2023 (11) TMI 255 - AT - Central Excise

Area based exemption - new and different marketable article is emerging at the said ESO having distinctive name, classification, character - Department contended that appellants are manufacturing HSRP Blank and multi layer labels stickers in their unit in Himachal Pradesh, however, are transferring the same to the ESOs installed by the appellants in the States / UTs under challan without payment of Central Excise Duty - extended period of limitation. What is the product in question, when it is cleared from Himachal Pradesh and whether it gets changed when it is sold to the vehicle owner in Rajasthan? - HELD THAT - The product is the high security registration plate, but blank, when it gets cleared from the factory in Kala Amb, Himachal Pradesh. It is blank for the reason that at that time the appellant is not aware about the registration number of the vehicle which has to be affixed on a particular plate. This registration number gets issued to the vehicle owner by the RTO in State of Rajasthan. While data entry at ESO in Rajasthan this registration number is entered against the specific alpha numeric PIN embossed on the HSRP blank at the manufacturing unit in Kala Amb, Himachal Pradesh. Finally, the said registration number gets embossed on said HSRP in the ESO of appellant established in Rajasthan. Hence what is cleared from Rajasthan is high security registration plate only except with the specific number embossed on it - It is observed from the record that SPV (RMRPL) is duly registered with the Service Tax Department and they are discharging their liability considering embossing to be a service. In addition, they are discharging their VAT liability while selling the individual HSRP to a particular vehicle owner. What is the meaning of manufacture to understand (as to whether the activity done at ESO in State of Rajasthan can be called as the part of manufacturing process which is otherwise done in State of Himachal Pradesh)? - HELD THAT - The product manufactured by the appellant is high security registration plate prior as well as post embossing / printing of the registration No. of the vehicle on it. Since no change in the commodity/product happens post performing the activity of embossing, this activity done at ESO in Rajasthan cannot be called as the part of manufacture. Otherwise also the burden of proving the fact of manufacture lies on the Revenue if it claims the same - manufacture of TLP also gets complete at Kala Amb, Himachal Pradesh. Printing on these stickers at ESO in Rajasthan was merely a service being provided by the appellant to the vehicle owner for which appellant is charging service tax and is duly discharging its liability. As already observed above, the said service could be provided by anyone other than the manufacturer subject to being the successful bidder. Can the demand of excise duty be sustained? - HELD THAT - Duty is payable on removal of goods from each manufacturing facility. For instance, if a company has its head office in, say Mumbai, where activities which do not amount to manufacture only take place and it has factories manufacturing excisable goods, in Chennai, Indore and Surat, the office in Mumbai need not register, pay duty or file returns but the Chennai, Indore and Surat factories need to do so and each of these is treated as a separate assessee. Duty amount be demanded from Mumbai Office for manufacture in Chennai or Surat. Therefore, the entire show cause notice issued to the appellant s Himachal Pradesh falls flat if the Revenue s argument that it is not manufacturing is accepted. Extended period of limitation - HELD THAT - Department had no opportunity to detect the non-payment of Central Excise duty from their monthly Service Tax Returns. No ER 1 Return reflecting the sale of HSRP plates has been filed is held as suppression of facts and reasons to invoke the extended period of limitation. However, we do not agree with those findings - In the present case the product manufacturer is known to market as HSRP and it has saleability except that under the statutory mandate the HSRP manufacturer has not to be sold by the manufacturer but by the person who succeeds the bid of State Transport Authority (RTA) to emboss the vehicle registration number allotted by the said RTA on the said HSRP. It is apparent on record that vide letter dated 22.07.2009 all these facts were conveyed to the department. Giving such information was a pre-requisite of the impugned notification. There is no suppression of facts. Appellant had already intimated the concerned Commissionerate about his option to exercise the said area based exemption with all requisite particular in the said application dated 22.07.2009. In the state of Rajasthan the appellant is discharging the service tax liability qua his activity of embossing registration No. on the HSRP manufactured in Himachal Pradesh. VAT liability is also being discharged by the appellant. Thus the Department has wrongly invoked the extended period. The confirmation of demand is liable to be set aside on this score also. There appears no evasion of tax liability and that the product of appellant gets manufactured in Himachal Pradesh to which area based exemption is available. Above all the Commissionerate in Himachal Pradesh has no jurisdiction to confirm any duty liability in case the manufacturing of HSRP would have completed in State of Rajasthan - the order by Himachal Pradesh Commissionerate confirming the demand of excise duty is hereby set aside. Appeal allowed.

Summary

Issues Involved:
1. Determination of the product and its status when cleared from Himachal Pradesh and sold in Rajasthan.
2. Definition and scope of "manufacture" concerning activities at the Embossing Station Office (ESO) in Rajasthan.
3. Validity of the demand for excise duty and the applicability of the extended period of limitation.

Issue 1: Product Status
The product in question is the High Security Registration Plate (HSRP). The appellant manufactures HSRP blanks in Himachal Pradesh, which include mandatory security features as per Rule 50 of the Central Motor Vehicle Rules, 1989. These blanks are transferred to ESOs in Rajasthan where the vehicle registration number is embossed. The Tribunal concluded that the product remains the same'HSRP'throughout the process. The HSRP blanks cleared from Himachal Pradesh are identical in identity, usage, and character to the embossed HSRPs sold in Rajasthan.

Issue 2: Definition of Manufacture
The Tribunal examined the definition of "manufacture" under Section 2(f) of the Central Excise Act, 1944, and Section 2(29BA) of the Income Tax Act, 1961. It found that the activities at the ESO in Rajasthan, such as embossing the registration number, do not result in a new and distinct product. The HSRP remains the same product before and after embossing. The Tribunal held that the manufacture of HSRP is completed in Himachal Pradesh, and the activities at the ESO are merely services akin to printing, not part of the manufacturing process.

Issue 3: Demand for Excise Duty
The Tribunal held that if the processes at the ESO do not amount to manufacture, the appellant's activities do not fall within the charging section of the Central Excise Act, 1944. Consequently, no excise duty can be charged, and the exemption notification is irrelevant. The Tribunal also found that the appellant had complied with the statutory requirements and had not suppressed any facts, thus the extended period of limitation was wrongly invoked. The demand for excise duty was set aside on this basis as well.

Conclusion:
The Tribunal concluded that the appellant's manufacturing activity was completed in Himachal Pradesh, entitling them to the area-based exemption. The activities at the ESO in Rajasthan were services, not manufacturing. The demand for excise duty was invalid, and the extended period of limitation was wrongly invoked. The appeals were allowed, and the order confirming the duty demand was set aside.