Case Law Details
Amit Talwar Vs CCE, Delhi-I (CESTAT Delhi)
The goods imported and traded by TAPL as well as 3D during the impugned period are covered under Third Schedule of the Central Excise Tariff Act, 1985. Such goods are covered by Section 2(f)(iii) of the Central Excise Act, 1944 which reads as follows:
“(f) “manufacture” includes any process-
(i) ……. ……. …….
(ii) ……. ……. …….
(iii) which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer;”
The investigation carried out by the Department concluded that both TAPL as well as 3D have-
(i) Imported various goods bearing their brand name in which the MRP was not marked. Such goods, after importation were affixed with MRP sticker and sold in the local market;
(ii) Some consignments were imported in which MRP stickers were already affixed but post importation new MRP stickers were affixed and goods were sold in the local market;
(iii) Goods were procured from indigenous manufacturers, the MRP was changed and such goods were also sold at the enhanced MRP;
It is the allegation of Revenue that the activity of changing the MRP/ affixing MRP stickers in their godown will fall within the deeming provision in Section 2(f) (iii) and consequently, Central Excise duty is required to be discharged in terms of Section 4A of the Central Excise Act, which has not been done by the appellant. Accordingly, after issue of show cause notice, demand of Central Excise duty stands confirmed which has been challenged in these appeals.
Both before the Adjudicating Authority as well as in the present appeal, the appellants are not challenging the stand taken by Revenue that the activity of fixing MRP stickers will amount to manufacture in terms of Section 2(f)(iii) and Central Excise duty will be liable to be paid.
FULL TEXT OF THE CESTAT JUDGMENT
The present appeals have been filed against the Order-in-Original No. 28-33/D-I/2016 dated 28.11.2016 passed by the Commissioner, Central Excise, Delhi-I. The dispute covers the period June 2009 to February, 2003.
2. M/s Trueline Appliances Private Limited (TAPL) and M/s 3D International (3D) were engaged in the activity of importing and trading of various items like home appliances, shoes, furniture, hardware items, stationary items etc. Sh. Amit Talwar and Sh. Sumit Sehgal were the Directors of TAPL as well as Partners in 3D. The Departmental Officers carried out search operations at various premises associated with the TAPL as well as 3D and also residential premises of the Directors / Partners on 27.02.2013 and recovered various documents as well as pen drives, computers etc. Subsequently, searches were also conducted at the premises of various C&F agents as well as super stockists. Statements were recorded from Sh. Amit Talwar, Sh. Sumit Sehgal as well as various connected persons including Sh. Kamal Madan, Marketing Manager. At the time of search operations, various goods were also seized at the godown premises of TAPL as well as 3D. After completion of investigation of the alleged Central Excise duty evasion, show cause notice dated 08.07.2014 was issued. Separate show cause notices were also issued proposing confiscation of the seized goods. The case was adjudicated vide the impugned order in which duty demands were raised and penalty were imposed against TAPL, 3D, Directors and Partners. Penalties were also imposed on various C&F agents. The seized goods were ordered for confiscation. Aggrieved by the impugned order, appeals have been filed and all the appeals are being disposed of through this common order.
3. The goods imported and traded by TAPL as well as 3D during the impugned period are covered under Third Schedule of the Central Excise Tariff Act, 1985. Such goods are covered by Section 2(f)(iii) of the Central Excise Act, 1944 which reads as follows:
“(f) “manufacture” includes any process-
(i) ……. ……. …….
(ii) ……. ……. …….
(iii) which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer;”
4. The investigation carried out by the Department concluded that both TAPL as well as 3D have-
(i) Imported various goods bearing their brand name in which the MRP was not marked. Such goods, after importation were affixed with MRP sticker and sold in the local market;
(ii) Some consignments were imported in which MRP stickers were already affixed but post importation new MRP stickers were affixed and goods were sold in the local market;
(iii) Goods were procured from indigenous manufacturers, the MRP was changed and such goods were also sold at the enhanced MRP;
4.1 It is the allegation of Revenue that the activity of changing the MRP/ affixing MRP stickers in their godown will fall within the deeming provision in Section 2(f) (iii) and consequently, Central Excise duty is required to be discharged in terms of Section 4A of the Central Excise Act, which has not been done by the appellant. Accordingly, after issue of show cause notice, demand of Central Excise duty stands confirmed which has been challenged in these appeals.
