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2025 (2) TMI 946 - AT - Central ExciseProcess amounting to manufacture or not - alteration of MRP on the imported goods - entitlement to claim CENVAT Credit on the duty paid at the time of importation of goods - Seizure and Confiscation of the Goods - Extended Period of Limitation - interest - penalty. Manufacture in terms of Section 2(f)(iii) of the Act - HELD THAT - The process of affixing MRP by the appellant on the goods in question i.e. various electrical home appliances which are covered under Third Schedule there is no manner of doubt that the activity carried out by the appellant amounts to manufacture. Apart from that in the statement recorded under Section 14 of the Act Shri A.K Jindal the General Manager of the company had categorically admitted that he understands that their products were covered under the Third Schedule of the Act and that the processes carried out by them in their company amounts to manufacture in terms of Section 2(f)(iii) and they were liable to pay excise duty which they actually paid. In view of their own admission accepting that the activity amounts to manufacture and is leviable to excise duty the issue stands concluded against them and in favour of the Revenue. Eligibility to CENVAT Credit - HELD THAT - Reliance placed on the decision of Delhi High Court in Global Ceramics Pvt. Ltd. versus Commissioner Central Excise Nagpur 2019 (5) TMI 1432 - DELHI HIGH COURT where it has been held that the amendment to Rule 4(1) of CCR prescribing a time limit for claiming CENVAT Credit will not apply to the consignments where the import took place prior to the date of the amendment and the deemed manufacture took place when the MRP was altered which also happened prior to the amendment. The facts of the present case are quite identical with the facts of the case before the Delhi High Court and therefore there are merit in the submission of the learned Counsel that the appellant having paid appropriate duty at the time of import has to be considered as an input for the purpose of CENVAT Credit Rules. Here the Bill of Entries considered were for the period 2011 12 to 2015 16 and therefore on the analogy drawn by the Delhi High Court the amendment w. e. f. 01.09.2014 prescribing the time limit for making the CENVAT Credit claim shall not apply to imports covered prior to the said date. Moreover once the activity has been held to be manufacture exigible to excise duty the Credit on CVD paid by the appellant on the goods imported is available. Seizure and Confiscation of the Goods - HELD THAT - The action of seizure of the goods lying in the premises is unjustified more so when the daily stock status as on 5.10.2016 was made available by the appellant to the Central Excise Officers and the goods were duly recorded - It is also relevant to refer the decision of the Mumbai Bench in Nakoda Enterprises versus Commissioner Central Excise Mumbai V 2016 (12) TMI 1679 - CESTAT MUMBAI where all the goods were covered under the SSI exemption except few and therefore they were under bonafide belief that since the unit is eligible for SSI exemption they were not required to obtain any registration. It was held that just because the exemption notification is not applicable on one of the products the goods lying within the factory should not be confiscated and it cannot be equated with the case of attempt to clear the goods clandestinely. Therefore in the present case the seizure and confiscation is unsustainable. Extended Period of Limitation - HELD THAT - From the statements recorded under Section 14 during the course of investigation it is apparent that the appellant was unaware of the fact that the activity of affixing MRP on the imported goods amounts to manufacture and the consequent duty liability. The appellant bonafide believed that they were into the trading activity and were therefore registered with the VAT Department and were paying the VAT regularly. Had they known that the activity amounts to manufacture under the excise law they would have registered themselves with the Excise Department and availed the benefit of CENVAT Credit - There is no reason to doubt the statement made by Shri A. K. Jindal or by Shri Rajesh Mohan and on the other hand Revenue has not produced any further evidence to show that non-registration and non-payment of excise duty was deliberate and wilful to evade payment of duty. In view of the fact that all the records/books of accounts were properly maintained and duly reflected in the balance sheet it cannot be said that there was any misstatement or suppression of facts with intent to evade payment of duty. Therefore the demand of excise duty is justified only qua the normal period i.e. 01.03.2015 to 05.10.2016. Interest and Penalty - HELD THAT - As the activity has been held to manufacture and therefore leviable to excise duty the appellant is liable to pay