mention what the Revenue allegations were - The revenue is of the opinion that putting electrolytes and charging of the battery of two wheelers is incidental or ancillary to the completion of two wheelers, hence, it amounts to manufacture as per the provisions of section 2(f) of the Central Excise Act, 1944. The revenue also relied upon the provisions of Section Note 6 of Section XVII of the First Schedule to the Central Excise Tariff Act, which provides in respect of the goods covered by these Section, conversion of an article which is incomplete or unfinished but having the essential character of the complete or finished article into complete or finished article, shall amount to manufacture.

The CESTAT, WZB has decided the matter by allowing all the appeals and observing thus –

"7. We find that as the appellants are receiving duty paid two-wheelers in complete and finished condition from the date manufacturers. The manufacturer of two wheelers paid the duty on complete two wheelers. We find that the Revenue is not disputing the fact that even the two-wheelers cleared by manufacturer contained battery and also that the appellants are only putting electrolyte. The electrolyte is nothing but a liquid which contains ions and can be decomposed by electrolysis. After putting the electrolyte appellants are charging the batteries before delivery to the customer. It cannot be said that this process undertaken by the appellant is conversion incomplete or unfinished article i.eTwo wheelers into complete or finished two wheelers. Further we find that the show cause notices were issued to dealers on the same grounds and are dropped by the Commissioner of Central Excise, Vadodara and Delhi III. Appellant also argued on limitation and also pleaded that in case the demand is confirmed, the appellant are entitled to take credit of duty paid by the manufacturer. As we allowing the appeal on merits, we are not dealing with other contentions of appellants. The impugned orders are set aside and appeals are allowed."

In passing: Hope this is the end of the matter…or has the battle just begun!

(See 2013-TIOL-1193-CESTAT-MUM)