Exam-Eve Quick Summary : Case Laws in Excise

Central Excise: Basic Concepts-Marketability and immovability-S  2(d) Explanation and 2{f}

Citation

Decision

Hindalco Industries Ltd. UOI 2009 (243) E.L.T. 481 (All.)

EFFECT OF DEEMING PROVISION

Aluminium dross and skimmings become excisable due to insertion of Explanation to overrule  CE. Indian Aluminium Co. Ltd. 2006 (203) E.L.T. 3 (S.C.) that everything that can be sold was not necessarily marketable. Hence prima facie, a new deeming fiction  in definition of “goods” to include any article, material or substance which is capable of being bought and sold for a consideration, and to treat such goods as marketable, would make the ‘aluminium dross and skimming’ liable to excise duty as  the goods are marketable or are deemed to be marketable.

Larsen & Toubro Limited v. UOI 2009 (243) E.L.T. 662 (Bom.)

COMMERCIAL MOVABLE PROPERY MUST COME INTO EXISTANCE

Mere bringing of the duty paid parts in an unassembled form at the site does not amount to manufacture unless an excisable movable product comes into existence by assembly of such parts. Hence, fabrication, assembly and erection of waste water treatment plant does not amount to manufacture as the plant could not function until it was wholly built including the civil construction. No commercial movable property came into existence until the assembling was completed by embedding different parts in the civil works.

Bata India Ltd. v. CCE 2010 (252) ELT 492 (SC)

THEORETICAL POSSIBILITY OF MARKETABILITY NOT ENOUGH  

Marketability is essentially a question of fact to be decided on the facts of each case .There can be no generalization. The test of marketability is that the product which is made liable to duty must be commercially marketable in the condition in which it emerges. The question is not whether there is a theoretical possibility of product being sold does not make it marketable. Moreover,   burden to show that the product is marketed or capable of being bought or sold is entirely on the Revenue.

CCE v. Solid & Correct Engineering Works and Ors 2010 (252) ELT 481 (SC)

INCIDENTAL FIXING DOES NOT MAKE GOODS IMMOVABLE

Manufacture of asphalt batch mix and drum mix/hot mix plant by assembling and installing its parts and components fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth, but because a foundation was necessary to provide a wobble free operation to the machine hence NOT Immovable property

CCE v. Sony Music Entertainment (I) Pvt. Ltd. 2010 (249) E.L.T. 341 (Bom.)

MERE REPACKING NOT MANUFACTURE

Imported complete and finished compact discs in boxes of 50  AND packed each individual disc in transparent plastic  jewel boxes box along with inlay card do not  amount to manufacture.

CCE v. Tarpaulin International 2010 (256) E.L.T. 481 (S.C.)

 NO MANUFACTURE IF A NEW PRODUCT DEOE NOT EMERGE DUE TO A PROCESS

Conversion of tarpaulin into tarpaulin made-ups would not amount to manufacture as the original material used i.e., the tarpaulin, was still called tarpaulin made-ups even after undergoing the said process and the original material used the tarpaulin, was still called tarpaulin even after undergoing the  process.

 The process involved  preparation of tarpaulin made-ups , chemical and was treatment  and drying up followed by after cutting and stitching the tarpaulin fabric and fixing the eye-lets amount to manufacture

Classification

Pleasantime Products v. CCE 2009 (243) E.L.T. 641 (S.C.)

 “Scrabble”  is not classifiable as  a puzzle  /crossword  or an educational toy under sub-heading 9503.00 but a board game under sub-heading 9504.90 of CETA  because a “game” and a “puzzle” is brought out by three distinct features,” outcome, clue-chance and skill. Unlike in a puzzle, the outcome is not  fixed or pre-determined in “Scrabble”  nor  there are  any  clues  to fill the crossword  according to clues. Hence, essential characteristic of crossword to lay down clues and having a solution is absent from “Scrabble”. As per the dictionary meaning, “Scrabble” is a board game in which players use lettered tiles to create words in a crossword fashion but it is not a crossword.

