COMMISSIONER OF CENTRAL EXCISE, MUMBAI-IV Vs. DILIP CHHABRIA DESIGNS (P.) LTD.
LAWS(CE)-2015-8-12
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on August 31,2015

Commissioner Of Central Excise, Mumbai -Iv Appellant
VERSUS
Dilip Chhabria Designs (P.) Ltd. Respondents


Referred Judgements :-

CCE V. SATGURU AUTO BUILDERS [REFERRED TO]
KAMAL AUTO INDUSTRIES VS. COLLECTOR OF C. EX. [REFERRED TO]


JUDGEMENT

RAMESH NAIR - (1.)REVENUE has filed these three appeals against orders in original No. 25/2003, dated 10/12/2003, OIO No. 26/2003, dated 10/12/2003 and OIO No. 27/2003, dated 10/12/2003 passed by the Commissioner Central Excise, Mumbai -IV.
(2.)The details of all appeals, order in original and relevant show cause notice are tabulated below:
The fact of the case is that M/s. Dilip Chabriya design Pvt. Ltd. having three units i.e. Andheri, Powai and Silvasa. They are engaged in customization of motor vehicle falling under chapter heading 8701, 8702, 8703, and 8711 and manufacture of body building of Motor Vehicle falling under 8702. They are also engaged in manufacture of parts/sub assemblies of motor vehicles. In all the three adjudication orders five show cause notices were adjudicated. In the show cause notice summarily demand was proposed on the following counts.

(a) Excise duty demand on customization of the already built up motor vehicle on the ground that the customization or modification of built up motor vehicle amounts to manufacture.

(b) Excise duty demand on the body building falling under chapter heading 8702 denying the exemption Notification No. 3/2001 -CE, dated 1/3/2001 on the ground that the respondent availed the Cenvat credit of the input which is in violation of condition of said notification.

(c) The excise duty demand on the removal of add on kits on the ground that either it was found short in the stock taking or removed under the cover of challan without issuing the invoices.

(d) Excise duty demand by denying SSI exemption Notification No. , dated 1/3/2001 during the period 2001 -2002 on the ground that the aggregate value of the clearances during the year 2000 -2001 exceeded threshold limit of Rs. 3 crores.

1.1 In the adjudication, the adjudicating authority dropped the proceedings in respect of excise duty demand on the customization of the motor vehicles, excise duty demand on alleged removal of add on kit, demand related to SSI exemption on the ground that threshold limit in 2000 -01 was below Rs. 3 crores. However excise duty demand on the body building denying claim of Notification No. 3/2001 -CE, dated 1/3/2001 was confirmed on the ground that the respondent had availed the Cenvat credit. The Adjudicating authority also imposed penalty on Shri. B.D. Bajaj under rule 209A for Rs. 5,000/ - each on OIO No. 26/2003 and OIO No. 27/2003 both dated 10/12/2003. Being aggrieved by the three orders in originals dated 10/12/2003 the Revenue filed three appeals before this Tribunal to decide the following issues:

Appeal No. E/225/05

(a) Whether after taking into consideration, the facts and circumstances as stated above, read with the show cause notice, the said order of the Commissioner, Central Excise, Mumbai -IV is legal and proper?

(b) Whether by an order passed under Section 35C of the Act, the CESTAT should:

(i) Hold that major/full customization activity carried out an existing motor vehicles by M/s. DCDPL., Andheri, amounts to manufacture of motor vehicles and consequently, Central Excise duty liability on such customized vehicles amounting to Rs. 86,62,940/ - during the period from Dec, 1997 to March, 2002, be ordered to be recovered.

(ii) Deny the exemption availed by M/s. DCDPL, Andheri under the provisions of Notifications No. 08/2001 -CE, dated 1/3/2001 in respect of clearances effected by it during the year 2001 -2002 and consequently, order recovery of Central Excise duty amounting to Rs. 1,71,131/ - liable on such clearances.

(iii) Impose penalty, as proposed under Show cause notice dated 1/1/2003 issued to M/s. DCDPL, Andheri, on all the notices and order recovery of interest on duty liable as above, under the relevant provisions of Central Excise Act, 1944 and the Rules made thereunder.

(iv) Up -hold the proceedings initiated under the SCN's dated 19/5/1998 and 7/5/2003 issued to M/s. DCDPL, Andheri by the jurisdictional Central Excise Commissionerate, and order recovery of Central Excise duty of Rs. 5,91,487/ - and Rs. 49,75,190/ - demanded in the said SCN's respectively, along with interest and as well as impose penalty under the relevant provisions of Central Excise laws.

