Pradeep Jain - Chartered Accountant

PJ/Case Laws/2009-10/26

Case Laws

Prepared by: - CA. Pradeep Jain,

Deepak Mohnot and

Megha Jain

Central Excise Section:

Case: - CCE, Pondicherry v/s MRF LTD.

Citation: - 2009 (95) RLT 825 (CESTAT–Che.)

Issue: - Whether Turnover deduction and Additional Sales tax is allowable deduction in transaction value?

Brief Facts: - There are four issues raised by the department. They are (1) Turnover Discount, (2) Prompt Payment Discount, (3) Sales Tax/Octroi, and (4) Application of CAS4 to valuation of intermediate goods for the period prior to 13/02/2003. The claim regarding prompt payment discount has been given up by the respondent-assessee therefore the same has been dropped.

Appellant’s Contentions: - The Department has objected to claim of 1.06% turnover discount as against the company policy of 1% discount.

Respondent’s Contentions: - With regard to issues relating to deduction on account of turnover discount and deduction on account of sales tax/Octroi etc., they have claimed such discounts and deductions based on computation made by their CA, taking into account the actual discounts given over a period of time in respect of turnover discount and the taxes paid only over a period of time but also in respect of all the factories of the respondents since the goods have been sold at a uniform price all over India.

They also submit that claim for such deduction is also supported by the clarificatory order issued by Hon’ble Supreme Court in the case of UOI v/s Bombay Tyres International Pvt. Ltd [1984 (17) ELT 329 (SC)].

It was also explained that the Quantum of 1% relates to cum duty value that translates 1.06% of the basic price and CA Certificate supports that such calculation. And since it is certified by the CA, the same is admissible.

Reasoning of Judgment: - The Tribunal held that with regards to the valuation of intermediate goods, the issue is settled by the Hon’ble Supreme Court in CCE, Pune v/s Cadbury India Ltd [2006 (75) RLT 744 (SC)] wherein it is held that CAS4 standard can be applied even for the period prior to 13/02/2003.

The Tribunal further held with regard to claim of 1.06% turnover discount is admissible since 1.06% represents the actual turnover discount given as certified by the Chartered Accountant.

With regard to deduction towards taxes paid such as additional sales tax, The Tribunal held that the Hon’ble Supreme Court’s decision in the case of Bombay Tyres International states that when manufacturer has more than one factory and the goods are sold at the same price, the deductions allowed under the said judgment can be computed and allowed on the basis of such uniform price. It is also submitted that they have computed the deduction on the basis of uniform price on which goods are cleared from their multiple factories. And since the deduction of taxes cannot be computed on each transaction, they have adopted a reasonable basis which has been approved by the Supreme Court in the above cited judgment.

In view of above Supreme Court’s decision, the Tribunal is of the view that the deductions claimed by the respondents are reasonable and hence, the impugned order passed by the lower appellate authority in respect of the four issues does not require any interference.

Decision: - Appeal rejected

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Case: Raj Rayon v/s CCE, Vapi

Citation: 2009 (95) RLT 470 (CESTAT – Ahmd.)

Issue: - Credit is admissible to the second unit on the basis of invoice which is issued in the name of one unit if the inputs are diverted to the second unit.

Brief Facts: - The appellant is engaged in the manufacture of Polyester filament yarn / Polyester texturised yarn from the duty paid POY received from various suppliers. The appellant has four units all situated at Silvassa, they can be called unit 1 to unit 4.

During the period 36.06.03 to 26.01.04, four duty paying invoices were issued by the concerned manufacturer of POY in favour of Unit 3 of the appellant. However, as the said material was proposed to be used in Unit 2, the said raw material was diverted in the appellant’s factory under the cover of invoices with the remark by the Unit 3 that entire consignment stands transferred to the appellant’s Unit.

The said goods were re–directed to the appellant’s unit without receiving in Unit 3. The appellant took the credit of the same in their record based on the said invoices. The Department has sought to deny cenvat credit to Appellant i.e. Unit 2.

