CX - Sec 4A - Appellant sells goods in retail packs by declaring MRP but assesses goods u/s 4 - similar goods imported from sister concerns and CVD paid also subjected to affixing MRP and which activity amounts to manufacture - Differential duty payable: CESTAT
By TIOL News Service
MUMBAI, NOV 07, 2013: THE appellants are manufacturers of solvents, industrial adhesives, sealants and other chemicals falling under various Chapters of the Central Excise Tariff. Most of these goods are sold under the brand name LOCTITE. They also import similar goods from their sister concerns abroad for trading in the Indian Market. Investigation was carried out by the Central Excise Department at Pune about the activities carried out by the appellant. It was noticed that the appellant were selling these goods in retail packs through dealers/distributors and were also declaring Maximum retail Price (MRP) on the goods but they were discharging duty liability on the goods on the transaction value u/s 4 of the CEA, 1944 even though the goods were notified for the purposes of assessment u/s 4A of the said Act. Nonetheless, the appellant had started discharging duty liability on the manufactured goods on MRP basis under section 4A with effect from 15/05/2008 onwards.
As regards imported goods, the appellant cleared the same through Customs by paying CVD on transaction value basis by declaring that the goods were meant for captive use. The imported goods were brought into their factory for re-labeling/affixing MRPs and thereafter sold in the Indian Market through dealers/distributors. This activity allegedly amounted to manufacture in terms of s. 2(f)(iii) of CEA, 1944 as applicable to goods specified in the Third Schedule.
Accordingly a SCN was issued inter alia demanding -
+ differential excise duty of Rs.46,59,372/- for the period from 13/01/2007to 14/05/2008 by assessing the goods as provided for under section 4A of the Act.
+ Rs.5,07,19,497/- being central excise duty on imported goods which are being subjected tore-labeling/affixing MRP in their factory for the period from 13/01/07 to March, 2010.
+ The amounts of Rs.46,59,342/- paid under protest on the indigenously manufactured goods and Rs.37 lakhs towards traded goods were sought to be appropriated.
As the demand was confirmed by the CCE, Pune-III the appellant is before the CESTAT and submits -
+ The appellant would be eligible for CENVAT credit of Rs.1,75,97,428/- towards the CVD+SAD paid on the imported goods; an amount of Rs.55,13,420/- pertains to the demand in respect of goods not covered by the Third Schedule; that they have already paid Rs.83.59 lakhs and if all these are taken into account, the appellant would have discharged about 60% of the demand confirmed and the same be considered sufficient for the grant of interim stay.
+ Since the goods have been supplied to industrial consumers, the appellant is not covered under the PCR and hence provisions of section 4A would not apply.
+ they have started affixing MRP labels only with effect from 15/05/08 as is evident from the statement dated 18/11/2008 of the Factory Manager and, therefore, duty demand on MRP basis prior to that date is not sustainable.
The Revenue representative referred to the statements recorded and submitted that the same established that the appellant had sold the goods in retail packages and the same had labels affixed indicating the MRP from the year 2006 onwards and hence the appellant be put to terms.
The Bench inter alia observed -
+ When the goods are sold through dealers/distributors in retail packages by affixing labels indicating MRP, the obvious conclusion is that the goods are meant for retail sale. Therefore, we are prima facie of the view that the demand of differential central excise duty of Rs.46,59,372/- in respect of the goods manufactured by the appellant for the period from 13/01/2007 to 14/05/2008 is sustainable in law.
+ As regards the imported and traded goods also, the requirement of affixing MRP was statutorily provided for in Rule 2(p) of PCR as the same applied to imported packages also. Therefore, it was incumbent upon the importer to get the re-labeling done before they were cleared through the Customs. In the present case, the appellant declared in the import documents that the goods are meant for captive use and not for trading. Thus there was a clear mis-declaration on the part of the appellant.
+ From the statements of the Logistics Assistant it is evident that the imported traded goods were in retail packages and the appellant had undertaken the activity of re-labeling in the appellant's factory even during the period 13-1-2007 to 14-5-2008. From the statements of…distributors of the appellant firm, it is evident that the imported goods traded by the appellant were in retail packages and were affixed with labels containing details including MRP. In addition the appellants were also circulating price lists indicating MRPs. If the goods were not meant for retail sale, there was no need to undertake any of these activities. Therefore, the claim of the appellant that they started declaring MRP only with effect from 15-5-2008 …stands disproved. From these evidences available on record, it is evident that the goods were meant for retail sale and they were not meant specifically for industrial or institutional consumer. None of these activities were declared or made known to the department by the appellant.
+ We are of the prima facie view that since the goods were notified in the Third Schedule to the CEA, 1994, the activity of labeling/re-labeling and affixing MRP amounted to ‘manufacture' as defined in section 2(f) of the Act. Further, the extended period of time has also been correctly invoked for demand of excise duty.
As regards the submissions that an amount of Rs.55,13,420/- is not demandable since the goods in respect of which this claim is made is not covered by the Third Schedule and the claim for CENVAT credit of the duty paid on the imported goods, the Bench observed that the same would need verification and would be dealt with at the time of final disposal of the appeal.
Noting that the appellant had not pleaded any financial hardship, the Bench adverted to the decision of the Andhra Pradesh High Court in the case of SQL Star International ltd. - (2012-TIOL-146-HC-AP-ST) and directed the appellant to make a pre-deposit of Rs.2 crores and report compliance for obtaining a stay in the matter.
We are certain to receive more details on the case soon…
(See 2013-TIOL-1659-CESTAT-MUM)
