By TIOL News Service

MUMBAI, DEC 09, 2013: AN Excise duty demand of Rs.53.47 Crores has been confirmed against the applicant by the Commissioner of Central Excise, Raigad along with imposition of penalties and interest. The demand is for the period February 2009 to September 2011. A penalty of Rs.20 lakhs has also been imposed on the officer-in-charge of legal affairs of the appellant firm.

The applicant is before the CESTAT.

The following are the submissions made by the applicant while pleading for interim stay -

# For the period from 26/02/2009, on the goods imported after payment of Customs duty, the appellant undertook the process of affixing labels and MRPs on the packages before they were marketed in the Domestic Tariff Area (DTA). During the impugned period the appellant cleared the goods under Customs bond & bank guarantee and undertook the process of a repacking, re-labeling, etc., under bond and thereafter the goods were cleared on payment of appropriate duty and, therefore, the charge of ‘manufacture' of these goods after clearance by the Customs does not arise at all. Inasmuch as the goods have been cleared on payment of CVD on MRP basis and no further activities were undertaken after clearance by the customs, the demand of duty of Rs.42 crores (approx.) is unsustainable in law.

# For the period prior to 26/02/2009, the appellant was following a procedure as directed by the Customs. From the Customs area, the goods were taken to a private godown at Bhiwandi, Dronagiri and the activities of affixing labels, MRPs, etc. were undertaken and the Customs granted permission for these activities to be undertaken outside the Customs area on execution of bond and bank guarantee and accordingly, they carried out these activities. In this case also, it cannot be said that the activities were carried out after customs clearance. Inasmuch as they had sought permission of the customs for undertaking the activity outside the Customs area which was given on execution of bond and bank guarantee which were duly discharged by the customs, therefore, it has to be presumed that the activities were undertaken prior to customs clearance and therefore, the question of demanding any excise duty liability would not arise.

The Special Consultant appointed by the Revenue conceded that as far as the period on or after 26/02/2009 is concerned the appellant had undertaken the activities within the bonded premises and the goods were cleared after payment of customs duty including CVD and, therefore, the appellant has a case in their favour to that extent - duty involved being approximately Rs.42 cores.

As regards the duty demand for the balance amount of duty of Rs.11 crores for the period prior to 26/02/2009, it is submitted that the duty demand pertains two types of goods -(i) The goods which were packed in packages containing 10ml or 10 gram or more (ii) the goods packed and packages containing less than 10ml or 10 grams. In respect of first category the duty demand would approximately Rs.8 crores. However, in this case, the position is that the appellant had discharged CVD on MRP basis and there is no difference in MRP which has been adopted for excise duty demands. As regards the goods contained in packages less than 10 ml or 10 gms, in respect of these goods, the CVD duty liability was discharged on transaction value basis. Thereafter, the goods were affixed with labels and MRP before marketing them into the domestic tariff area. In respect of these goods there is a value addition during the process and the total duty liability on such goods works out to 3.36crores and the appellant had discharged the CVD liability of approximately Rs.1crore. Therefore, the differential duty liability would amounts to Rs.2.3 crore approximately. In view of the above, as the Revenue has a strong case in their favour the appellant be put to terms.

The Bench observed -

"5.1 As regards the duty demand of Rs.42 crores (Approximately) it is an admitted fact that the appellant undertook the process of affixing labels/MRP before the goods were cleared by the Customs and the goods were cleared on payment of CVD on MRP basis. Therefore, prima facie, the Revenue has no case at all in respect of these demands. With respect to the demand of Rs.11 crores, the demand of Rs.8 crores pertains to goods on which CVD liability was discharged on MRP basis and Rs.3 crores in respect of goods on which CVD was discharged on transaction value basis. As regards the duty demand on goods on which CVD liability was discharged on MRP basis, it is an admitted position that there is no change in MRP. In other words, MRP on which CVD was discharged is the same as that adopted for excise duty liability. Since the appellant has discharged the CVD liability on MRP basis, even it is assumed that the appellant is liable to pay duty, the appellant would be eligible for the benefit of Cenvat Credit of CVD paid and the CVD paid would be more or less the same as the excise duty demand. Therefore, insistence of pre-deposit to secure the interests of Revenue does not arise. As regards the duty demand of Rs.3.3 crores in respect of goods where CVD liability was discharged on transaction value basis, there may be some merit in the contention of the revenue that the activity of affixing labels and MRP enhancing the marketability of the products. However, in this case also, the appellant would be eligible for Cenvat Credit of CVD paid on the imported goods which is approximately of Rs.1 crore. Therefore, additional duty liability on account of re-labelling, MRP affixation would be approximately Rs.2.3 crores…."

Noting that no financial hardship was pleaded, the Bench directed the appellant to make a pre-deposit of Rs.2.3 Crores and report compliance.

In passing: Also see 2004-TIOL-238-CESTAT-MUM, 2012-TIOL-1117-CESTAT-MUM & 2013-TIOL-49-CESTAT-MUM. Oh, really!

(See 2013-TIOL-1827-CESTAT-MUM)