Messrs Rohan Automotive Equipment Pvt Ltd Vs C.C.E.-Ahmedabad-ii (CESTAT Ahmedabad)
Introduction: This case analysis focuses on the CESTAT Ahmedabad order in the matter of Messrs Rohan Automotive Equipment Pvt Ltd Vs C.C.E.-Ahmedabad-ii. The case pertains to the disallowance of excise duty expenses due to the alleged non-inclusion of excise duty in the price charged from buyers. The analysis examines the arguments presented by the appellant and the decision rendered by the CESTAT, which grants the benefit of cum-duty price. The case is remanded for re-quantification of duty demand and penalties.
Analysis: In this case, the appellant, Messrs Rohan Automotive Equipment Pvt Ltd, faced a demand for excise duty for the period from 2007-08 to 2009-2010. The appellant was engaged in procuring imported and indigenous parts of LPG/CNG Kits and selling them under the description of Kit Assembly. While the appellant had paid appropriate duty for supplies to certain manufacturers, they had cleared kits without payment of duty to various buyers/dealers. A show cause notice was issued, alleging that the activity constituted manufacturing and attracted excise duty liability.
The appellant contended that no assembly or attachment of parts occurred, and the bought-out parts were simply packed in a box and sold without any processing. They argued that the activity of collecting and packing various components into a box for installation in a motor vehicle did not amount to manufacturing, and therefore, excise duty was not leviable.
The appellant relied on judgments supporting their position that the activity did not meet the criteria of manufacture. They also emphasized that the excise duty liability was confirmed based on the assembly of a few bought-out parts, which they disputed. Additionally, they highlighted that similar transactions involving original equipment manufacturers (OEMs) had led to duty payment, but it did not establish evidence of the business activities constituting manufacturing.
The CESTAT observed that the learned Commissioner confirmed the excise duty liability but failed to provide any evidence of the inclusion of excise duty in the price charged from the buyers. The CESTAT referred to the benefit of cum-duty price granted in a similar case, National Plywood Industries Ltd., where the excise duty held payable subsequently was abated from the total sale price realization by treating it as the cum-duty price for determination of the assessable value and duty demand payable.
Based on this precedent, the CESTAT held that the appellant was entitled to the benefit of cum-duty price. They set aside the impugned order and remanded the case for re-quantification of the duty demand and penalties. The CESTAT did not comment on the merits of the case, leaving it open for further determination.
Conclusion: The CESTAT Ahmedabad order in the case of Messrs Rohan Automotive Equipment Pvt Ltd Vs C.C.E.-Ahmedabad-ii grants the benefit of cum-duty price to the appellant. The absence of evidence of excise duty inclusion in the price charged from buyers led to the remand of the case for re-quantification of duty demand and penalties. This analysis highlights the importance of providing evidence of cum-duty price and the application of precedents in excise duty disputes.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that during the course of audit, it appeared that Appellant was procuring imported and indigenous various parts of LPG/CNG Kits and clearing the same after affixing their brand name under the description of Kit Assembly. In respect of supplies to Hindustan Motors, General Motors, Maruti Suzuki and Tata Motors, the Appellant had been clearing the kit assembly on payment of appropriate duty. However, appellant also had cleared such Kits to various buyers/ dealers without payment of duty. Whereas on being pointed out, the said Appellant produced trading unit records comparing the value of imported as well as indigenous components/Parts showing as non-excisable components/parts and profit margin. Statement of Shri Upendra C.Shah Manager(Accounts) of the Appellant was recorded and with a view to ascertain the manufacturing process undertaken by the Appellant, a team of officers was deputed to the premises of the Appellant. It appeared that a distinctive product emerged inasmuch as CNG/LPG gas conversion kit assembly came into existence as result of process applied. It appeared that the same constituted „manufacture’ within the meaning of Section 2(f) of the Central Excise Act, 1944 and Appellant was liable to pay duty. Since CNG/LPG gas conversion kit assembly merits classification under Heading 84.09 as suitable for use solely or principally with the engine of heading 84.07 or 84.04 of the First Schedule to the Tariff Act. It is on this basis that show cause notice dated 26-04-2012 was issued to the appellant for recovery of duty for the period from 2007-08 to 2009-2010 along with interest under Section 11AB and also for imposition of penalty on the appellant under Section 11AC. The show cause notice was adjudicated vide impugned Order-in-Original dated 08-022013 by which Ld. Commissioner holding the appellant’s activity as manufacture of the goods attracting the Central Excise Duty under Tariff head84.09 , confirmed the duty demand against the appellant along with interest thereon and besides this, imposed penalty of equal amount on the appellant under Section 11AC. Penalty of Rs. 2,00,000/- was also imposed on Shri Upendrabhai Chhanalal Shah under Rule 26 of the Central Excise Rules, 2002. Against this order of the Commissioner, this appeal has been filed.
2. Shri Paresh M. Dave, learned counsel appearing for the appellant submits that there is no finding in the impugned order that any processes were undertaken by the Appellant on the bought out parts and components, and there is also no finding in the impugned order that a complete kit was assembled and then sold to the buyers in completely assembled condition. The bought out parts and components were not subjected to any process/es and such bought out parts were packed in a box and sold without any processing, has not been found to be false or incorrect by the Commissioner.
It is also accepted by the Commissioner that the buyer would assemble and install the CNG/LPG kit. Even otherwise, it is a matter of common knowledge that a CNG/LPG kit comes into existence only when the parts and components are fitted into a motor vehicle.
2.1 He also submits that the excise duty liability is confirmed only on the basis that a few bought out parts were assembled by the Appellants, and that by assembly of various parts a new product came into existence. Factually, there was no assembly of various parts in this case, because the appellants have not assembled or attached any parts with one another; and in any case, the bought out parts were not subjected to any process by the Appellant. The only activity undertaken by the appellant company was of procuring various parts and components of LPG/CNG kit, and packing such parts in a box, and selling such box with a tank and a tank stand in loose condition under the description of “CNG Automobile Conversion Kit” or “LPG Automobile Conversion Kit”. No process on the bought out parts is undertaken by the appellant, but all such parts are packed in a box and the supply was made to traders, and the box carried the details like the Appellant’s name and Ahmedabad. Such activity of collecting various components and packing them into a box for installation in a motor vehicle is not manufacture, and excise duty is not leviable on such activity. He placed reliance on the following judgments:
