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TMI Blog2024 (2) TMI 1479X X X X Extracts X X X X X X X X Extracts X X X X ..... ss model, to the extent of not being illegal, is entirely beyond intrusion of agencies of the State and their cause for apprehension, but for the proximate detriment, does not require justification or explanation. Not so is the taxing agency and the absence of review, contemplated in section of Central Excise Act, 1944, for evaluation of the impugned order as legal and proper has not attempted to rectify this inadequacy in the adjudicated demand. There is no dispute on the classification adopted by the appellant upon clearance of the goods from the factory of manufacture or on the value adopted for assessment. And yet there is a differential duty demand which must, necessarily, be predicated on either, or both, of rate of duty and value. That incongruence should suffice for discard of the impugned order but in circumstances of objection from the assessee and marketability aspect set forth by the respondent, to adjudicate the validity of the contrary claims. The hologram affixing proposition too presupposes lack of marketability in the absence of hologram. It also takes the scope of excisability beyond the stage of manufacture to brand acceptability. It is all too clear that not onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the burden entailed on the impugned activity carried out between February 2014 and June 2017 at distribution centres (DC) , belonging to their logistics service providers, M/s DHL Ltd, M/s CFC Carriers (P) Ltd and M/s Ceva India (P) Ltd, as manufacture on their behalf, has filed these several appeals which, though impugning a single order, correspond to each of the locations and on identical cause of action prompting disposal by us in common order too. The appellant, till 2014, had been importing tyres of all types which were subjected to the impugned activity at the premises of logistic service providers and, even after commencement of manufacture at its plant in Chennai, the contractual arrangement continued, though now encompassing both imported and manufactured tyres. At the distribution centres , the tyres , tubes and flaps, received from different sources with specifications and brand detailed on them, were checked for imperfections and, in accordance with indents from dealers, segregated as separate and individual articles or as permutations and combinations of the three; it is common ground that the dispute is only about all three put together and it was alleged that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities to be carried out by DHL. None of the activities is related to 'kitting of TTF' sets. Mainly the activities refer to loading-unlading of tyres, etc. keeping records of goods received and dispatched, MIS reports and other confidentiality clauses. Secondly, DHL have been referred to as 'service providers' and as mentioned earlier no activity related to kitting is specifically mentioned as to be carried out by DHL in the agreement. The contention of the Noticee that kitting of tyres, tubes and flaps which allegedly amounted to manufacture was undertaken by DHL and hence, if at all any liability to pay central excise duty arose, would rest on DHL. This argument does not hold good as visibly there is no specific clause in the Schedule-1 of the Agreement that the kitting of tyres, tubes and flaps' would be carried out by DHL. In fact, MIPL has stated that the TTF kitting was done by them in their warehouses. The contents of the case law in respect of Ujjagar Prints [referred to by the Noticee at para D.4 of their reply dated 27.09.2019] have been quoted and used without proper context by the Noticees. The clearance of the TTF kits was done by the logistics p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccessories and assemblies of vehicles falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716 and accordingly, its valuation to be done as per entry no. 100 of the Third Schedule to the Central Excise Tariff Act, 1985. Further, the manufacturer is legally obliged to print the MRP on the packages of the goods, under the provisions of the Legal Metrology Act, 2009. To check whether the provisions of the Legal Metrology Act, 2009 TTF kit, it is observed that as per Rule 3 (a) of Chapter II of the Legal Metrology {Packaged Commodities) Rules, 2011, the provisions of this Act will not apply to packages of commodities containing quantity of more than 25 kg or 25 litre excluding cement and fertilizer sold in bags up to 50 kg. It was ascertained and informed by MIPL that the approximate weight of a truck/bus tyre was around 62-65 Kg and of TTF set around 66-70 Kgs. Therefore, I find that as per the aforementioned condition these rules will not apply to the TTF kits for truck/ bus tyre. following which quantity of kits , that, admittedly and owing to lack of such description in the invoice and records, had to be estimated were valued on some basis that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to determine the rate of duty to be fastened on the so-called unique product emerging from the assembly of tyres , tubes and flaps which begs the question of whether duty liability was determined for manufacture of the goods or arose from deeming of manufacture. The distinction between the two mutually exclusive events is the nature, and extent, of transformation with only superficial impact owing to the latter in comparison with substantive alteration from the former; else, there was no need to make special provision for such activity to be brought within the tax net close to six decades after enactment of the statute and a decade and half after tariff note determined deemed manufacture. The discarding of all preceding rules for resort to 4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. in General Rules for Interpretation of the Schedule to Central Excise Tariff Act, 1985, which does not appear to advance the basis on which the classification of tyres was adopted across the board for the other two articles, is also inexplicable. Likewise, the impugned order has, in a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 7. Learned Senior Counsel informed that the commercial model, devised even when the appellant was solely in the business of trading in imported goods, continued after commencement of their own manufacturing activity in India and, furthermore, that the affixing of Michelin hologram on the outer wall of tyres had been discontinued since December 2012. He dwelt, too, upon other practices that, similarly, may have been construed against the appellant, such as the enumeration of TTF price in the printed price list, that was in vogue till August 2015 and only owing to oral orders from dealers for combination to be supplied, was not on offer in the online mode of indenting and that, even so, TTF price was nothing but the sum of the prices of the three. He submitted that strapping at three points of the circumference, for retaining the assembly undisturbed during handling and transport, was not treatment on any of the three elements. The thrust of his submission was that no addition of any sort had been made to goods that had already discharged duty liability. 8. Contending that every tyre , tube and flap , arriving at distribution centre after payment of duty for further despatch witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture, section 132 of Finance Act, 2002 incorporated such empowerment thus 2. .. (f) manufacture includes any process (i) xxxxxxx (ii) which is specified in relation to any goods in the Section or Chapter Notes of the Fourth Schedule as amounting to manufacture; or, (iii) which is specified in relation to any goods by the Central Government, by notification in the Official Gazette, as amounting to manufacture. in section 2 of Central Excise Act, 1944. By Finance Act, 2003, Third Schedule was incorporated to collate goods to which 2. .. (f) manufacture includes any process (i) xxxxxxxx (iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer; and the word manufacture shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account; in secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not been limited to such distinguishable goods and, indeed, in the absence of such segregation as well as proposition in the show cause notice, the charge that inspection fell within section 2(f)(iii) of Central Excise Act, 1944 is not tenable. That deficit in the proceedings cannot be introduced in post-notice proceedings without compromise to integrity of section 11A of Central Excise Act, 1944. 13. The hologram affixing proposition too presupposes lack of marketability in the absence of hologram. It also takes the scope of excisability beyond the stage of manufacture to brand acceptability. It is all too clear that not only is central excise law not about branding but is about manufacture. Duty liability devolves upon manufacture of the product and rate of duty is determined in generic existence and not from consumer perception of comparability of products that are all subject to the same rate of duty. The expression in section 2(f) of Central Excise Act, 1944 is marketable and not more marketable and, thereby, puts that proposition to rest. The submission on this aspect is not acceptable. 14. The convenience of aggregation notwithstanding, it is not the case of the respond ..... 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