Appellant’s Contentions: - All the units are belonging to the same appellant and it is not a case of sale of input requiring any endorsement etc. For this, appellant have relied upon the case of CCE, Coimbatore Murugan Mills [2003 (56) RLT 84 (CEGAT–Che.)].

Respondent’s Contentions: - The Department is objecting that the invoices were in the name of Unit 3, who could not endorse the same.

Reasoning of Judgment: - The Tribunal found that there is no dispute about the factual position. The inputs were actually received by the appellant and utilised by them in manufacture of final product.

Admittedly, the inputs were duty paid and covered by the invoices, which were in the name of M/s Raj Rayon only. There was difference in the address of the recipient inasmuch as the address of Unit 3 was shown instead of Unit 2. As per the remarks on the invoices, Unit 3 diverted the entire consignment to the present appellant who actually received in their factory. As such, it cannot be said to be a case of endorsement of invoices. Reliance has been placed on the judgments in Zenith Weaves Pvt. Ltd. v/s CCE, Surat [2004 (178) ELT 1029(Tri.–Del.)] and in CCE, Noida v/s Flex Ind. Ltd [2004 (178) ELT 1029 (Tri.-Del.)].

The Tribunal held that as there is no doubt about the duty paid character of the input, their receipt in the appellant’s factory, utilization of the same in manufacture of final product, cleared on payment of duty; there is no justification for denial of Modvat credit to the appellant. Impugned order is set aside.

Decision: - Appeal allowed with consequential relief.

Comments: - Good decision. It is a great relief to manufacturers having more than one unit. The goods are diverted to other unit in such cases.

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Case: - Dolphin Laboratories Ltd. v/s CCE, Ahmedabad

Citation: - 2009 (95) RLT 823 (CESTAT-Ahmd.)

Issue: - Whether credit can be taken by the assessee on his own invoice upon return of his finished goods?

Whether Cenvat Credit is allowable on the invoice issued by Loan Licensee?

Brief Facts: - The appellant sold his goods to the buyer but the same were returned and were received back by the appellant on the basis of his own invoice. The appellant took credit on the basis of his own invoice. Revenue denied the credit on the ground that appellants availed the credit on the basis of invoices issued by themselves and not by the buyers of the goods. Credit was also sought to be denied on the ground that the invoice which were in the name of Principal manufacturer with no remarks or correspondence indicating that the inputs were supplied to the appellants on behalf of their principal manufacturer.

Appellant’s Contentions: - With regard to the second ground for denial of credit, the appellant contended that they were manufacturing the goods for loan licensee and the invoices were raised by the input supplier in the name of the loan licensee. Reliance was placed on the judgments given in Universal Medicare Limited v/s CCE, Goa [2003 (54) RLT 110 (CESTAT-Mum)] and Crop Health Products Limited v/s CCE, Meerut [1998 (25) RLT 413 (CEGAT)].

Reasoning of Judgment: - The Tribunal held that in terms of Rule 16, the final product originally cleared, when returned by the buyers, is to be considered as inputs for the purpose of credit. Thus, the appellant who is the input manufacturer and the invoice issued by him would be entitled to be considered as eligible inputs. The Tribunal relying on the decision in the case of BAPL Industries v/s CCE, Coimbatore [2006 (72) RLT 691 (CESTAT-Che)], Polyplex Corporation Ltd v/s CCE, Meerut-II [2008 (224) ELT 46 (Uttarakhand)] and Calcom Electronics v/s CCE, New Delhi held that credit cannot be denied when there is no doubt about rejection and return of the goods to the appellant’s factory.

Further the Tribunal allowed the credit on the invoices which were in the name of Principal manufacturer, on the basis of the law declared in the above cited judgments by the appellant. Impugned order set aside.

Decision: - Appeal allowed with consequential relief.

Comments: - This is good decision as many time goods are returned by supplier without taking the delivery and sometimes these are returned without taking the credit. In such cases, the Cenvat credit has to be taken on own invoices.

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Case: - Hindalco Industries Ltd. v/s CCE, Belapur

Citation: - 2009(95) RLT 809 (CESTAT-Mum)

Issue: - Credit need not to be reversed on inputs written off in the books of account prior to 11.05.07 when sub-rule (5B) was inserted in Rule 3 of the Cenvat Credit Rules, 2004.

Brief Facts: - Appellants were availing cenvat credit on inputs which were used for manufacturing excisable goods which were cleared without payment of duty. During the Audit conducted in August, 2006 it was found that the appellants were writing off the stocks not useful/unfit for consumption in their books of accounts but were not reversing the cenvat credit availed on these written of stock. Despite of the fact that the said goods were lying within the factory and on many of them credit was not availed, reversed the full amount of cenvat credit presuming full stock was subject to cenvat. The department was informed about such reversal.

It was also found that for the goods/inputs which were physically damaged in the floods and for which reimbursements were claimed under the insurance policy, cenvat credit on many goods was not availed. Appellants agreed to reverse cenvat credit equal to 16% of the damage claimed from insurance after salvage to avoid any dispute and litigation.

Show cause notice was issued to them proposing to deny credit on cancelled bills as well as flood damaged goods and to appropriate the amount deposited under the provisions of Rule 14 of CCR, 2004 r/w Section 11A and also to impose penalty under Rule 15 r/w Section 11AC. The Assistant Commissioner confirmed the demand b holding that as the SCN was issued for imposition of penalty and payment of interest which has not been deposited by the appellant, therefore they have deliberately not paid interest to evade government revenue and therefore liable to pay equal penalty.

In appeal, the Commissioner (A) held that the appellant were required to reverse the credit and insertion of sub-rule (5B) in Rule 3 only clarified the pre-existing legal position. Appellant is in appeal against this decision.

Appellant’s Contentions: - Appellant argued that they were not legally required to reverse Cenvat Credit on the goods which were written off in the books of accounts. They had reversed the credit to avoid litigation. There was no legal requirement to pay duty nor there were any grounds to invoke the ingredients of either suppression of facts or willful mis-statement or deliberate contravention of excise provisions with intent to evade duty. Also, there were no grounds for invoking penal provisions under Section 11AC r/e interest provisions of Section 11AB.

It was contended that the written off stock was still lying in factory premises and therefore, reversal of credit was not warranted. Further, Rule 3(5B) of CENVAT Credit Rule, 2004 came into existence by Notification 26/2007-CE(NT) dated 11/05/07 which provides that manufacturer is required to reverse the Cenvat credit on the capital goods and inputs if the value of same is written off in the books of account. But this rule is applicable only on or after 11.05.07. Reliance was placed on the judgments given in Bharat Heavy Electricals ltd v/s CCE, Bangalore [2002 (50) RLT 208 (CESTAT)], Audco India Ltd v/s CCE, Chennai [2005 (184) ELT 77 (Tri-Mum)] and Tecumseh Products India Pvt Ltd v/s CCE, Hyderabad [2008 (221) ELT 129 (Tri-Bang)].

Respondent’s Contentions: - Respondent contended that when the stores were written off in their books of accounts they were not inputs as per the definition of inputs under Section 2A. Hence, they were liable to reverse the credit. But the appellants has availed the credit to discharge their demand and therefore, have evaded the duty with an intention to avoid payment of duty and hence are liable to pay interest and equal penalty. Reliance was placed on Asiatic Gases Ltd v/s CCE, Mumbai [Order No. A/154/2009/SMB dated 25.03.09], UOI v/s Rajasthan Spinning & Weaving Mills [2009-TIOL-63-SC-CX] and CCE v/s Monarch Pipes Ltd [2009 (235) ELT A87 (SC)].