4.2 Both before the Adjudicating Authority as well as in the present appeal, the appellants are not challenging the stand taken by Revenue that the activity of fixing MRP stickers will amount to manufacture in terms of Section 2(f)(iii) and Central Excise duty will be liable to be paid.
5. The case of the Revenue is based on the following main evidences:
(a) From the CPUs resumed during the course of proceedings, data was cloned and retrieved under panchnama. Among the documents retrieved from the CPU were MRP pricelists indicating the MRPs at which various imported goods were sold in the local market.
(b) The records of import of goods by both TAPL as well as 3D were obtained by the Department from the Custom formations at ICD, Tughlakabad, Loni and Ballabhgarh, through which the goods were imported. The details of goods procured from local sources had been culled out from the seized documents.
(c) Various pricelists were also recovered from C&F agents and super stockists.
(d) In various statements Sh. Amit Talwar, Sh. Sumit Sehgal, Directors/ Partners and Sh. Kamal Madan, Marketing Manager have admitted the modus operandi adopted by TAPL as well as 3D. Various C&F agents, super stockists have admitted in their statements the fact of selling the gods received from TAPL as well as 3D after affixing the pricelists.
(e) The Department raised the demand in the show cause notice by working out the duty payable by adopting the prices found in the MRP pricelists found in the CPUs. In respect of indigenously procured goods, where no MRP was found, 200% of the purchase value has been taken as MRP as per the statement of Sh. Amit Talwar.
(f) After the due process of adjudication the impugned order has been passed which stands challenged before us.
6. With the above background, we heard Sh. Amit Jain, ld. Advocate for the appellant and Sh. R. K. Mishra, ld. AR appearing for the Revenue.
7. Sh. Amit Jain, ld. Advocate argued the case of the appellant. His arguments are summarised below:
(a) Ld. Advocate submitted that prior to April, 2012, both TAPL as well as 3D were importing goods and selling the same without altering the MRP or affixing such sticker. With effect from June, 2012, the practice was changed and the business model underwent a change. C&F agents and super stockists were appointed on commission basis and pricelists was circulated. Hence, he submitted that prior to June 2012 the demand raised by the Revenue is not sustainable.
(b) The entire demand has been worked out on the basis of various price lists all of which were circulated post April, 2012 which cannot be made applicable for the period right from June, 2009 onwards.
(c) The appellants had requested the Adjudicating Authority for allowing the cross-objection of various C&F agents and dealers whose statements have been relied upon in the show cause notices and also several co-noticees. The same has not been permitted by the Adjudicating Authority. This amounts to violation of the principles of natural justice.
(d) The detailed reply submitted by the appellants in reply to the show cause notice has not been considered and discussed by the Adjudicating Authority.
(e) The Adjudicating Authority has clubbed the clearances of both TAPL as well as 3D and confirmed the demand jointly and severally against both. He argued that demand cannot be made jointly and severally from two persons as has been held by the Tribunal in the following cases:
(i) CC, New Delhi vs. Futura Travels Ltd. -2017-TIOL-4206-CESTAT-DEL
(ii) Krishna Kumar Gupta vs. CCE, Surat-2016 (338) ELT 432 (Tri. Ahmd.)
(iii) Commissioner vs. Tejas Arvindbhai Desai-2016 (338) ELT 432 (Tri. Ahmd.)
(f) Both TAPL as well as 3D have separate existence in the eyes of law and hence the value of clearances of the two cannot be clubbed. He further submitted that both will be separately entitled to the SSI exemption notification which stands denied by the Adjudicating Authority.
(g) The appellant will be entitled to the cenvat credit of CVD paid at the time of import. The same should be allowed.
8. Ld. AR appearing for the Revenue justified the impugned order. His arguments are summarised below:
(a) The activity of affixing MRP stickers is admitted to be manufacture as per Section 2(f)(iii) of the Act and hence the TAPL as well as 3D are liable to pay Excise duty on the goods on the basis of MRP.