(c) Whether the CESTAT should pass any such other order as may be deemed fit.

Appeal No. E/329/05

(a) Whether after taking into consideration, the facts and circumstances as stated above, read with the show cause notice, the said order of the Commissioner, Central Excise, Mumbai -IV is legal and proper?

(b) Whether by an order passed under Section 35C of the Act, the CESTAT should:

(i) To hold that Central Excise duty is liable on the goods cleared by M/s. DCDPL, Powai to M/s. DCDPL, Silvassa, and consequently, order recovery of Central Excise duty amounting to Rs. 11,66,802/ - liable on such clearance.

(ii) Deny the exemption availed by M/s. DCDPL, Andheri under the provisions of Notifications No. 08/2001 -CE, dated 1/3/2001 in respect of clearances effected by it during the year 2001 -2002 and consequently, order recovery of Central Excise duty amounting to Rs. 1,68,317/ - liable on such clearances.

(iii) Impose penalty, as proposed under Show cause notice dated 1/1/2003 issued to M/s. DCDPL, Andheri, on all the noticees and order recovery of interest on duty.

(iv) Liable as above under the relevant provisions of the Central Excise Rules, and Rules thereunder.

(v) Impose penalty as provided in Rule 209 A of Central Excise Rules, 1944 and Rule 26 of Central Excise Rules, 2001, viz a penalty not exceeding the duty on the excisable goods or Rupees ten thousand whichever is greater.

(c) Whether the CESTAT should pass any such other order as may be deemed fit.

Appeal No. E/339/05

(a) Whether after taking into consideration, the facts and circumstances as stated above, read with the show cause notice, the said order of the Commissioner, Central Excise, Mumbai -IV is legal and proper?

(b) Whether by an order passed under Section 35C of the Act, the CESTAT should order

(i) To hold that Central Excise duty is liable on the goods; found short during the search operations at M/s. DCDPL, Silvassa, on 30/1/2002 involving Central Excise duty amount to Rs. 4,93,276/ -

(ii) The production of which was suppressed by M/s. DCDPL, Silvassa involving Central Excise duty amounting to Rs. 1,01,644/ -

(iii) Which were removed under delivery challans, without the cover of Central Excise invoices by M/s. DCDPL, Silvassa, involving Central Excise duty amount to Rs. 21,917/ - and consequently, order recovery of total Central Excise duty amounting to Rs. 6,16,837/ - liable on aforesaid clearances.

(iv) Deny the exemption availed by M/s. DCDPL, Silvassa under the provisions of Notifications No. 08/2001 -CE, dated 1/3/2001 in respect of clearances effected by it during the year 2001 -2002 and consequently, order recovery of Central Excise duty amounting to Rs. 7,65,837/ - liable on such clearances.

(v) Impose penalty, as proposed under Show cause notice dated 1/1/2003 issued to M/s. DCDPL, Andheri, on all the notices and order recovery of interest on duty liable as above, under the relevant provisions of Central Excise Act, 1944 and the Rules made thereunder.

(vi) Up -hold the proceedings initiated under the SCN's dated 1/1/2003 issued to M/s. DCDPL, Silvassa by all the notices and order recovery of interest on duty liable as above, under the relevant provisions of central Excise Act, 1944 and Rules made thereunder.

(vii) Impose penalty, as provided in Rule 173Q & 209A of the Central Excise Rules, 1944 and Rules 25 and 26 of Central Excise Rules, 2001, viz. a penalty not exceeding the duty on the excisable goods or Rupees ten thousand whichever is greater.

(c) Whether the CESTAT should pass any such other order as may be deemed fit.