interest on the delayed payment of duty. The liability to interest is mandatory and automatic which the appellant cannot escape - The levy of penalty under Rule 25 read with Section 11 AC is not sustainable as we have already held that extended period of limitation is not invokable in the absence of any mis-statement or willful suppression of facts. The penalty under Section 11 AC is mandatory only when duty is confirmed by invoking the extended period of limitation. Personal penalty imposed on Director of the appellant company under Rule 26 of the Rules - HELD THAT - The personal penalty imposed on Shri Rajesh Mohan under Rule 26 of the Rules is also not sustainable as the penalty under Rule 26 can be imposed for actions related to goods which were rendered liable for confiscation. In this case the confiscation of goods is set aside. Hence there is no reason to impose penalty when the goods itself were not to be confiscated. The second situation in which penalty under Rule 26 can be imposed is where invoices are issued without supplying goods so as to enable the recipient to avail ineligible CENVAT Credit which is also not the case here. Conclusion - i) The activity of affixing MRP on the imported goods which are covered under Third Schedule amounts to manufacture in terms of Section 2(f)(iii) of the Act and are exigible to excise duty along with interest. ii) Since the activity amounts to manufacture the appellant is entitled to CENVAT Credit. iii) Seizure and confiscation of the goods is unsustainable. iv) Extended period of limitation is not invocable in the facts of the present case. v) Penalty under Rule 25 cannot be imposed on the appellant. Penalty under Rule 26 cannot be imposed on Director of the appellant company. Matter remanded to the Adjudicating Authority for limited purpose of computation of the duty liability along with interest and entitlement of CENVAT Credit - The appeals are partly allowed in above terms by way of remand.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered by the Tribunal were:
ISSUE-WISE DETAILED ANALYSIS Manufacture under Section 2(f)(iii) of the Act The Tribunal examined whether the activity of altering the MRP constituted 'manufacture' under Section 2(f)(iii) of the Act. The goods in question were covered under the Third Schedule, and the appellant admitted to affixing MRP stickers on the goods. The Tribunal referenced the clear language of Section 2(f)(iii), which includes processes such as packing, repacking, labeling, or altering the retail sale price as 'manufacture'. The Tribunal cited precedents such as Komatsu India Pvt. Ltd. vs. Commissioner of C.EX., Nagpur, affirming that such activities constitute 'deemed manufacture' and are liable for excise duty. Eligibility to CENVAT Credit The Tribunal addressed whether the appellant could claim CENVAT Credit for the duty paid at import. The denial of credit was based on claims made beyond the prescribed time limit. However, the Tribunal noted the decision in Global Ceramics Pvt. Ltd. vs. Commissioner Central Excise, Nagpur, which held that amendments prescribing time limits for CENVAT Credit claims do not apply retroactively. The Tribunal found that for imports before the amendment date, the appellant was eligible for credit. For imports after the amendment, the time limit applied, rendering some claims time-barred. Seizure and Confiscation of Goods The Tribunal considered whether the goods seized were liable for confiscation. It reiterated the principle that excise duty is payable upon removal of goods from the premises, not merely upon manufacture. Citing precedents like Caltex Oil Refining (India) Ltd vs. Union of India, the Tribunal concluded that goods recorded in the books and not removed from the premises were not subject to seizure or confiscation. Extended Period of Limitation The Tribunal examined the invocation of the extended period under Section 11A(4). It found no evidence of willful misstatement or suppression of facts by the appellant, who was unaware that their activities constituted manufacture. Citing Collector of Central Excise vs. Chemphar Drugs & Liniments, the Tribunal emphasized that the extended period requires proof of deliberate default, which was absent. Thus, the demand was justified only for the normal period. Imposition of Penalties The Tribunal addressed penalties under Rule 25 and Rule 26. Since the extended period was not applicable, penalties under Section 11AC were not sustainable. The Tribunal noted that penalties under Rule 26 require goods to be liable for confiscation, which was not the case here. Thus, penalties on both the company and its Director were deemed unwarranted. SIGNIFICANT HOLDINGS The Tribunal held:
The Tribunal remanded the matter to the Adjudicating Authority for recalculating duty liability and CENVAT Credit entitlement, partially allowing the appeals.
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