2016 (3) TMI 435 - AT - Central Excise

Mounting charges inclusion in the assessable value of the bodies - demand of duty in respect of the bodies which were being cleared by them after being mounted on the chassis on the ground that the mounting activity is part and parcel of the manufacturing activity in terms of the provisions of Chapter Note 3 of Chapter 87 and as such the mounting charges are required to be included in the assessable value of the bodies Held that - The Revenue was happily accepting the same and at no point of time any objection was raised. The manufacturing as also the mounting was being done by the appellant, under two purchase orders, Revenue, probably, was also under the bonafide impression that mounting charges are not required to be added in the assessable value of their final product and as such was accepting the appellant s style of payment of central excise duty and service tax. The extended period of limitation, is available to the Revenue only when an assessee acts with a malafide intention and there is a positive suppression or misstatement by him with an intention to evade payment of duty. Otherwise also, we note that the appellant was working under a job work Notification No. 214/86 in which case there would be no duty liability on the assessee if the procedure as envisaged under the said Notification is duly followed by them. However, having paid the duty on the value of the bodies only and having paid the service tax on the mounting charges, it cannot be said that the appellant was guilty of any malafide. The duty so paid by the appellant was available as credit to its principal customers i.e. M/s Volvo India Ltd., who were in a position to use the same for payment of tax on their final product, The entire exercise seems to be revenue neutral. In view of our foregoing discussion, we agree with the appellant s stand a part of the demand out of the total period April 2002 to July 2005 shall be barred by limitation. Accordingly we hold so. However a part of the demand would fall within the limitation period for which the matter is being remanded to the original adjudicating authority for quantification of the same. While judging the appellant s liability to pay the central excise duty, the benefit of the service tax already discharged by them would be given to them and their liability would be neutralized to that extent. As we have already held that there is no malafide on the part of the appellant, we find no reason to impose penalty on them. - Decided in favour of assessee

Summary

Issues:
1. Whether the mounting activity is part of the manufacturing process?
2. Whether the demand of duty is barred by limitation?
3. Whether penalty imposition is justified?

Analysis:
1. The appellant, engaged in vehicle body fabrication, faced a demand of duty for mounting bodies on chassis after paying service tax on the mounting charges. The dispute arose regarding whether the mounting activity constituted manufacturing. The appellant argued that they were following separate purchase orders and paying service tax, indicating revenue neutrality. The Revenue contended that as per Chapter Note 3 of Chapter 87, mounting on chassis amounts to manufacturing. The Tribunal noted the appellant's payment of service tax, accepted by Revenue without objection, and found no malafide intent or suppression to invoke the extended limitation period. The Tribunal held that the duty paid was creditable to the principal customers, maintaining revenue neutrality.

2. The appellant contested the demand on the grounds of limitation, asserting that a portion of the demand period should be barred due to revenue neutrality and lack of malafide intent. The Tribunal agreed that a part of the demand fell outside the limitation period, while the remaining portion within the limit was remanded for quantification. The Tribunal directed that the appellant's liability should be adjusted by considering the service tax already paid, ensuring neutrality in their duty liability.

3. Regarding penalty imposition, the Tribunal found no malafide intent on the appellant's part. Consequently, the penalty was set aside, considering the revenue-neutral nature of the appellant's transactions. The Tribunal disposed of the appeal by holding in favor of the appellant on the limitation issue and setting aside the penalty, emphasizing the absence of malafide intent.

This judgment highlights the importance of considering revenue neutrality, malafide intent, and adherence to statutory provisions in determining duty liability, limitation periods, and penalty imposition in excise duty disputes.