In an another proceeding the appellant had filed appeal against Order -in -Original No. 27/2003, dated 10/12/2003 challenging the confirmation of demand of Rs. 16,48,780/ - before this Tribunal by way of an appeal No. E/574/2004 -MUM. on the ground that though the respondent had availed modvat credit but equal amount was lying in balance and subsequently that amount stood lapsed which amount to non -availment of Cenvat credit. This tribunal vide final order No. A/649/2004 -WZB/C -II, dated 22/7/2004 allowed the appeal of the respondent by extending benefit of notification No. 3/2001 - CE, dated 1/3/2001. Against the said Tribunal order, revenue filed appeal before Hon'ble Bombay High Court which was allowed by the Hon'ble High Court vide order dated 12/3/2015 wherein the Hon'ble High Court reversed the Tribunal's by upholding the demand but the penalty was waived. The order of the High Court then attained finality. Aggrieved by the impugned orders the Revenue filed these three appeals.
Shri Ashutosh Nath, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue submits that as regard the customization of motor vehicle, the activity amounts to manufacture on the ground that as per Chapter Note 3 of Chapter 87 the independent activity of building of body/fabrication on the chasis of motor vehicle is amount to manufacture therefore irrespective of the fact that the motor vehicle on which customization was undertaken, though duty paid but body building/fabrication etc. on chasis is independently amounting to manufacture. Therefore even though customization was carried out by the respondent on the duty paid motor vehicles but by virtue of Chapter Note 3 of chapter 87, the activity of customization is amounting to manufacture. He placed reliance on the following judgments: - -
(a) CCE v. Satguru Auto Builders, 2006 (199) ELT 386 (SC)

(b) Kamal Auto Industries v. Collector of Central Excise : 1996 (82) ELT 558 (Trib. -Delhi)

(c) Maruti Udyog v. CCE, 2002 taxmann.com 725 (CEGAT - New Delhi)

As regard duty demand on removal of add on kit without payment of duty from Powai unit to Silvassa unit, he submits that the goods were not properly accounted for by the Silvassa unit therefore it amounts to clandestine removal and duty was correctly proposed. He further submits that the Ld. Commissioner has dropped the demand on the ground that Silvassa unit was entitle for Modvat credit therefore even if the duty not paid on the clearances made by Powai unit, it amounts to revenue neutral which is not as per statute. The Powai unit is independently registered and whatever goods manufactured and cleared are liable for duty irrespective whether duty is available as Modvat credit to the Silvassa unit. He further submits that Ld. Commissioner observed that goods transferred from Powai unit to Silvassa units were accounted for by the later, the excise duty would have been discharged at the time of their further clearance of Silvassa unit therefore demand of duty on goods transferred from Powai unit would amount to double demand of duty and that the department should have worked out total clearance from Silvassa unit including those seized from Powai unit. In this regard he submits that Ld. Commissioner made a serious error in as much as no goods were seized at Powai unit on 30/12/2002 therefore the entire findings based on such wrong fact are incorrect. He further submits that during the physical stock at Silvassa unit, no excess stock was found so as to assumed that duty would be paid on its further clearance from Silvassa unit. He also submits that no evidence was produced regarding duty paid clearance from Silvassa unit of the goods said to have been transferred from Powai unit. Therefore the demand of duty amounting to Rs. 11,66,802/ - raised in the show cause notice dated 1/1/2003 was liable to confirmed. In regard to OIO No. 27/2003, dated 10/12/2003 he submits that demand of Rs. 16,48,750/ - though dropped by the tribunal vide order dated 22/7/2004 but the Hon'ble Bombay High Court vide order dated 12/3/2015 maintained the demand confirmed by original order, hence the same attained finality. Regarding duty of Rs. 4,93,276/ -, on shortage of goods found in Silvassa unit, duty of Rs. 1,01,644/ - on the kits manufactured but not accounted for in the statutory records and duty of Rs. 21,917/ - in respect of kits cleared from Silvassa unit without payment of duty, he submits that Ld. Commissioner dropped the demand on the basis that the stock taking was carried out for individual item whereas accounting was done as per kit and one kit consist of number of parts. He submits that there was no dispute at the time of panchanama drawn therefore whatsoever shortage was recorded at the time of panchanama the same cannot be disputed at later stage. As regard SSI exemption Notification No. claimed by the respondent and allowed by the Ld. Commissioner, he submits that there is apparent error in the computation of aggregate clearance value for the period of 2000 -01 in as much as Ld. Commissioner considered the aggregate value of Rs. 2,46,58,245/ - which is below the threshold limit the Rs. 3 Crores and accordingly SSI exemption was extended during the year 2001 -02. In this regard he submits that the Ld. Commissioner has not taken into account value of Rs. 1,03,04,873/ - towards the clearance of buses/tempo traveller for arriving at the aggregate value of clearances during the year 2000 -01. In view of this undisputed facts the total aggregate value during the 2000 -01 comes to Rs. 3,49,63,118/ - (Rs. 2,46,58,245/ - + 1,03,04,873/ -). In view of this the respondent is not eligible for SSI exemption during the period 2001 -02. Therefore dropping of demand by Ld. Commissioner extending the benefit of SSI exemption in all the three impugned orders are apparently incorrect. As regard the penalty on Shri B.D. Bajaj of Rs. 5,000/ - each in impugned Order Nos. 26/2003 and 27/2003 both dated 10/12/2003 on Shri B.D. Bajaj, he submits that the minimum penalty under rule 209A of Central Excise Rules, 1944 and Rule 26 of Central Excise Rules, 2001 is Rs. 10,000/ - therefore the Commissioner had no discretion to impose any lower penalty than the minimum penalty of Rs. 10,000/ - prescribed under the law.