Reasoning of Judgment: - The Tribunal held that the judgments relied upon by the appellants were squarely applicable to the facts of the case and the judgments relied upon by the respondent were not applicable. It was held that Notification No. 26/2007 (NT) was not retrospective in nature as it was introduced on 11.05.07. Accordingly, impugned order set aside.

Decision: - Appeal allowed.

Comments: - Even we have also written article on this subject as this issue has again been raised by Board Circular in respect of WIP/ Finished goods.

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Case: - CCE, Jalandhar v/s S. K. Sacks Pvt Ltd

Citation: - 2009 (95) RLT 369 (CESTAT-Del)

Issue: - Refund of cenvat credit can be granted in cash if the factory is closed and the credit cannot be utilised.

Brief Facts: - Respondent had filed for refund of pre-deposit. The original authority sanctioned the refund claim and allowed the respondent to take credit in Cenvat account. Respondents filed application for refund of the said amount in cash as their factory was closed in June 2003 and they had surrendered their registration at that time. The said request was rejected by the Original Authority. In appeal, however, the refund in cash was allowed. Revenue has filed appeal against the said order.

Appellant’s Contention: - It is contended that Rule 5 would not allow refund of cenvat credit in cash. It was submitted that the respondents debited this amount from their cenvat account and therefore, they are not eligible to get refund in cash. Reliance was placed on judgments in Nahar Industrial Enterprises Ltd v/s UOI [2009 (91) RLT 212 (P&H)] and in Gauri Plastic Culture (P) Ltd v/s CCE, Indore [2006 (76) RLT 109 (CESTAT-LB)].

Respondent’s Contentions: - Respondents have relied upon the decisions in DCM Fabrics v.s CCE, Jaipur [2009 (239) ELT 139 (Tri-Del)] and CCE, Jaipur v/s Talforge Pvt Ltd [2009 (92) RLT 463 (CESTAT-Del)] in support of their contention.

Reasoning of Judgment: - The Tribunal held that it is a case of closure of factory and the respondents were not in apposition to utilise the said amount if it is credited in their Cenvat account. The judgments given in DCM Fabrics case and in UOI v/s Slovak India Trading Co. Pvt Ltd [2006 (201) ELT 559 (Kar)] were followed. The judgment in Nahar Industrial Enterprises Ltd case was held to not applicable to the present case. Impugned order upheld.

Decision: - Appeal rejected.

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Case: - Commissioner of Central Excise., Guntur v/s Asian Peroxides Ltd

Citation: - 2010(249) E.L.T. 155 (Tri-Bang.)

Issue: - Can exemption under Notification No. 8/97-CE be denied to the assessee if some items which are used as consumables are imported and consumed in manufacturing of final product?

Brief Facts: - Respondent is a 100% EOU. Hydrogen peroxide was manufactured by them from raw materials which were wholly produced in India and then cleared to DTA. They sought benefit of exemption under Notification No. 8/97-CE, Dated 01.03.97. Revenue sought to deny the exemption benefit on the ground that respondent had imported other raw materials like methyl cyclehexyl acetate, solvesso etc. The Adjudicating Authority held against the respondent but in appeal, the Commissioner allowed the appeal in favour of the respondent. The Tribunal also held in favour of the respondent. Revenue filed appeal before the High Court. The High Court remanded the matter to the Tribunal for fresh adjudication.

Appellant’s Contentions: - Appellant contented that the said items imported by the respondent were raw materials and not consumables. It is submitted that raw materials need not go directly into the finished goods but as long as it is consumed and utilised in a way that results in the production or manufacture of an article in which the system is engaged, it would be a raw material and input for the finished product.

Respondent’s Contentions: - The respondent contended that the items imported by them were not raw material but were consumables.

Reasoning of Judgment: - After hearing the both the sides, the Tribunal held that items which were imported by the respondent and consumed during the course of the manufacturing of the finished good i.e. Hydrogen peroxide were consumables and not raw material. The appellant has not adduced evidence regarding whether the imported goods used in the manufacturing is raw material or consumable. With regard to use of consumables for the benefit of Notification No. 8/97-CE, the Tribunal held that the issue is squarely covered by the judgment in CCE v/s Sri Vajra Granites Ltd [2008 (229) ELT 535 (Tri-Bang). No merit in Revenue’s appeal.

