E-bikes imported in CKD condition not liable for additional automobile cess after assembly process

The CESTAT Chandigarh allowed the appeal, setting aside the demand for automobile cess on E-bikes imported in CKD condition. The tribunal held that since the appellant had already paid automobile cess at the time of import and the classification remained unchanged after assembly, no additional cess was payable. The assembly process did not constitute manufacture under section 2(f) of the Central Excise Act as no new distinct product emerged. The demand was also time-barred as the SCN issued on 19.11.2010 for the period September 2006 to September 2008 exceeded the normal limitation period, and the department failed to establish grounds for invoking extended limitation. The appellant's periodic ER-1 returns reflected all clearances without departmental objection.

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Issues involved:
The judgment involves the demand of Automobile Cess on the ground of value addition, computation of Automobile Cess, imposition of penalty, and demand of interest on the appellant.

Comprehensive Details:

Demand of Automobile Cess on Value Addition:
The appellant, engaged in the manufacture of E-bikes and parts, imported E-bikes and parts in CKD condition. The show cause notice alleged that the appellant did not file mandatory returns under the Automobile Cess Rules, 1984 and suppressed production, clearance, and value of E-bikes to evade payment of automobile cess. The appellant contended that they imported E-bikes in CKD condition and parts falling under specific headings, and the processes undertaken did not amount to manufacture as per the Central Excise Act. The Commissioner (Appeals) held that there is a need to work out the automobile cess on the value addition, requiring fresh computation without imposing penalty and interest.

Computation of Automobile Cess:
The appellant argued that the impugned order was unsustainable as it did not appreciate the facts and law, and the automobile cess was already paid at the time of import. The appellant maintained that the processes undertaken did not amount to manufacture, and the duty was not payable on the cleared E-bikes. The appellant contended that the demand was time-barred, as all relevant information was reflected in the ER-1 returns submitted to the department periodically, with no objection raised regarding non-payment of automobile cess.

Imposition of Penalty and Demand of Interest:
The appellant argued that the entire demand was time-barred, as the show cause notice was issued beyond the normal period of limitation. The appellant emphasized that the department confirmed the demand by invoking the extended period of limitation without demonstrating the presence of the necessary conditions for such invocation. The Tribunal found that the demand was barred by limitation, setting aside the impugned order on both merit and limitation, thereby allowing the appeal of the appellant.

Separate Judgment by Judge:
The judgment was pronounced by MR. S. S. GARG, MEMBER (JUDICIAL) on 11.12.2023.

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