(3.)ON the other hand, Shri Rajeev Wagle, Ld. Counsel alongwith Ms. Anagha Gawade, Advocate appears for the respondent. He submits that as regard the customization of the cars the respondent is carrying out only restyling of interior body of the duty paid cars. They are not fabricating completely new body and mounting on chassis. The Revenue in their appeal has mainly emphasized on the Chapter Note 3 of Chapter 87 that since the respondent had customized the vehicle as per requirement of the customer, the activity falls under the said Chapter Note 3 and accordingly it amounts to manufacture and liable for duty. He submits that as per the Chapter Note 3 only if the whole body of motor vehicle is fabricated and mounted on chasis, then only it amounts to manufacture, whereas it is admitted fact in the present case that the respondent's activity is limited to redesigning and restyling of the already built up cars. It is not a case of the Revenue also that the respondent is removing the old body and fabricating a new body and mounting on the chassis. Therefore the activity of the respondent in any case does not fall under the Chapter Note 3 of Chapter 87 of Central Excise Tariff Act. He submits that in view of this fact, the judgments relied upon by the revenue are not applicable as those judgments are related to the issue where the independent body was fabricated. He further submits that as regard the SSI exemption, the respondent was of bona fide belief that clearance of bus/tempo traveller was under exemption notification No. 3/2001, dated 1/3/2001 and accordingly the value of said exempted goods were not liable to be added in the total aggregate value and consequently they were entitle for SSI exemption for the period 2000 -01 as well as 2001 -02. He submits that clearances on which SSI exemption was availed were very much declared to the department in their returns. The exemption become ineligible only on the ground that the aggregate value of 2000 -01 exceeded Rs. 3 crore, which is due to denial of exemption notification No. 3/2001 -CE. The issue of eligibility of the said notification was highly contentious and once the Tribunal has allowed it and subsequently the Hon'ble Bombay High Court has reversed the order of the Tribunal. In these circumstances, the respondent had bona fide belief that they were entitle for SSI exemption, hence there is no suppressions of facts or misdeclaration on the part of the respondent, accordingly the demand as related to SSI Exemption is time bar in respect of clearances made beyond one year from the date of show cause notice. As regard the demand of Rs. 11,66,802/ - in the OIO No. 26/2003 it was submitted that the clearances are pertaining to the period July 2000 as can be seen from Annexure C -I and C -II of SCN dated 1/1/2003. During the said period the respondent was under SSI exemption limit therefore there is no question of payment of duty. He also submits that since the respondent was at bona fide belief that SSI exemption was available even though demand of Rs. 11,66,802/ - is payable, it is time bar as the demand pertains to July 2000 and show cause notice was issued after one year i.e. on 1/1/2003. As regard shortage of stock in Silvassa unit, he submits that the shortage in statutory register as against physical verification of stock were on account of fact that kits received from Powai unit were lying in factory and not accounted in statutory record and only stock of finished kits were entered in the statutory register. It is his submission that had all the loose kits would have counted there would not have been any shortages. He further submits that if the duty is demanded at Powai unit same duty again cannot be charged at Silvassa since the same goods were there as can be seen from Annexure C -I and Annexure B -I. As regard duty demand of Rs. 1,01,644/ -, he submits that there is contradiction in Paras 30 and 31 of SCN dated 1/1/2003 and Annexure B -II inasmuch as Paras 30 and 31 of SCN alleged clearance value Rs. 1,59,005/ - while the value mentioned in Annexure B -II is Rs. 6,35,272/ -, This has been considered by the Ld. Commissioner on page 8 of OIO number 27/2003 therefore duty at the most can be demanded only on Rs. 1,59,005/ - and not on Rs. 6,35,270/ -. As regard duty demand Rs. 21,917/ - he submits that this demand was raised on the allegation of clandestine removal whereas no positive evidence was produced therefore the Ld. Commissioner rightly dropped the demand. He further submits that if at all any demand arises the value should be considered as cum duty value and abatement on account of excise duty be extended while re -quantification of the duty.
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