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PJ/CASE LAW/2015-16/2683

Whether excise duty on account of re-labelling of imported goods payable if CVD already paid?

Case:-UNITED DISTRIBUTORS VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE-I
 
Citation:- 2014 (309) E.L.T. 571 (Tri. - Mumbai)
 
Brief Facts-The appellant is in appeal along with an application for stay against the impugned order wherein the duty demand of Rs. 1,23,29,946/- has been confirmed along with interest and equivalent amount of penalty. Redemption fine of Rs. 1 crore has also been imposed on the appellant.
Brief facts of the case are that the appellant is engaged in the activity of importing and trading of goods like perfumes, shampoos, body spray, fruit juice based drinks, etc., falling under Chapters 15, 18, 19, 20, 21, 22, 33 and 85 of the Central Excise Tariff Act, 1985 (CETA, 85). The goods imported by the appellant are required to pay duty on MRP basis as per Section 3 of the CETA, 85. As the appellant was fixing sticker in their warehouse after clearance of the goods by discharging duty on the basis of MRP less abatement, the Revenue issued a show cause notice to the appellant on the premise the activity of fixing stickers amounts to manufacture as per Section 2(f)(iii) of the Central Excise Act, 1944. Therefore, the goods were seized and impugned proceedings were initiated. The learned Commissioner held that the activity amounts to manufacture therefore the duty demand was confirmed along with interest and equivalent amount of penalty was also imposed. The goods were allowed to be redeemed on payment of redemption fine of Rs. l crore. Aggrieved by the said order, the appellant is before Tribunal. As the matter came up for several times before this Tribunal and this Tribunal was of the view that the stay application has to be heard along with appeal therefore we take up the appeal as well as the stay application together for final disposal.
 
Appelants Contention-The learned Counsel for the appellant submits that after import of goods wherever it was found that label/sticker was damaged or missing they carried out the activity of stickering and re-labelling on the said goods as prescribed under the relevant statutes. Therefore, their activity does not amount to manufacture as per the decision of this Tribunal in the case of L’Oreal India Pvt. Ltd. vide Order Nos. A/422-430/2014/EB/C-II, dated 13-6-2014 [2014 (308)E.L.T.746 (Tri. - Mum)]. He further submits that as it is a case of’ revenue neutrality, as they have paid CVD on the imported goods on MRP basis. If their activity happens to amount to manufacture, then they are entitled to take CENVAT Credit of the CVD paid by them. As MRP remain same the liability of the duty shall be equal to the CENVAT Credit of CVD. In these circumstances, the learned Advocate prays that the impugned order is required to be set aside. With regard to the issue of revenue neutrality, the learned advocate relies on the decision in the case of BASF India Ltd. v. CCE - 2009 (245)E.L.T.381 (Tri.-Ahmd.) = 2011 (22)S.T.R.359 (T)and also on the decision in the case of L’Oreal India Pvt. Ltd. (supra).
 
Respondents Contention-On the other hand, the learned AR opposes the contentions of the learned Counsel and submits that the main issue in this case is that whether putting MRP stickers in their private warehouse amounts to manufacture or not. Admittedly as per the Section 2(f)(iii) of the Central Excise Act, 1944 the said activity amounts to manufacture. Therefore, the show cause notice has rightly been issued to the appellant. The learned Commissioner has rightly upheld that the activity undertaken by the appellant is an activity of manufacture. He also submits that the facts of the case of L’Oreal India Pvt. Ltd. (supra) are distinguishable to the facts of this case but on the issue of revenue neutrality he fairly admitted that the duty demanded in the show cause notice and the CVD paid by the appellant on the MRP basis are the same.
 
Reasoning of Judgement-Considered the submissions made by both sides. Tribunal find that in this case, the show cause notice issued to the appellant on the issue whether the activity of labelling/re-labelling or putting stickers on the imported goods amounts to manufacture or not. In the case of L’Oreal India Pvt. Ltd. (supra) they find that this Tribunal has observed that as the activity of fixing MRP stickers took place in Customs bonded warehouse therefore, the same does not amount to manufacture but in this case the MRP stickers have been fixed after clearance of the goods from the Customs. Therefore, as per Chapter note and Section 2(f)(iii) of the Central Excise Act, 1944, the activity undertaken by the appellant amounts to manufacture. In these circumstances, they hold that the activity undertaken by the appellant is amounts to manufacture. As they held that the activity undertaken by the appellant amounts to manufacture, the appellant is entitled to take Cenvat Credit of CVD paid by them at the time of importation of the goods. They also find that the MRP declared before the Customs or before the Central Excise is the same therefore, the duty payable on the said goods is equal to the CVD paid by the appellant. Therefore, the situation is of Revenue neutrality as held by this Tribunal in the cases of L’Oreal (supra)andBASF India Ltd.(supra). As the whole exercise in this case is of revenue neutrality, therefore, following the above cited decisions, they hold that although the activity undertaken by the appellant amounts to manufacture but the duty impact is nil being of Revenue neutrality situation therefore, they set aside the demand confirmed by the adjudicating authority in the impugned order and also set aside the imposition of redemption fine, interest and penalty. In these terms the appeal is allowed. Stay application is also disposed of in the above terms.
 
Decision-Appeal allowed
 
Comment- The analogy of the case is that although the activity of labelling/re-labelling of stickers on the imported goods after clearance of the goods from the Customs amounts to manufacture but no excise duty is payable if the situation is revenue neutral. In this case, the amount of CVD and the excise duty payable on re-labelling was same. Accordingly, even if the assessee was compelled to pay the excise duty on re-labelling, he would be eligible to claim the cenvat credit of CVD. As such, the entire exercise would not gain revenue anything and the situation was revenue neutral. Hence, the excise duty demand was set aside even if the activity of re-labelling amounted to manufacture.

Prepared By-Neelam Jain
 

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