(b) With effect from June, 2012, the duty demand already stands admitted as recorded by the Adjudicating Authority in para 50.4. The Adjudicating Authority has further held that the duty will be payable right from June, 2009 in view of the statements of the Directors/ Partners recorded during the course of adjudication.
(c) Though, TAPL as well as 3D are Private limited as well as Partnership entities, the Adjudicating Authority has recorded that the two are de facto one and the same in view of the fact that both share the same premises, both are controlled and run by Sh. Amit Talwar and Sh. Sumit Sehgal. He submitted that the demand may be upheld alongwith the penalties imposed.
9. We have heard both sides at length and perused the voluminous records.
10. TAPL is a Private Limited company with Shri Amit Talwar and Sh. Sumit Sehgal as Directors. The same two persons are Partners in 3D. Both the entities are shown as functioning from the same premises; have both undertaken the activity of importing various goods and selling the same at higher prices after affixing MRP stickers. The goods imported in the name of both TAPL as well as 3D have been stored at the same godown where the MRPs have been manipulated and have also been sold through the same set of C&F agents even though the latter were appointed only by TAPL. It is established during the course of investigation that the price list circulated by TAPL have also been adopted for selling of goods imported in the name of 3D. The modus-operandi adopted is not challenged by the appellants. It stands admitted that such activity amounts to manufacture in terms of Section 2(f)(iii). The demand raised is w.e.f. June 2012.
11. The impugned order stands seriously challenged with reference to its finding that clearances of both TAPL as well as 3D are liable for clubbing, for purposes of allowing the benefit of small scale exemption. From the appeal record, we find that both TAPL as well as 3D have separate existence in the eyes of law. The former is a Private Limited company whereas the latter is a Partnership firm. The goods were imported under both names and have also been sold under both names, inspite of the fact that the goods were mixed up at the godown and have been sold on the basis of price list circulated by TAPL.
It is settled position of law that in the absence of mutuality of interest and financial flow back from one firm to another, clubbing of clearances is not permissible merely on the ground that both firms are in the common premises and affairs of all firm are looked after by one person. It is further seen that the goods imported through TAPL as well as 3D have been separately tabulated by the Revenue and demand also was tabulated on that basis but the value of clearances was finally clubbed for purposes of determining the entitlement to SSI exemption. We are of the view that since TAPL as well as 3D have separate existence and have separate registration for VAT, Income Tax etc each one will be entitled to the benefit of SSI exemption separately.
12. Demand has been made jointly and severally from both TAPL as well as 3D. It is well settled that demand cannot be made jointly and severally. The demand can only be made from that entity which has manufactured the goods in question. We have perused the case laws relied upon by the appellant which supports the above view.
13. It has been seriously argued by the appellant that the practice of affixing MRP stickers on imported goods and selling the same through C&F agent at enhanced price has been commenced only w.e.f. April 2012. The price list recovered from the CPUs also pertains to this period. It has been argued that no evidence has been disclosed in the show cause notice for such activity undertaken prior to June 2012. The quantification has also been seriously challenged. It has also been argued before us that the various contentions raised in the reply to the show cause notice was not considered and discussed by the Adjudicating Authority.
14. In view of the above discussions, we uphold the view that the activity carried out by TAPL as well as 3D will amount to manufacture as per Section 2(f)(iii) of the Act and hence, Central Excise duty is required to be paid on the basis of MRP but such Excise duty payable is required to be computed after extending the benefit of SSI exemption separately to TAPL as well as 3D. Further, the demand made jointly and severally from two parties cannot be upheld. The case is required to be remanded to the Adjudicating Authority to work out the demand denovo separately from TAPL as well as 3D after extending the benefit of SSI exemption separately to the two companies. At the time of denovo adjudicating proceedings, the Adjudicating Authority will also consider the arguments advanced regarding the quantification of the demands for the period prior to April 2012 vis-a-vis the evidence on record. The orders in denovo proceedings will be passed after extending the opportunity of hearing to the appellants. Additional evidence may be admitted as per law.
(Pronounced on 08.05.2018).