VALUATION OF EXCISABLE GOOD- Section 4(3)(d)

Maruti Suzuki India Ltd. v. CCE 2010 (257) E.L.T. 226 (Tri. – LB)

Old decisions are no more valid law

AFTER SAELS SERVICES INCU SIBLE IN ASSESSABLE VALUE

While selling the cars to buyers, dealers added  called dealers’ margin  in the price of the car , which covered  pre-delivery inspection and Post-delivery three after-sale-service INLUDIBLE in the assessable value of cars  because :

·   Transaction value includes the amount paid by reason of/in connection with sales of goods   including any amount paid on behalf of assessee to the dealer or the person selling the vehicles. The reason of sale and inter connection thereto are essential elements to contribute for assessable value.

·       Definition of transaction value is extensive, as the section  use s  expressions like “includes in addition to” and “including but not limited  to the amount actually paid or restricted to flow back of consideration or part thereof to the assessee directly but even for discharge of sales obligations both in present and future. Thus, all deferred and future considerations are added to assessable value.

·   However, the section precisely pinpoints the items to be excluded from the assessable value with the prefix as “but does not include”. Hence there can not  be a presumption for further exclusions is permissible . Hence, the definition is restrictive and exhaustive in relation to the items excluded therefrom.

·    PDI and after sales service charges is a payment  by the buyer to the dealer in connection with or by reason of the sale transaction assessee to the dealer by the buyer .

CENVAT CREDIT  UNDER CENVAT Credit Rules, 2004

Coca Cola India Pvt Ltd. v. CCE (2009) 15 STR 657 (Bom.)

ADVERTISING SERVICES ETC ELIGIBLE FOR CENVAT EVEN IF USED BY ASSOCIATES IN DISTRIBUTION CHAIN

The manufacturers of non-alcoholic beverage bases or concentrates –aerated waters-sold through a chain i.e. bottlers, distributors, retailers and consumers    HELD eligible to avail credit of the service-tax paid on advertising services; sales promotion, market research undertaken by the assessee but  used for marketing of soft drink removed by bottlers.

The Court  laid down five  independent limbs of definition of ‘input service’ under rule 2(l) , any one of which will entitle an  assessee claim credit on input service  even if it does not satisfy the other limbs.

·    Any service used  by  the manufacturer, whether directly or indirectly, in or in relation to

 [i] the manufacture of final products or [ii]  clearance of final products from the place of removal

·   Any  service used in relation to:

 [iii]  setting up, modernization, renovation or repairs of a factory, or an office relating to such factory, [iv]advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,

 [v] Business and outward transportation upto the place of removal.

High Court interpreted various expressions used in the definition of “input service”

(a) Expression “means” is very exhaustive and “includes”  may cover services  otherwise not covered  

(b) Expression “such as” are illustrative and not exhaustive. In the context of business, it refers to those services which are related to the business.

(c)  Expression “ business “ used in the phrase   “activities relating to business” Business is of wide import and expression ‘relating to’ further widens the scope of the expression ‘activities relating to business’.

Thus, business cannot be given a restricted meaning to say that business of a manufacturer is to manufacture final products only. Hence, the assessee’s business would include, apart from manufacture of concentrates, entering into franchise agreements with bottlers, permitting use of brand name, promotion of brand name, etc.

Since , there are no any qualifying words before the word ‘activities’, like main activities or essential activities etc,  It implies that all activities (essential or not) in relation to a business would fall within the ambit of input service. Hence, in the present case all activities having a relation with the manufacturer of the concentrate would fall within the definition of input service forming part of value of final product eligible for CENVAT credit

Service tax is a value added tax on consumption. Hence the burden of service tax must be borne by the ultimate consumer and not by any intermediary i.e. the manufacturer or service provider. To avoid the cascading effect, CENVAT credit on input stage goods and services must be allowed as long as a connection between the input stage goods and services is established. Any input service  e.g. Advertising that forms a part of assessable  value of final product and is  be eligible for the benefit of CENVAT

Credit allowed in case of existence of relationship between input service and final product e.g.  Advertisement of soft-drink enhanced the marketability of the concentrate.

