2019 (4) TMI 160 - AT - Central Excise

Process amounting to manufacture or not - trading of parts of earthmoving equipment/excavators and receive parts in bulk and sell them after consolidation by putting in polythene bags/wooden boxes/gunny bags as the case may be without any labeling etc. - case of Revenue is that the activity of packing/re-packing by the appellant amounts to manufacture in terms of Section 2(f)(iii) of the Act, therefore, they are liable to pay duty on their activity - extended period of limitation. Held that - In this case, the facts of the case are not in dispute that the appellant is a trader and receiving the parts in bulk and sell them after consolidation by putting in polythene bags/wooden boxes/gunny bags as per the requirement of the buyers - the activity of packing/re-packing of the goods in a unit container amounts to manufacture. On going through the process undertaken by the appellant, we find that the appellant is not putting this packing/packed goods in a unit container. In fact, the appellant is packing the goods a bigger carton/gunny bags for ease of transportation to the place of the buyers and the buyers are selling these parts separately without any packing done by the appellant to the ultimate customers - the appellant is engaged in the activity of packing/re-packing of the parts/components of earthmoving equipments falling under Tariff 84264100, 8427, 8429 and 843010 of the First Schedule to the Central Excise Tariff Act, 1985, which has been put at Sl. No. 108 amending the Notification No. 49/2008-CE(NT) dt. 24.12.2008 under Section 4A as notified the items for the purpose of MRP valuation. However, these items were not brought under the ambit of Section 2(f)(iii) of the Act fiction of manufacture, it was only brought in the Finance Act, 2011 with retrospective effect under Section 73 of the said Act w.e.f. 29.04.2010 i.e. at par with amendment to Notification issued under Section 4A of the Act. Extended period of limitation - Held that - Prior to 28.05.2012, there was no deeming provision to demand duty under Section 2(f)(iii) of the Central Excise Act, 1944 and the introduction of such amendment which was made effective retrospective, the extended period of limitation is not invokable for issuance of the show cause notice as there is no allegation to invoke extended period of limitation such as fraud, collusion, willful mis-statement, suppression of facts or intent to evade duty under Central Excise Act/Rules. Admittedly, whole of the demand in this case has been confirmed by invoking extended period of limitation, therefore, the extended period of limitation is not invokable in the facts and circumstances of the case. The demand against the appellant is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of duty for manufacturing activity - Whether activity of re-packing parts amounts to manufacture under Central Excise Act - Applicability of Section 2(f)(iii) - Legality of seizure - Application of MRP valuation - Bar of limitation for demand - Correct quantification of demand.

Analysis:
The appellants appealed against a demand of duty amounting to ?4,61,83,132 confirmed for the period 2010-11 to 2011-12 due to the activity of re-packing parts, alleged to be manufacturing. The case revolved around whether the activity undertaken by the appellants constituted manufacturing under Section 2(f)(iii) of the Central Excise Act, 1944. The appellants, engaged in trading of parts, consolidated them in polythene bags/wooden boxes/gunny bags without labeling, which the Revenue claimed as manufacturing. The appellants argued that their activity did not fulfill the conditions of Section 2(f)(iii) as the goods were not repacked for sale to ultimate consumers but for ease of transportation to dealers. They contended that no branding was done by them and relied on precedents to support their stance. The legality of the seizure was questioned, citing inapplicability of Section 2(f)(iii) at the time of seizure. The appellants also challenged the applicability of MRP valuation, the limitation for demand, and the correctness of quantification.

The Tribunal analyzed the provisions of Section 2(f)(iii) and found that the activity of packing/re-packing in a unit container amounts to manufacture. However, in this case, the appellants were not repacking goods in a unit container but in larger cartons/gunny bags for transportation to buyers who sold them individually without the appellants' packing. The goods involved fell under Tariff categories specified for MRP valuation, but the relevant provisions were introduced with retrospective effect post the period in question. The Tribunal held that the extended period of limitation could not be invoked for the show cause notice as there was no basis for such invocation. Precedents were cited where similar demands were set aside due to incorrect application of extended limitation. Consequently, the demand against the appellants was deemed unsustainable, and the impugned order was set aside, allowing the appeals with any consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, holding that the demand for duty was not sustainable due to the lack of fulfillment of conditions under Section 2(f)(iii) for manufacturing activity. The impugned order was set aside, and the appeals were allowed with any necessary consequential relief.