CX - Imported cosmetics before being cleared into DTA are affixed with MRP - appellant discharging CVD on MRP - CCE demanding CE duty alleging manufacture- appellant contention that entire exercise is revenue neutral not looked into by adjudicating authority - matter remanded: CESTAT
By TIOL News Service
MUMBAI, JULY 17, 2014: THE CCE, Thane-I confirmed a duty demand of Rs.13,21,25,414/- for the period September, 2007 to March, 2011 against the first appellant and a duty demand of Rs.12,53,04,176/- against the second appellant for the period 07/04/2011 to 06/05/2012 along with interest thereon. He has also imposed equivalent amount of penalties on the appellants apart from confiscating the goods valued at Rs.37,05,89,916/- seized under panchnama and imposed a redemption fine of Rs.3,75,00,000/-. The CCE, Thane-I also imposed penalty of Rs.25 lakhs on the Finance Head under Rule 26 of the CER, 2002.
But naturally, the appellants were aggrieved with this misplaced largesse of the CCE, Thane-I and have filed stay applications/appeals before the CESTAT.
It is their fortune that the new provisions of section 35F of CEA, 1944 are yet to see the light of the day. Else they would have been required to make a total pre-deposit of almost Rs.4 crores for their appeals to be heard by the CESTAT.
Be that as it may, the issue is that the appellants trade in imported healthcare products and cosmetics. Before the goods are marketed in the DTA, the appellants are required to do labeling/re-labeling, packing/re-packing, etc. and affix MRP. Due to lack of space in the docks area, the goods were taken out of the customs area to their godown at Bhiwandi where these activities were undertaken. On the MRP affixed, the CVD liability has been discharged by the appellants. It is the allegation of the department that the appellants are required to discharge Central Excise duty on the said notified goods in view of section 2(f)(iii) of the CEA, 1944.
Before the CESTAT, the appellants submit that the entire case is revenue neutral in as much as the CVD paid on the imported goods would be available as CENVAT credit to the appellant for discharge of excise duty liability.It is also submitted that since May, 2011, the appellant has been clearing the goods by filing an into-bond bill of entry and undertaking all these activities under Customs Bonded warehouse and thereafter clearing the goods for home consumption after filing the ex-bond bill of entry and this procedure is followed in terms of Board's Circular No. 19/2011-Customs dated 15/04/2011. The appellant further submitted that although this plea of revenue neutrality was taken in original proceedings, the adjudicating authority refused to take cognizance of the same and, therefore, the matter be remanded, after granting stay, for ascertaining this fact.
The Revenue representative stuck to the findings of the adjudicating authority and submitted that the appellants be put to terms.
The Bench observed that as the issue lay in a narrow compass the appeals themselves could be disposed of. After waiving the pre deposit and obtaining the consent of both sides, the appeals were taken up for disposal.
The Bench, inter alia , observed -
++ The short question is whether the excise duty demanded on the basis of MRP is a revenue neutral exercise inasmuch as the appellant has discharged CVD liability on the imported goods on the same MRP.
++ Even though this contention was raised by the appellant before the adjudicating authority, no verification appears to have been done and if this had been done, it could have been easily ascertained whether the appellants' claim in this regard is correct or not?
++ In any case, the appellants would have been entitled to CENVAT credit of the CVD paid on the imported goods, even if there was a variation in the MRP declared to the customs and the MRP on which excise duty liability is being demanded.
Holding that in the circumstances, the matter has to go back to the adjudicating authority for verification of the claim made, the appeals were allowed by way of remand and the stay petitions were also disposed of.
The Bench also directed the Registry to mark a copy of the order to the Chief Commissioner of Central Excise, the reason - for issue of necessary directions in this regard so that avoidable litigation need not be perpetuated without any gain for anybody.
In passing : Also see L'Oreal India Pvt. Ltd. 2014-TIOL-1170-CESTAT-MUM. We hope the directions are issued. By the way, one more ground to protest against the new s.35F!
(See 2014-TIOL-1264-CESTAT-MUM)