Decision: - Appeal rejected.

Comments: - This issue has been raised in many EOUs and they have paid the custom duty even if only consumables were imported.

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Case: - Transpek Industry Ltd v/s Commissioner of C. Ex., Vododara

Citation: - 2010 (249) E.L.T. 91 (Tri-Ahmd)

Issue: - Whether Cenvat credit can be denied to the person purchasing goods from registered dealer on the ground that Central Excise invoice issued by the principle input-manufacturer was fake and duty is not paid by him, but the invoice issued by dealer is valid?

Brief Facts: - The appellant has purchased capital goods from a registered dealer. On the investigation conducted by DGCEI, it was found that the principal manufacturer has issued fake invoice and not paid the duty mentioned in the invoice. However, the subsequent invoice of dealer was valid. Accordingly, Revenue sought to disallow the Cenvat credit to the appellant. Lower authorities held that the appellant had failed to follow the provisions of Rule 3 and Rule 7 of the CCR, 2002/2004 which require them to take reasonable steps to ensure that proper central excise duty was paid on capital goods and therefore they are liable to be penalized.

Appellant’s Contentions: - The appellant contented that they had got nothing to do with the manufacturer as he has purchased the capital goods from a registered dealer who has issued invoice as per Central Excise rules. The invoice has not been found to be fake. It was submitted that they had reversed the credit with interest and in the absence of any fraud or collusion on their part they could not be penalized. They had entertained a bona fide belief that the capital goods supplied by the said registered dealer would be in accordance with law. It as submitted that they had taken requisite steps as per provisions of Rule 7. It is also submitted that subsequently, the manufacturer has paid the duty and therefore, credit could not be denied to them.

Reasoning of Judgment: - The Tribunal held that the appellant had taken reasonable steps in terms of Rule 7 about the invoices issued to them by the registered dealer were genuine. Rule 7 of Cenvat Credit Rule, 2002 provides that assessee has to take reasonable steps to satisfy himself about the identity and manufacturer or supplier, as the case may be. Wherever the goods are supplied by a person other than manufacturer, it is sufficient if assessee satisfies him about the identity of such supplier. An Assessee buying goods from registered dealer cannot be expected to go beyond that and examine as to whether the credit availed by such dealer is in accordance with law or not and as to whether the manufacturer, who has sent the goods to the registered dealer, has actually discharged his duty liability or not.

Further, it was held that the remedy for the Revenue lies in initiating proceeding against the manufacturer, who had cleared the goods under the fake central excise duty without payment of duty.

As the manufacturer has subsequently paid the excise duty, credit cannot be denied to the appellant. Impugned order set aside.

Decision: - Appeal allowed with consequential relief.

Comments: - This decision is very good. DGCEI had started drive of such sort to curb mis-utilisation of Cenvat scheme. Many cases have been booked in this regard. It is rightly said that the credit should be recovered from the person who has issued fake invoices and not from the person who has take the cenvat credit after payment of duty to him. Even in some cases, the party who has issued fake invoices was not even served the show cause notice.

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Service Tax Section:

Case: - M/s Shree Dharmabhakti Travels & Ors v/s CCE, Rajkot

Citation: - 2010-TIOL-14-CESTAT-AHM

Issue: - Whether providing vehicle with driver on demand to BSNL will be covered under Rent-a-cab service?

Brief Facts: - Appellants are providing vehicles to BSNL. The Department alleged that the said provision of vehicle fell under the category of rent-a-cab service and accordingly, demanded service tax. This is a second round of litigation wherein the order of the Lower Authority passed in the remanded matter is being challenged.

