2015 (12) TMI 224 - AT - Central Excise

Manufacture - scope of the term automobile - activity of packing/re-packing, labelling/re-labelling and fixing of MRP on automobile parts amounts to manufacture - Classification - Valuation of goods u/s 4 or 4A - MRP based valuation or transaction value - Confiscation of goods - Redemption fine - Held that - Just because such automobiles have machinery aspect which helps them use in the construction and mining industry, will not take them away from the term automobile. The assistance provided by the Commissioner (AR) is of great help and fully supports the conclusions already drawn by this Tribunal in the case of JCB India Ltd (2014 (2) TMI 632 - CESTAT MUMBAI) - whether the equipment is made of rubber tyre or crawler type/steel drum wheel mounted will not make any difference. The judgment of the hon'ble Supreme Court in the case of Ratan Melting Wire Industries (2008 (10) TMI 5 - SUPREME COURT OF INDIA) further strengthens the decision taken by this Tribunal relating to the circulars. We also note that the purpose of judicial scrutiny in taxation matter is to reach to the truth of the matter and in reaching to the truth, incorrect interpretation taken by some authority cannot supersede the judicial decision on the issue. We also agree with the Commissioner (AR) that even the circular of 2008 was not binding circular and it would be seen from the circular that it is only suggestive and is not a conclusive or directive circular. We also note that large number of such parts, components and assemblies are interchangeable in different road vehicles including construction equipment vehicles. Thus wider meaning to the term automobile is to be given. Scope of the term Manufacture - deemed manufacture - Held that - the argument that putting a tag is not labelling or there is absence of container, etc., in our view, will defeat the purpose of definition given in Section 2(f)(iii). In view of the said position, we hold that even putting the tag on the unpacked parts will amount to manufacture and will be covered under Section 2(f)(iii). For determining whether a particular process amounts to manufacture it is not relevant whether the inputs are locally produced or imported. What is important is the end product and whether the manufacturing process amounts to manufacture or not. In the present case, there is no dispute that the activity undertaken by the appellant amounts to manufacture under Section 2(f)(iii). The fact that inputs were imported is immaterial and hence the submission made by the learned senior counsel is rejected. Extended period of limitation - Held that - Appellant were aware of the fact that the goods are covered under Section 4A. The ratio of JCB India Ltd. case (supra) as far as invocation of limitation and penalty, is therefore, not applicable. In that case, M/s. JCB India Ltd. has started paying duty from April 2010. In the present case, even that was not done. Extended period of limitation as also imposition of penalty under Section 11AC is upheld. Valuation - As per the said explanation to section 4, in the facts of the present case, the appellant would be entitled to cum-duty benefit. We accordingly extend the same and set aside the impugned order as far as the benefit of cum-duty is concerned. Cenvat Credit - Keeping in view these facts and the fact that the matter was not examined by the Commissioner we remand the matter for the limited purpose of examining these documents regarding admissibility of CENVAT credit as per law and in case the appellant is eligible for CENVAT credit the same should be extended. Decided substantially against the assessee.

Issues Involved:
1. Whether the activities undertaken by the appellant amount to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944.
2. Whether the parts of certain earth-moving/construction vehicles are covered under Section 4 or Section 4A of the Central Excise Act, 1944 for valuation purposes.
3. Applicability of extended period of limitation.
4. Entitlement to cum-duty benefit.
5. Eligibility for CENVAT credit.
6. Legality of confiscation and penalties imposed.

Detailed Analysis:

1. Manufacture under Section 2(f)(iii):
The Tribunal examined whether the activities of packing, repacking, labeling, or relabeling parts of earth-moving vehicles amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. The Tribunal found that the parts, components, and assemblies of scania trucks, dumpers, motor graders, wheel loaders, dozers, and hydraulic excavators are covered under Section 2(f)(iii) when these activities are performed. This conclusion was based on the interpretation of the term "automobile" and the broad scope of Section 2(f)(iii), which includes any process that makes the goods marketable to consumers.

2. Valuation under Section 4 or Section 4A:
The Tribunal addressed whether the goods in question should be valued under Section 4 or Section 4A of the Central Excise Act. It was determined that parts packed or labeled are to be valued under Section 4A, while unpacked parts should be valued under Section 4. The Tribunal noted that the appellant's activities, such as labeling and tagging, amounted to manufacture, thus requiring valuation under Section 4A for packed goods. For unpacked goods, the Tribunal upheld the valuation under Section 4, recognizing the appellant's claim that certain parts were sold unpacked due to their size.

3. Extended Period of Limitation:
The Tribunal upheld the invocation of the extended period of limitation, noting that the appellant continued to clear goods without registration and payment of duty even after amendments in 2010 clarified the applicability of Section 4A. The Tribunal found that the appellant's conduct indicated suppression of facts with the intent to evade duty, justifying the extended period of limitation.

4. Cum-Duty Benefit:
The Tribunal accepted the appellant's claim for cum-duty benefit for goods valued under Section 4. It referred to the explanation added to Section 4(1) in 2003, which clarified that the price-cum-duty of excisable goods includes the duty payable. Consequently, the Tribunal extended the cum-duty benefit to the appellant.

5. CENVAT Credit:
The Tribunal remanded the matter to the Commissioner for the limited purpose of examining the appellant's entitlement to CENVAT credit. It directed the appellant to produce necessary documents, such as invoices, to prove the duty-paid nature of the goods received. The Tribunal emphasized that the appellant should be extended the benefit of CENVAT credit if eligible, and any reduction in duty liability should also reduce the penalty under Section 11AC.

6. Confiscation and Penalties:
The Tribunal set aside the confiscation of goods and related redemption fines, noting that the goods were not available for confiscation and considering the nature of the dispute. It also set aside the penalty imposed on Shri J. Kumar, finding no evidence of his personal knowledge of the goods being liable for confiscation. However, the Tribunal upheld the confiscation and penalty under Section 11AC for goods seized at the dealer's premises, as the goods were cleared without payment of duty and were liable for confiscation.

Conclusion:
The Tribunal concluded that the activities undertaken by the appellant amounted to manufacture under Section 2(f)(iii), and the goods were correctly valued under Section 4A or Section 4 as applicable. The extended period of limitation was justified, and the appellant was entitled to cum-duty benefit and CENVAT credit, subject to verification. Confiscation and penalties were partly set aside, and the matter was remanded for limited examination of CENVAT credit entitlement.

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