Final Order Nos. 815-817/2010-Ex(Pb), arising from Appeal Nos. E/975-977/2009. Case: Xerox India Ltd. Vs Commissioner of C. Ex., Meerut-II. CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)

Case NumberFinal Order Nos. 815-817/2010-Ex(Pb), arising from Appeal Nos. E/975-977/2009
CounselFor Appellant: Shri V. Lakshmi Kumaran With B.L. Narasimhan, Advocates, And For Respondent: Shri B.K. Singh, Jt. Cdr.
JudgesR.M.S. Khandeparkar, J. President and Shri Rakesh Kumar, Member (T)
IssueCentral Excise Act, 1944 - Section 2(F)
Citation2011 (270) ELT 395 (Tri - Del)
Judgement DateOctober 30, 2010
CourtCEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)

Order:

R.M.S. Khandeparkar, J. President (Oral), (Principal Bench, New Delhi)

  1. These Appeals Arise From Order Dated 20th November, 2008 Passed By The Commissioner, Meerut And Involve Common Questions Of Law And Facts, And Hence Were Heard Together And Are Being Disposed Of By This Common Order. By The Impugned Order, The Commissioner Has Confirmed The Demand Of Excise Duty To The Tune Of Rs. 15,25,07,215/- As Also Rs. 37,24,324/-, Along With Interest Payable Thereon For The Period From April, 2001 To March, 2006. Besides, Penalty Of Equal Amount Has Also Been Imposed. A Sum Of Rs. 37,24,324/-, Already Paid By The Appellants, Has Been Appropriated. A Penalty Of Rs. 2,00,000/- Has Been Imposed Against Shri S.K. Gupta, Financial Controller And That Of Rs. 1,00,000/- Has Been Imposed Against Shri A.K. Srivastava, Sr. Manager (Distribution) Of The Appellants.

  2. We Have Heard At Length The Ld. Advocates For The Appellants And The Jt. Cdr And For Respondent: We Have Perused The Written Submissions Filed On Behalf Of The Parties, As Well As Other Materials Placed On Record.

  3. The Appellants Are Engaged In The Manufacture Of Photocopier And Are Also Engaged In Trading Of Digital Multifunctional Printers, Copiers And Photocopiers-Cum-Printers, And Photo Receptors-Cum-Printers. Pursuant To Visit By The Preventive Wing Personnel Of The Central Excise Department, Meerut To The Factory Premises Of The Appellants On 17th August, 2005, Certain Documents Were Seized Under A Panchnama. Simultaneously, The Statements Of Shri S.K. Gupta, Financial Controller, Shri Nitin Jagtap, Head Technical Support, Shri Arvind Kumar Srivastava, Sr. Manager (Distribution), Shri Anil Kumar Gupta, Dy. General Manager (Imports) And Shri Prabhat Kumar Gupta, General Manager (Planning And Technical) Were Recorded Under Section 14 Of The Central Excise Act, 1944. In The Course Of Investigation And Pursuant To The Scrutiny Of The Said Statements And Documents, It Was Revealed To The Department That The Appellants Were Engaged In The Manufacturing Activities Of Goods Under The Guise Of Trading And Such Goods Were Cleared Without Payment Of Duty. And Thus, They Were Engaged In Clandestine Removal Of Such Goods Without Payment Of Duty. On Completion Of The Investigation, A Show Cause Notice Dated 18th Of April, 2007 Came To Be Issued To The Appellants. The Same Was Contested While Contending That Their Activities Were Nothing But Installation Of Copiers-Cum-Printers And No New Product Emerged From Such Activities. Even If The Process Was To Be Termed As Manufacturing, The Same Was Carried Out Beyond The Territorial Jurisdiction Of The Commissioner Of Meerut And In Any Case The Demand Was Barred By Limitation And There Was No Case For Invoking Of Extended Period Of Limitation. The Commissioner After Hearing The Parties Passed The Impugned Order As Stated Above. Hence The Present Appeals.

  4. The Relevant Facts Are That The Appellants Were Previously Manufacturing Complete Machines At One Place And Used To Supply The Same To The Customers. But Later On, To Reduce The Cost Of Manufacture And For Administrative Purposes, They Adopted A Chain Management System Whereby Various Modules And Parts Of The Machines Were Being Manufactured At Different Parts Of The World And Supplied To Different Countries To Be Assembled Along With Locally Manufactured Essential Parts And Accessories To Make The Machines Functional For Supply To The Customers. Unless The Different Modules And Parts Along With Such Locally Procured Parts And The Accessories Were Properly Assembled, The Machines Did Not Become Functional.