Appellant’s Contentions: - Appellant contended that the issue was covered by the judgments given in Kuldip Singh Gill v/s CCE, Jalandhar [2005 (186) ELT 373 (Tri-Del)] and in Surya Tours and Travels v/s CCE, Jaipur [2008-TIOL-2035-CESTAT-DEL]. It is argued that they are not giving a vehicle on rent but providing the vehicle whenever BSNL requires for the same. Since the vehicle is provided on demand with the driver, the service does not amount to rent-a-cab.

Respondent’s Contentions: - Revenue contended that there are several decisions to support his case that when a vehicle is provided to a client wherein he is required to pay specific amount as per month based on the charges per day specifying the limits, time as well as Kms, such a service amounts to rent a cab service.

Reasoning of Judgment: - The Tribunal held that the matter was arguable and there are decisions on both the sides. Considering the fact that all the appellants are owning one vehicle each which they have provided to BSNL, the appellant are directed to deposit 25% of the service tax demanded within 6 days. On receipt of pre-deposit, recovery of the rest of the amount and penalty to be stayed.

Decision: - Pre-deposit ordered.

Comments: - The outcome of this decision will have far reaching effect because all vehicle called on demand with driver. Everyone is paying service tax on the same.

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Case: - Pan Asia Corporation v/s CCE, Mumbai-II

Citation: - 2009(95) RLT 863 (CESTAT-Mum.)

Issue: - Whether cenvat credit is admissible on Commission Agent’s service received for procuring purchase orders as well as for collection of sale price?

Brief Facts: - Appellant paid commission to a commission agent during the period April 2006 to January 2007. The appellant availed cenvat credit on the commission paid. Show cause notice was issued to deny the credit on service tax paid on commission paid for post clearance services. The Lower Authorities held that credit benefit is liable to be restricted to procurement of purchase orders by the commission agents and is not admissible insofar as the collection of sale price of the goods is concerned. The Lower Authorities bifurcated the commission agent’s functions into pre-clearance and post-clearance of goods and restricted credit on post-clearance services.

Reasoning of Judgment: - The Tribunal held that the commission agent’s service is one integrated service which cannot be split up in the manner done by the Lower Authorities. Neither the authorities has a case that the commission agent service is not covered by Rule 2(l) of Cenvat Credit Rules, 2004. In the circumstances, the appellant is entitled to the benefit of Cenvat credit on the entire amount of commission paid by then to the commission agent for the service received from the latter during the period of dispute as held by this Tribunal in CCE vs. Bhilai Auxiliary Industries [2009 (92) RLT 97 (CESTAT-Del)].

The Tribunal further held that the judgment in International Tractors Ltd v/s CCE [2006 (201) ELT 461 (Tri-Del)] which was relied upon by the Revenue was not applicable as the issue discussed therein was altogether different. Impugned order set aside.

Decision: - Appeal allowed.

Comments: - The sales commission is paid for sales promotion and it is covered in definition of “input services”.

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Case: - Ganesh Tours & Travels v/s Commissioner of Service Tax, Bangalore

Citation: - [2009] 23 STT 453 (BANG.-CESTAT)

Issue: - Penalty cannot be imposed on review, when the adjudication order has dropped the penal proceedings on finding that appellant’s failure was due to reasonable cause.

Brief Facts: - At the adjudication stage, the Adjudicating Authority had dropped the penal proceedings under Section 76 and 78 of the Finance Act, 1994 against the appellant in 2007. In 2009, the Commissioner initiated review proceedings against the appellant and passed an order imposing penalty under the afore-said sections. Appellant is challenging the said review order.

Appellant’s Contentions: - Appellant contended that appeal remedy which was available with the Revenue against the adjudication order was not availed by them. Review after 2 years of the passing of the adjudication order was not sustainable. Reliance was placed on the judgment given in Majestic Mobikes (P) Ltd v/s CST {[2008] 16 STT 296 (Bang-CESTAT)}.

