CX - s.2f(iii) - Parts of MV imported were asssessed under Third Schedule - it cannot now be argued that same fall under CH 87.08: CESTAT
By TIOL News Service
MUMBAI, DEC 04, 2017: THE appellant imported various parts of motor vehicle. The said parts were subjected to process of packing/repacking in unit container, labelling/ relabeling and affixing the brand name along with MRP before clearing to their dealers/ customers.
The case of the department is that the activity carried out by appellant is covered under Third schedule to CEA and amounts to 'manufacture' in terms of Section 2(f)(iii) of the CEA, 1944 w.e.f 01.03.2003 and is chargeable to CE duty.
A SCDN was issued demanding central excise duty of Rs.81,80,520/- for the period 01.03.2003 to 06.11.2005. Confiscation of goods valued at Rs.8,35,46,236/- (MRP) was also proposed.
The charges were confirmed by the adjudicating authority and penalty, interest and redemption fine was imposed.
The appellant is before the CESTAT and submits that the imported parts are classifiable under CH 87.08 and which entry is not covered under the Third Schedule, therefore, activity is not 'manufacture' and no duty demand is sustainable. It is also pleaded that the demand is hit by limitation as imports of spare parts, availment of CENVAT credit and transfer to Spare Parts division is known to the department; also appellant had paid the entire duty along with interest before issuance of show-cause notice, therefore, their case is covered by Section 11A(2B) and hence no penalty can be imposed; that since the goods were already cleared and unavailable for confiscation, no redemption fine can be imposed [Shiv Kripa Ispat Pvt. Ltd. = 2009-TIOL-388-CESTAT-MUM-LB which and CCE vs. Finesse Creations Inc. = 2009-TIOL-655-HC-MUM-CUS relied upon.]
The AR while supporting the order submitted that the adjudicating authority had followed the classification as adopted by the appellant at the time of import and, therefore, since the nature of goods did not change after packing/repacking, the appellant's contention that the goods are classifiable under heading 8708 was incorrect.
The Bench inter alia observed –
Merits:
+ If the goods are not capable of being classified in a particular chapter heading, then only it will be classified as parts of equipment/machine/vehicle. In the present case, various parts imported by the appellant have its respective tariff entry which will prevail overall general entry, therefore, not only on the basis of the classification decided at the time of assessment of bill of entry, but independently also it is correctly classifiable under the specific tariff entry of the product in respective chapter heading.
+ Therefore, the submission that all the items which were cleared as spare parts should be classified as parts of motor vehicles under 8708 is not acceptable on the facts as well as on law point. Therefore, we hold that the goods repacked and sold as spare parts is not classifiable under 8708 but it is correctly classified under respective chapter heading as held by the adjudicating authority.
+ In the facts of the present case, the goods are falling under various chapter heading as proposed in the show-cause notice are covered under third schedule and the activity which is undisputedly carried out by the appellants are packing in unit container, labelling with declaration of the MRP on the unit container are clearly covered under Section 2(f)(iii) therefore amounting to manufacture.
+ In this undisputed fact the appellant was liable to pay excise duty on the basis of MRP based valuation under Section 4A after deduction of abatement as provided under notification issued thereunder. Therefore we are of the view that on merit, the activity being one of manufacturing, clearance of the goods was liable to payment of duty.
Limitation:
+ Although the transfer of spare parts to the spare parts division on payment of duty may be known to the department from the records, but the activity of packing, repacking, declaration of MRP thereon was not known to the department which alone is the basis for making the product excisable.
+ Therefore the activity of manufacture was not disclosed to the department by the appellant. Therefore there is a clear suppression of vital fact from the department. Accordingly, the proviso to Section 11A(1) is clearly invocable, hence the demand for extended period is legal and correct.
+ Since there is suppression of fact on the part of appellant, the payment by the appellant of the duty along with interest will be of no help to the appellant.
+ Therefore, the demand of duty, interest and penalty under Section 11AC is upheld.
Confiscation:
+ Confiscation was made in respect of the goods which had already been cleared and the same was not available. No seizure of such goods were made.
+ Therefore, confiscation of the goods which were not available is not legal and correct as held in the Larger Bench judgment in Shiv Kripa Ispat Pvt. Ltd . (supra).
+ We, therefore, set aside the confiscation of the goods and consequential Redemption Fine.
The appeal was partly allowed.
(See 2017-TIOL-4245-CESTAT-MUM)
