By TIOL News Service

MUMBAI, JAN 24, 2018: THE respondents imported cosmetic products.

It is the case of the Revenue that the importers are affixing retail sale price on the imported cosmetic products and this activity amounts to manufacture in terms of section 2(f)(iii) of the CEA, 1944 w.e.f. 01.03.2003 and, therefore, they applicants are liable to pay Central Excise duty.

The  CCE, Thane-I  did not bat an eyelid while confirming the duty demand of Rs.58.34 Crores on the importer and imposed an equal penalty and also interest.

This order was challenged before the CESTAT and the Bench vide its order dated 13.06.2014 held thus –

CE - S.2(f)(iii) of CEA, 1944 - Manufacture - activity of affixing RSP/labeling on imported goods as per requirement of DGFT Notfn. 44(RE-2000) in the Customs bonded warehouse or in a private warehouse on execution of Bond/BG with Customs - So long as the goods remain under Customs control, they cannot be said to have been imported into India and, therefore, the question of ‘manufacture' & attracting excise duty liability would not arise at all: CESTAT

The Tribunal also observed –

++ The excise duty demand on imported goods contained in packages of above 10 grams or 10 ml. isnot sustainable in law as the activity of labeling/affixing MRP is a statutory requirement before goods are allowed to be cleared for home consumption and therefore, the import is complete only after these activities are undertaken. Further no additional excise duty liability accrues as the additional customs duty (CVD) liability has been discharged on the MRP affixed and the entire exercise is revenue neutral.

++ As regards the goods contained in packages of 10 grams of 10 ml. or less, the activity of labelling/re-labelling would amount to "manufacture" as there is no statutory requirement of undertaking the said activity before their import can be allowed. However, the appellant would be eligible to take CENVAT credit of the CVD paid on such goods. Further, as the entire activity was undertaken with the knowledge and permission of the Customs authorities, the allegation of suppression of facts does not sustain and the duty demand is sustainable only for the normal period of limitation. Since the issue relates to interpretation of law, there is no warrant for imposition of any penalties. Thus the matter is remanded back to the adjudicating authority only for the limited purpose of re-computation of duty demand for the normal period and allowing CENVAT credit of the CVD paid on the imported goods, subject to the appellant producing the necessary documentary evidence in this regard.

We reported this order as 2014-TIOL-1170-CESTAT-MUM .

Revenue is aggrieved with this order and has filed an appeal before the Bombay High Court.

The High Court after going through the facts involved observed -

"6. The entire exercise in the given facts and circumstances and peculiar to the assessee, to our mind does not raise any substantial question of law. We have perused the order with the assistance of Shri Dwivedi and invited his attention to the specific observations on facts in paragraph 8 of the order under appeal. The conclusions are to be found in paragraph 9 of the same. In the backdrop of the factual position as also the contentions of the parties, we do not think that the Tribunal has laid down any principle of law which could be termed as vitiated by an error apparent nor could its findings and conclusions particularly on the point of limitation can be said to be perverse. The view taken is a possible view. The view taken that there is no suppression of facts by the assessee is based on the disclosures that have been made throughout to the Customs Authorities. For these reasons, we do not feel that the appeal raises any substantial question of law…"

The Revenue appeal was dismissed.

(See 2018-TIOL-139-HC- MUM-CX)