2025 (3) TMI 1057 - AT - Central Excise

Packing and labelling at warehouse not manufacture for excise duty, spare parts misclassified under automobile category

CESTAT Mumbai held that packing, re-packing and labelling activities at central warehouse did not constitute manufacture for excise duty purposes. The ... Process amounting to manufacture or not - activities undertaken at the Central warehouse, where the activity of packing, re-packing and labelling was carried out by the appellant - demand of excise duty on re-packed spare parts on the ground that these goods were parts of motor vehicles (automobiles) and these parts were covered under Sl. No.100 of the Third Schedule to the Central Excise Tariff Act, 1985 - HELD THAT:- The issue involved in this appeal was decided by the Larger Bench of the Tribunal in ACTION CONSTRUCTION EQUIPMENT LTD. [2023 (6) TMI 1320 - CESTAT MUMBAI (LB)]. The present appeal is also covered by such order of the Larger Bench. On careful reading of the decision given by the Larger Bench of the Tribunal on the disputed issues, it is found that the amendment carried out w.e.f. 29.04.2010 makes it abundantly clear that a legislature did not intend to tax the parts, components and assemblies of earthmoving equipment etc. under the Head “Automobiles”; therefore, to this extent, the adjudged demands for the period prior to 29.04.2010 cannot be sustained. Further, it is a fact on record that Third Schedule to the Central Excise Tariff Act, 1985 was retrospectively amended vide Finance Act, 2011 read with Finance Act, 2012, with effect from 29.4.2010. Accordingly, from 29.4.2010, the appellant started discharging the excise duty on activity of packing / re-packing and affixing MRP undertaken on spare parts at warehouse, on the basis of MRP-based assessment. This was also confirmed by the jurisdictional Commissioner of Central Excise, Nagpur vide their letter dated 07.01.2014 submitting therewith the verification report dated 30.12.2013 received from the Assistant Commissioner of Central Excise Division-II, Nagpur that the appellant is discharging the Central Excise duty on MRP basis. In finally answering the issues on which reference was made to Larger Bench, on account of difference of opinion between two Co-ordinate Benches of the Tribunal and based on the direction given by the Hon’ble Supreme Court, it was held 'The amendment made in the Third Schedule to the Central Excise Tariff Act by Finance Act, 2011 w.e.f. 29.04.2010 by adding serial no. 100A to the Third Schedule is prospective in nature.' Thus, on the basis of the decision given by the Larger Bench, it is concluded that the adjudged demands for the period October, 2006 to 28.04.2010 is not sustainable. Conclusion - i) The term 'automobile' should be interpreted based on common parlance and dictionary definitions rather than definitions from other statutes. ii) The activities undertaken by the appellant did not amount to 'manufacture' for the relevant period, and the classification of the parts as 'automobiles' was not applicable. Therefore, the excise duty demands were not legally sustainable. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment was whether the activities of packing, repacking, and labeling of spare parts of earthmoving equipment by the appellant at their Central warehouse amounted to 'manufacture' under Section 2(iii) of the Central Excise Act, 1944, thereby attracting excise duty. A related issue was whether these spare parts should be classified under the category of 'parts, components, and assemblies of automobiles' as per the Central Excise Tariff Act, 1985, which would necessitate the imposition of excise duty based on the MRP-based assessment.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents: The legal framework involved the interpretation of the term 'manufacture' under Section 2(iii) of the Central Excise Act, 1944, and the classification of goods under the Central Excise Tariff Act, 1985. The Tribunal also considered various precedents, including decisions by the Larger Bench and the Supreme Court, specifically focusing on the classification of earthmoving equipment parts under the category of 'automobiles.'Court's interpretation and reasoning: The Tribunal relied on the Larger Bench's interpretation that the term 'automobile' was not defined in the Central Excise Act or Tariff Act. Therefore, it was appropriate to refer to dictionaries to understand the term in common parlance. The Tribunal noted that the definition of 'automobiles' in other statutes, such as the Motor Vehicles Act, 1988, and the Air (Prevention and Control of Pollution) Act, 1981, could not be applied to the Central Excise context.Key evidence and findings: The Tribunal found that the amendment to the Third Schedule of the Central Excise Tariff Act, effective from 29.04.2010, indicated a legislative intent not to classify earthmoving equipment parts as 'automobiles' for excise purposes prior to this date. The Tribunal also noted the retrospective amendment in 2011, which confirmed this interpretation.Application of law to facts: The Tribunal applied the legal principles established by the Larger Bench and the Supreme Court to conclude that the appellant's activities did not constitute 'manufacture' under the Central Excise Act for the period prior to 29.04.2010. Consequently, the excise duty demands for this period were unsustainable.Treatment of competing arguments: The Tribunal considered the arguments presented by the Revenue, which relied on the classification of parts under the Third Schedule and the interpretation of 'manufacture.' However, these arguments were countered by the Tribunal's reliance on the Larger Bench's findings and the legislative amendments.Conclusions: The Tribunal concluded that the activities undertaken by the appellant did not amount to 'manufacture' for the relevant period, and the classification of the parts as 'automobiles' was not applicable. Therefore, the excise duty demands were not legally sustainable.SIGNIFICANT HOLDINGSThe Tribunal upheld the principles established by the Larger Bench, emphasizing that the term 'automobile' should be interpreted based on common parlance and dictionary definitions rather than definitions from other statutes. The Tribunal also confirmed that the legislative amendments to the Third Schedule were prospective, reinforcing the conclusion that the appellant's activities did not attract excise duty for the period in question.The Tribunal's final determination was to set aside the impugned order dated 30.11.2012, thereby allowing the appeal in favor of the appellant. The judgment clarified that the demands for the period from October 2006 to 28.04.2010 were not sustainable, and the appellant was not liable for excise duty for this period.