CESTAT Rules, Packing/Re-Packing Of Parts Of Device Is Not Manufacture U/S 2(f)(iii) Of Central Excise Act; No Excise Duty
Pranav B Prem
The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the activity of packing or repacking parts of construction equipment such as Wheeled Tractor Loader Backhoe (WTLB) and Vibratory Compactor (VC) does not amount to "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944 for the period prior to 29.04.2010. Consequently, no excise duty is leviable for that period.
The Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) allowed three connected appeals filed by M/s Case New Holland Construction Equipment (India) Pvt. Ltd. (earlier known as L&T Case Equipment Pvt. Ltd.), its warehouse at Pithampur, and its authorized dealer, M/s Shri Balaji Tractor House. The Tribunal set aside the common Order-in-Original dated 27.02.2012 passed by the Commissioner of Central Excise, Customs & Service Tax, Indore confirming a central excise duty demand of ₹13.40 crores along with interest and penalties.
The core issue raised in the appeals was whether the construction equipment—WTLB and VC—fall within the term “Automobiles,” and whether packing/repacking of their parts constitutes “manufacture” under Section 2(f)(iii) of the Central Excise Act by virtue of their inclusion in Serial No. 100 or 100A of the Third Schedule.
The Revenue had issued four show cause notices covering the period from 01.06.2006 to 30.06.2011, asserting that the parts of WTLB and VC were components of Motor Vehicles (Automobiles). It was alleged that since these were covered under Serial No. 100 of the Third Schedule and MRP Notification No. 01/2006-CE dated 01.03.2006 (as amended), the activity of packing/repacking amounted to manufacture, and the goods were to be assessed on MRP basis.
The appellants refuted this by arguing that neither WTLB nor VC qualified as Automobiles in the common parlance or as per tariff classification. It was submitted that both are earthmoving construction machines classifiable under ETI 8430 50 90 and not under Chapter 87, which deals with automobiles. The Tribunal accepted this argument and noted that the Larger Bench of the Tribunal in M/s Action Construction Equipment Ltd. had already settled the issue, holding that such construction equipment are not automobiles and that packing or repacking their parts does not amount to manufacture unless specifically covered in the Third Schedule.
Further, the Tribunal noted that Entry No. 100A was inserted in the Third Schedule by Section 73 of the Finance Act, 2011 retrospectively w.e.f. 29.04.2010. This entry covered parts, components, and assemblies of certain specified earthmoving equipment, including WTLB but not VC. Therefore, no duty was payable on packing/repacking of VC parts even after 29.04.2010.
The Tribunal observed that: “Serial No. 100A that was inserted in the Third Schedule would not cover Vibrator Compactor as they are classifiable under ETI 8430 50 90, which is not included in Serial No. 100A. Therefore, no excise duty would be leviable on the packing/re-packing of parts of such Vibrator Compactor.”
The Tribunal further held that for the period prior to 29.04.2010, the activity of packing/repacking of both WTLB and VC parts did not amount to manufacture and thus could not attract excise duty. It also took into account that the appellants had already voluntarily deposited duty with interest on WTLB parts post 29.04.2010 and had informed the department of the same.
Considering all facts and the binding decision of the Larger Bench, the Tribunal set aside the entire demand and penalties imposed by the Commissioner. It also struck down the redemption fines imposed on goods found in the factory premises at the time of search. Accordingly, the Tribunal allowed all three appeals.
Appearance
Counsel for Appellant/ Assessee: B.L. Narasimhan, Sukriti Das
Counsel for Respondent/ Department: Sanjeev Kumar Ray
Cause Title: M/s Case New Holland Construction Equipment (India) Private Limited V. Commissioner of Central Excise, Customs & Service Tax
Case No: Exicise Appeal nO. 1455 Of 2012
Coram: Justice Dilip Gupta [President], P.V. Subba Rao [Technical Member]