Respondent’s Contentions: - Revenue contended that power of review being exercised properly, the fact that the appeal remedy was not exhausted could not deprive them to review the order and impose penalty. Therefore the review order should not be interfered.

Reasoning of Judgment: - The Tribunal held that the Adjudicating Authority had examined the facts and circumstances before him and reached a finding that penalty was not warranted under the said sections. The Adjudicating Authority was justified in concluding that provisions of Section 80 be applied as he had noticed that there was a reasonable cause for failure on the appellant’s part. Therefore, the appellant cannot be adversely affected by the review order. It was also noted that for sometime, the Revenue had accepted the order of the Adjudicating Authority as the review was filed after 2 years.

The Tribunal further held that it was a well settled principle that one shall not be exposed to adversity in appeal or review when he was not exposed to such adversity in adjudication. It was also supported by the judgment in the case of Majestic Mobikes (P.) Ltd. Review order being unsustainable is set aside.

Decision: - Appeal allowed.

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Customs Section:

Case: - Prateek Traders & Anr v/s CC, Ahmedabad

Citation: - 2009 (95) RLT 544 (CESTAT-Ahmd)

Issue: - The opinion of experts about the serviceability of goods is to be given preference over examination report prepared by panchas or officers who are not experts.

The request for mutilation of goods if made by the assessee should be accepted by the Department.

Brief Facts: - Appellant purchased goods on high sea sale basis. The imported goods were declared as heavy metal scrap and bill of entry was filed declaring its value. On examination, it was found that the goods were old, used, discarded automobile vehicle and their parts in semi-knocked down condition. It was also noticed that the consignment contained cater pillars, fork lifts, road roller etc. Proceedings were initiated against the appellants for mis-declaration of the goods and their value. Order was passed confiscating the goods with option at redemption with payment of redemption fine. The value of the goods was enhanced and demanded from appellant as well as penalty was imposed. Appeal before the commissioner did not succeed and hence the appellant has filed this appeal before the Tribunal.

Appellant’s Contentions: - Appellant-assessee contended that they had purchased goods on high sea sale basis and the declarations were made on the basis of documents so received by them from seller. The goods were not in serviceable condition as noticed by the first examination report. But subsequently at the time of drawing of Panchnama that re-examination was done in the presence of pancha witnesses who cannot be considered to be experts. They have relied upon the opinion of experts obtained by them immediately after drawing of panchnama, which indicated that the said goods were old/discarded/unserviceable/in broken condition/bent/rusted/beyond repair and damaged. It is contended that as there is no other opinion of any expert, the said goods are to be treated as scrap. They also requested the customs authorities, to order mutilation of goods if they are of the opinion that the goods are of serviceable condition.

Respondent’s Contentions: -

Reasoning of Judgment: - The Tribunal held that there is no dispute that the goods were old, used and discarded automobile vehicles and their parts. The issue involved is can the said goods be said to be in serviceable conditions to be classified as automobile and their parts. The Tribunal held that views reflected in the panchnama were based upon the visual examination of goods by the officers or the panchas, which cannot be considered as an expert. The report of experts relied upon by the appellant indicating that goods are not serviceable. Serviceability may be a possibility, but not a commercial reality. Reliance was placed on M/s Patiala Castings Pvt Ltd v/s UOI [2003 (156) ELT 458 (P&H)] and SPS Metal Cast & Alloys Ltd v/s CC (Port) Kolkata [2004 (60) RLT 679 (CESTAT-Kol)] wherein it was held that old and used pipes of iron and steel have to be considered as scrap.

The Tribunal found that as there is no other opinion of expert on record to indicate to goods were in serviceable conditions, benefit has to be extended to the appellant.

The Tribunal further noted that the request for mutilation of goods made by the appellants ought to have been accepted by the Tribunal as in many cases such request was accepted by the Tribunal. In this regard, reliance was placed on M/s Taping International v/s Collr. of Customs [1996 (14) RLT 131 (Cal)]. Impugned orders set aside.

Decision: - Appeals allowed with consequential relief.

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