Maruti Suzuki Ltd. v CCE (2009) 240 ELT 641 (SC)

SELF GENERATED OWER ELIGIBLE BUT POWER SOLD TO OTHERS NOT ELIGIBLE

The Court analysed the definition of  “input” i. e.  mean all goods, except light diesel oil, high speed diesel oil and petrol, used in or in relation to the manufacture of final products whether directly or indirectly and held

Specific part

1.    All goods “used in or in relation to the manufacture” of final products qualify as “input”.

2.    Presupposition that the element of “manufacture” must be present.

3.    Use of input in the manufacturing process may be direct or indirect and the absence of the input in the final product becomes irrelevant. Electricity is an ancillary activity which is anterior to the process of manufacture of the final product

Inclusive part

Unless and until it is established that inputs mentioned   viz Lubricating oils, greases, cutting oils and coolants;  (b) Accessories; (c) Paints; (d) Packing materials; (e) Input used as fuel; (f) Input used for generation of steam or electricity in the inclusive part of the definition is  are used in or in relation to the manufacture of final product” within the factory of production, the said item would not become an eligible input.

Place of use

Inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose.

All the three parts of the definition, namely, specific part, inclusive part and place of use, are required to be satisfied before an input becomes an eligible input.

1.    Eligible inputs naptha as fuel utilized in the generation of electricity used electricity within their factory for captive consumption eligible for CENVAT

2.    Excess electricity sold outside for a price to joint ventures or given to the grid for distribution Not entitled to CENVAT credit .  

CCE v. Bhuwalka Steel Industries Ltd. 2010 (249) ELT 218 (Tri-LB)

DIFFERENCE OF WEIGHT OF FINISHED PRODUCT NOT THE SOLE GROUND OF DENIAL OF CENVAT CREDIT SHORTAGE IN STOCK

Each case to be decided on merits where the weight of the inputs recorded on receipt in the premises of the manufacturer of the final products shows a shortage as compared to the weight recorded in the relevant invoice  for denying CENVAT under Rule (1) depending upon various factors  whether the impugned goods:

(i) have been diverted en-route or the entire quantity with the packing intact has been received and put to the intended use at the recipient factory.

(ii) are hygroscopic in nature or are amenable to transit loss by way of evaporation etc.

(iii) comprise countable number of pieces or packages and whether all such packages and pieces have been received and accounted for at the receiving end. Or  

(iv) Whether the difference in weight in any particular case is due to different scales at the dispatch and receiving ends and whether the same is within the tolerance limits with reference to the Standards of Weights and Measures Act, 1976.

(v) Whether the recipient assessee has claimed compensation for the shortage of goods either from the supplier or from the transporter or the insurer of the cargo.

Tolerances in respect of hygroscopic, volatile and such other cargo has to be allowed as per industry norms excluding, however, unreasonable and exorbitant claims. Similarly, minor variations arising due to weighment by different machines will also have to be ignored if such variations are within tolerance limits.

Ashok Kumar H. Fulwadhya v. UOI 2010 (251) E.L.T. 336 (Bom)

Penalty Under  Rule 15(1)  be imposed only on company and  NOT on the directors for the wrong CENVAT credit availed by the company as  “any person” used in rule 13(1) who has availed CENVAT credit viz the company  shall only be the person liable to the penalty

CCEx. v. Stelko Strips Ltd. 2010 (255) ELT 397 (P & H)

CCE v. M/s. Auto Spark Industries P & H) and

CCE v. Ralson India Ltd. 2006 (200) ELT 759 (P & H) followed

MODVAT credit could be taken on the strength of private challans not prescribed as the same were not found to be fake and there was a proper certification that duty had been paid.

