2017 (10) TMI 1183 - AT - Central Excise

Manufacture - the appellant had 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 on the product before clearing to their dealers/ customers - case of the department is that the said activity carried out by appellant is covered under third schedule to Central Excise Act and also amounts to manufacture in terms of Section 2(f)(iii) of the Central Excise Act 1944 with effect from 01.03.2003 - classification of goods. Held 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 respect of goods specified in third schedule activity such as packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer amounts to manufacture. In the facts of the present case, the goods as discussed above 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 - the activity being one of manufacturing, clearance of the goods was liable to payment of duty. Extended period of limitation - Held that - though the transfer of spare parts to the spare part 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 - extended period rightly invoked. As regards the issue of confiscation of the goods, it is found that the 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 - confiscation and redemption fine set aside. Appeal allowed in part.

Summary

Issues:
Classification of imported goods under Central Excise Act and applicability of manufacturing provisions.

Analysis:
1. The case involved the appellant importing various motor vehicle parts, subjecting them to packing, labeling, and affixing brand names and MRP before selling. The department claimed this activity amounted to manufacturing under Section 2(f)(iii) of the Central Excise Act, demanding duty, interest, penalty, and proposing confiscation of goods.

2. The appellant argued that the imported parts were correctly classified under 87.08, not falling under the third schedule of the Central Excise Act, hence not subject to manufacturing provisions. They contested the extended period demand, citing no suppression of facts and payment of duty before the notice, invoking Section 11A(2B) for penalty waiver.

3. The Revenue maintained the classification based on the bill of entry, asserting that repacking did not change the nature of goods, and the classification of repacked goods aligned with the imported goods' classification. They referred to precedent to support their stance.

4. The Tribunal upheld the classification of goods under specific tariff entries, not as parts of motor vehicles, rejecting the appellant's arguments. The activity of repacking and labeling fell under Section 2(f)(iii) of the Act, constituting manufacturing and liable for duty payment.

5. The Tribunal found suppression of vital facts by the appellant regarding manufacturing activities, justifying the extended period demand under Section 11A(1) proviso. The payment of duty post-facto did not absolve the appellant, leading to upholding duty, interest, and penalty demands.

6. The confiscation of goods was deemed incorrect as the cleared goods were not available for seizure, aligning with the Larger Bench judgment. The Tribunal set aside the confiscation and Redemption Fine.

7. The Tribunal distinguished previous judgments cited by the appellant, emphasizing the specific manufacturing activity under Section 2(f)(iii) in this case, rendering those judgments inapplicable.

8. Ultimately, the impugned order was partly modified, with the appeal partly allowed based on the above analysis. The judgment was pronounced on 26/10/2017.