2014 (2) TMI 632 - AT - Central Excise

Tribunal Partially Sides with Appellant on Tax Issue, Overturns Penalties

COMMISSIONER OF CENTRAL EXCISE Versus M/s JCB INDIA LTD

The Tribunal allowed the appeal in part, confirming the demand within the normal period of limitation and setting aside the penalties and confiscation. ... Benefit of exemption Notification No. 61/86-C.E., dated 10-2-1986 - Benefit to driver's seats meant for hydraulic excavators - Appellants are engaged in activities involving purchase of various parts of Loaders, Backhoe Loaders, Road Rollers from different suppliers in India and abroad, repacking these parts with new packing material and affixing their Logo, fixing of MRP and selling under their own brand name - Held that:- all the items in question viz. Loader, Backhoe Loader and Road Roller are self propelled, work with internal combustion engine using fuel such as diesel, have four wheels and are rubber tyred (road roller may have two rubber tyres and one roller, or only rollers). These move also on roads. Thus, these have all the characteristics of motor vehicles. In addition, these items have attachments which enables to execute and move earth, mud etc. from one place to another. In case of road rollers, it helps in compacting and setting the road due to vibrating techniques in compaction jobs. 'Parts, components and Assemblies of Automobiles' is further qualified by 'falling under any heading of the tariff', both in the third Schedule to the Central Excise Act as also Notification No. 11/2006. Thus the expressions used are very very wide and does not restrict to few parts or assemblies but to all parts and falling under any heading of the whole schedule to Tariff. We also note that a large number of such parts, components and assemblies are interchangeable indifferent types of vehicles (though manufacture assign their part numbers). Thus keeping in view the way the two expression 'parts, components and Assemblies of Automobiles' and 'Any heading' is used, we consider that Parts, components, and assemblies of Loader, Backhoe Loader and Road Roller are covered by the said entry/expression. In order to avoid the terminology automobile, (being not defined in Act/Tariff) specific heading of the Central Excise Tariff were introduced in the Notification No. 49/2008-C.E. (NT) in February 2010 vide Notification NO. 9/2010-C.E.(NT). Apparently this was done in haste and Government had to further amend the amendment made in February, 2010 within two months to specifically include headings relating to earth moving machinery. Not only this, corresponding amendment in Third Schedule was forgotten and the next year retrospectively amendment had to be brought with effect from 27.02.2010/29.04.2010. Thus a holistic look of these amendments, only supports that Parts, components and assemblies of automobiles included that of Loader, Backhoe Loader & Road Roller and were covered from June, 2006 onwards. Circular dated 16.12.2008 was not issued in 2006 when 'Parts, components and assemblies of Automobiles' were brought into Third Schedule to the Central Excise Act or specified under Section4A (which would have indicated the objects and purpose of amendments). It has been issued after almost three years. In any case, it is settled legal position, that Circular contrary to the judicial decision are not binding - Circular dated 16.12.2008 is with reference to Hydraulic Excavators which are motor vehicle, the same is required to be ignored in view of decisions on the issue by Higher Judicial forumsParts, components and assemblies of Loader, Backhoe Loader and Road Rollers are covered by 'parts, components and assemblies of Automobiles - this is not a fit case for invoking the extended period of limitation as ingredients to invoke the same are absent. Accordingly, demand within the normal period of limitation is only confirmed. We also do not consider the case fit for imposing penalty under Section 11AC or Rule 25 or confiscation of goods under Rule 25 - Following decision of KRISHNA FABRICATORS P. LTD. Versus COLLECTOR OF C. EXCISE, BANGALORE [1991 (4) TMI 270 - CEGAT, NEW DELHI] - Accordingly, penalties and confiscation are set aside - Decided against Revenue. Issues Involved:1. Whether the activities of the appellant amount to 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944.2. Whether the goods dealt by the appellant are covered under the Third Schedule to the Central Excise Act, 1944.3. Whether the parts, components, and assemblies of Loaders, Backhoe Loaders, and Road Rollers are considered as parts, components, and assemblies of 'automobiles.'4. Applicability of extended period of limitation and penalties.Detailed Analysis:1. Whether the activities of the appellant amount to 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944:The appellant, engaged in repacking and relabeling parts of Loaders, Backhoe Loaders, and Road Rollers, argued that these activities do not amount to manufacture. However, as per Section 2(f)(iii), 'manufacture' includes any process involving packing or repacking of goods in a unit container or labeling or re-labeling of containers including the declaration or alteration of retail sale price on it. Since the appellant's activities fall under this definition, they are considered as manufacturing processes, making the appellant liable to pay Central Excise duty.2. Whether the goods dealt by the appellant are covered under the Third Schedule to the Central Excise Act, 1944:The dispute centered on whether the goods are covered under the Third Schedule. The appellant contended that their goods are not covered under the Third Schedule or relevant notifications until May 2010. However, the Tribunal noted that the Third Schedule was amended by the Finance Act, 2006, to include 'Parts, components, and assemblies of automobiles,' and subsequent notifications and amendments further clarified and included these goods. Therefore, the Tribunal concluded that the goods dealt by the appellant are indeed covered under the Third Schedule from June 2006 onwards.3. Whether the parts, components, and assemblies of Loaders, Backhoe Loaders, and Road Rollers are considered as parts, components, and assemblies of 'automobiles':The Tribunal examined various definitions and judicial precedents to determine whether Loaders, Backhoe Loaders, and Road Rollers qualify as 'automobiles.' Notably, the Tribunal referred to the definitions provided in the Air (Prevention and Control of Pollution) Act, 1981, and the Motor Vehicles Act, 1988, which broadly define 'automobiles' to include vehicles powered by internal combustion engines. The Tribunal also considered Supreme Court judgments, which held that vehicles like excavators and road rollers are motor vehicles. Consequently, the Tribunal concluded that Loaders, Backhoe Loaders, and Road Rollers are motor vehicles, and their parts, components, and assemblies are parts, components, and assemblies of automobiles.4. Applicability of extended period of limitation and penalties:The Tribunal found that the dispute involved complex legal interpretations and that the appellant had acted based on a plausible understanding of the law. Given these circumstances, the Tribunal held that the extended period of limitation could not be invoked, and penalties under Section 11AC or Rule 25 were not justified. Therefore, only the demand within the normal period of limitation was confirmed, and penalties and confiscation were set aside.Conclusion:The Tribunal allowed the appeal in part, confirming the demand within the normal period of limitation and setting aside the penalties and confiscation. The Tribunal's decision clarified that the appellant's activities amount to manufacture, the goods are covered under the Third Schedule, and the parts, components, and assemblies of Loaders, Backhoe Loaders, and Road Rollers are considered as parts, components, and assemblies of automobiles.