2018 (5) TMI 667 - AT - Central Excise

Method of valuation - MRP based valuation - It is the allegation of Revenue that the activity of changing the MRP/ affixing MRP stickers in their godown will fall within the deeming provision in Section 2(f) (iii) and consequently, Central Excise duty is required to be discharged in terms of Section 4A of the CEA - Held that - It is established during the course of investigation that the price list circulated by TAPL have also been adopted for selling of goods imported in the name of 3D. The modus-operandi adopted is not challenged by the appellants. It stands admitted that such activity amounts to manufacture in terms of Section 2(f)(iii). The demand raised is w.e.f. June 2012 - It has also been argued before us that the various contentions raised in the reply to the show cause notice was not considered and discussed by the Adjudicating Authority - matter placed on remand for reconsideration. SSI exemption - clubbing of clearances - case of Revenue is that clearances of both TAPL as well as 3D are liable for clubbing - Held that - both TAPL as well as 3D have separate existence in the eyes of law. The former is a Private Limited company whereas the latter is a Partnership firm. The goods were imported under both names and have also been sold under both names, inspite of the fact that the goods were mixed up at the godown and have been sold on the basis of price list circulated by TAPL - It is settled position of law that in the absence of mutuality of interest and financial flow back from one firm to another, clubbing of clearances is not permissible merely on the ground that both firms are in the common premises and affairs of all firm are looked after by one person. Since TAPL as well as 3D have separate existence and have separate registration for VAT, Income Tax etc each one will be entitled to the benefit of SSI exemption separately. The case is required to be remanded to the Adjudicating Authority to work out the demand denovo separately from TAPL as well as 3D after extending the benefit of SSI exemption separately to the two companies - appeal allowed by way of remand.

Summary

Issues:
1. Central Excise duty evasion by importing and trading companies.
2. Allegations of affixing MRP stickers on goods.
3. Adjudication of duty demands and penalties.
4. Challenge to impugned order and appeals filed.
5. Interpretation of Section 2(f)(iii) of the Central Excise Act.
6. Clubbing of clearances for small scale exemption.
7. Joint and several demand against multiple entities.
8. Benefit of SSI exemption and cenvat credit eligibility.

Central Excise Duty Evasion:
The case involved M/s Trueline Appliances Private Limited (TAPL) and M/s 3D International (3D) engaged in importing and trading various goods. Allegations included affixing MRP stickers post-importation and selling goods at enhanced prices. Central Excise duty evasion was alleged, leading to duty demands and penalties imposed on the companies, directors, partners, and agents.

Interpretation of Section 2(f)(iii):
The investigation concluded that affixing MRP stickers constituted "manufacture" under Section 2(f)(iii) of the Central Excise Act. The Revenue contended that such activity required payment of Central Excise duty under Section 4A, a stance not disputed by the appellants. Evidence included seized documents, statements, and price lists indicating the MRP at which goods were sold.

Clubbing of Clearances and Small Scale Exemption:
The impugned order faced challenges regarding clubbing clearances of TAPL and 3D for small scale exemption eligibility. The Tribunal noted separate legal existence of both entities, rejecting the clubbing of clearances. Each entity was deemed entitled to the Small Scale Industry (SSI) exemption notification separately.

Joint and Several Demand:
The demand made jointly and severally against TAPL and 3D was deemed impermissible by the Tribunal. Citing legal precedents, the demand can only be made from the entity that manufactured the goods. The Tribunal upheld the view that the demand must be worked out separately for each entity.

Remand and Denovo Adjudication:
The Tribunal remanded the case to the Adjudicating Authority for denovo adjudication. The Authority was directed to compute the duty demands separately for TAPL and 3D, extending the benefit of SSI exemption to each. The Authority was instructed to consider arguments on quantification and evidence prior to April 2012, allowing additional evidence and providing an opportunity for a hearing.

This detailed analysis of the legal judgment highlights the key issues, interpretations of legal provisions, challenges to the impugned order, and the Tribunal's directions for further adjudication.