2013 (12) TMI 752 - AT - Central Excise

Affixation of labels/MRP before clearance Payment of CVD on MRP basis Held 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 - MRP on which CVD was discharged is the same as that adopted for excise duty liability - 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 thus, insistence of pre-deposit to secure the interests of Revenue does not arise. As regards the duty demand of Rs.3.3 crore 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 - the appellant would be eligible for Cenvat Credit of CVD paid on the imported goods which is approximately of Rs.1 crore - thus, additional duty liability on account of re-labelling, MRP affixation would be approximately Rs.2.3 crores - the appellant directed to make a pre-deposit of duty of Rs.2.3 crore upon such submission rest of the duty to be stayed till the disposal Partial stay granted.

Summary

Issues:
Appeal against excise duty demand, imposition of penalties, activities considered as 'manufacture', clearance of goods under Customs bond, affixing labels and MRPs, CVD liability, pre-deposit requirement, eligibility for Cenvat Credit.

Analysis:
The judgment involves an appeal against an excise duty demand of approximately Rs. 53.47 crores imposed on the appellant, M/s. L'Oreal India Pvt. Ltd., for the period from February 2009 to September 2011, along with penalties. The appellant contested the demand stating that they undertook activities like affixing labels and MRPs on imported goods after customs clearance and payment of Customs duty. They argued that such activities did not amount to 'manufacture' as the goods were cleared under bond and bank guarantee before being marketed in the Domestic Tariff Area (DTA). The appellant sought interim stay based on these contentions.

The Revenue, represented by the Special Consultant, countered that affixing labels and MRPs before clearance into DTA constituted 'manufacture'. However, they acknowledged that for clearances after 26/02/2009, where activities were undertaken within bonded premises and goods were cleared after payment of customs duty, the duty demand of approximately Rs. 42 crores was in favor of the appellant. The remaining duty demand of Rs. 11 crores was divided into two categories: goods packed in packages containing 10ml or more and those with less than 10ml. The Revenue argued for the duty liability based on these categories.

After considering both sides' submissions, the Tribunal found that for the duty demand of Rs. 42 crores, where the appellant affixed labels/MRPs before customs clearance and paid CVD on MRP basis, the Revenue had no case. Regarding the Rs. 11 crore demand, the Tribunal noted that the appellant had discharged CVD liability on MRP basis without a change in MRP, making them eligible for Cenvat Credit. For goods where CVD was discharged on transaction value basis, the Tribunal acknowledged the marketability enhancement due to affixing labels and MRPs but still allowed Cenvat Credit eligibility. The Tribunal directed the appellant to make a pre-deposit of Rs. 2.3 crores within four weeks, with the balance of dues waived upon compliance. The appeal was listed for final hearing on a specified date.

In conclusion, the Tribunal analyzed the duty demands based on the activities undertaken by the appellant, the nature of CVD liabilities, and the eligibility for Cenvat Credit. The judgment balanced the interests of the Revenue and the appellant by requiring a pre-deposit while considering the appellant's financial situation and directing further proceedings for final resolution.