Madras Cements Ltd. v. CCE 2010 (257) E.L.T. 321 (S.C.)

Vikram Cement v. CCE 2006 (194) E.L.T. 3 (S.C.).followed

MODVAT /CENVAT credit  ALLOWED on

·   inputs (explosives, lubricating oils etc.)

·   capital goods used in captive mines  constituting one integrated unit together with the concerned cement factory available

however MODVAT /CENVAT credit NOT ALLOWED  if  the mines are not captive mines  they supply goods to various other cement companies of different assessees such  goods were being used in the lime stone mines outside the factory of the assessee

Ambuja Cements Eastern Ltd. v. CCE 2010 (256) E.L.T. 690 (Chhattisgarh)

Jaypee Rewa Cement v. CCE 2003 (159) E.L.T. 553 (Tribunal – LB), Reversed

Welding electrodes used in repairs/maintenance of plant and machinery by the assessee engaged in manufacture of clinker and cement are ‘input’ as defined under old  rule 2(g) [now rule 2(k) employed in the manufacturing process, whether directly or indirectly and whether contained in the final product or not  and eligible for credit. .

DEMAND. ADJUDICATION AND OFFENCES

CCE v. International Auto Ltd. 2010 (250) E.L.T. 3 (S.C.)

CCE v. S.K.F. India Limited 2009 (239) E.L.T. 385 (S.C.) followed

Interest is levied for loss of revenue caused on any count including short payment of duty When ,the price, on the date of removal/clearance of the goods, was not correct i.e. it was understated and the enhanced duty was leviable on the corrected value of the goods on the date of removal. The differential duty was paid after the date of clearance, it indicated short-payment/short-levy on the date of removal, hence, interest which was for loss of revenue, became leviable under section 11AB of the Act

CC Ex. & C v. Accrapac (India) Pvt. Ltd. 2010 (257) E.L.T. 84 (Guj.)

Whether non-disclosure of a statutory requirement under law HELD NOT to suppression for invoking the larger period of limitation under section 11A. In this case , the court  noted that denaturing process in the cosmetic industry was a statutory requirement under the Medicinal & Toilet Preparations (M&TP) Act. Thus, addition of DEP to ENA to make the same unfit for human consumption was a statutory requirement. Hence, failure on the part of the respondent to declare the same could not be held to be suppression as Department, knowing the fact that the respondent was manufacturing cosmetics, must have the knowledge of the said requirement. Further, as similarly situated assesses were not paying duty on denatured ethyl alcohol, the respondent entertained a reasonable belief that it was not liable to pay excise duty on such product.

REFUND

CCE v. Gem Properties (P) Ltd. 2010 (257) E.L.T. 222 (Kar.)

The claim for refund by the assessee was not liable to pay the duty and was entitled to the refund of the excise duty wrongly paid by it was rejected as  it would amount to unjust enrichment as all the materials sold by the assessee had been inclusive of the duty CA certificate included cost of the duty in the  computing the cost of production of the material.  The burden is on the assessee to prove that while computing the cost of the material it had not included the duty paid by it.

EXEMPTION BASED ON VALUE OF SSICLEARANCES

CCE v. Deora Engineering Works 2010 (255) ELT 184 (P & H)

The clearances of two firms having common brand name" Dominant", goods being manufactured in the same factory premises, having common management and accounts and the machines were cleared from both the units under common serial number having common accounts CLUBBED for the purposes of SSI exemption?

SETTLEMENT COMMISSION

Ashwani Tobacco Co. Pvt. Ltd. v. UOI 2010 (251) E.L.T. 162 (Del.)

Is the Settlement Commission NOT empowered to grant the benefit under the proviso to section 11AC in cases of settlement as order of settlement made by the Settlement Commission is distinct from the adjudication order made by the Central Excise Officer  and the benefit under the proviso to section 11AC, which could have been availed when the matter of determination of duty was before a Central Excise Officer was not attracted to the cases of a settlement, undertaken.