  5. Accordingly, During The Period From April, 2002 To November, 2006, The Appellants Imported Various Parts/Modules/Accessories Of Digital Multi Functional Printers, Copiers And Photocopiers-Cum-Printers Depending Upon The Purchase Orders Received From Customers. The Same Were Imported Either In One Consignment Or In Split Packings Comprising Of Various Parts/Modules/Accessories And Also Procured Some Indigenously Manufactured Components. The Same Were Stored In The Approved Warehouse At Rampur, Where Kitting Activities Were Undertaken And Such Activities Included Assembling Of All The Components With The Use Of Not Only The Imported Parts/Modules But Also The Indigenous Components And Accessories Including Pin-Top, Software, Ram, Stabilizers, Etc., As Per The Requirement And Configuration Given By The Customers. On Completion Of Kitting Activities, The Goods Were Dispatched To The Customer''s Site, Where They Were Installed. The Kitting Activity Was An Essential Function To Make The Machine Operational, And The Modules And Parts Were Not Of The Nature Which Could Render The Function Independently Which A Complete Machine Could Perform On Being Assembled With Necessary Modules And Parts.

  6. The Commissioner In The Impugned Order Has In Detail Analyzed The Activities Which Were Carried Out By The Appellants And Has Held That The Same Amounted To Manufacture Under Section 2(F) Of The Said Act Read With Note 6 Of Section Xvi Of The Central Excise Tariff Act.

  7. The Ld. Advocate For The Appellants While Assailing The Impugned Order Submitted That The Authority Below Has Considered The Activity As Manufacturing Activity Essentially On The Basis Of Note 6 To Section Xvi Of The Tariff Act. He Submitted That The Copier-Cum-Printer Was Complete In Itself And Was Cleared In Modular Form Merely For Ease Of Transportation And Also Because The Goods Were Imported In Such Modular Form. According To Ld. Advocate, No Activity Was Carried Out By The Appellants In The Premises At Rampur Which Could Amount To Manufacture. The Relevant Bills Of Entry Disclose That The Copier-Cum-Printers Were Imported In Modules Equal In Number And The Classification And Assessment Thereof Had Been Done As Copier Printers Only. Thus, The Machines In Modular Form Were Complete Machines And No Process Was Carried Out By The Appellants To Make Machines Complete, As They Were Already Complete In All The Respect. Reliance Is Placed In The Decisions In The Matter Of Eureka Forbes Ltd. V. Cce, Chandigarh, Reported In 2000 (120) ELT 533 (Tri.-Lb), Indian Xerographic System Ltd. V. Collector Of Customs, Bombay Reported In 1995 (80) ELT 337 Read With 1997 (93) ELT A68, Eureka Forbes Ltd. V. Cce Reported In 2000 (125) ELT 1195 Read With 2001 (131) ELT A85, British Physical Laboratories India Ltd. V. Cce Reported In 1990 (50) ELT 567 And Walchand Nagar Industries V. Collector Of Central Excise, Pune Reported In 1995 (79) ELT 485 In Support Of The Contention That By The Activity Carried Out By The Appellants, There Was No Manufacturing Process Involved Therein.

  8. Referring To Rule 2(A) Of The Rules Of Interpretation Of The Central Excise Tariff Act, It Is Submitted That The Same Rule Refers To Incomplete Or Unfinished Articles Even If Presented In Unassembled Or Disassembled Form, Whereas Note 6 Refers To Incomplete Or Unfinished Goods Including Blanks And The Phrase Like "Presented Unassembled/Disassembled" Is Missing In The Said Note. Therefore, In View Of Rule 2(A) Providing Classification Of Goods Under The Same Heading Even If Presented Unassembled Or Disassembled Suggests That No Manufacture Has Taken Place, Note 6 In The Absence Of The Phrase Presented Unassembled Or Disassembled Cannot Be Brought In Play To Allege Manufacture. Referring To The Activity Of Kitting, It Was Sought To Be Contended That It Is Nothing But Dispatch Of Various Modules As Per The Requirements Of The Customers. Some Customers Require Four Or Two Punch Hole Finishers Whereas Some Require Regular Stapling Facility, Besides Voltage Stabilizer Or Adapter Is Added To Meet With The Local Power Conditions. The Process Of Arranging/Sourcing All These Requirements Is Called The Kitting. Reliance Is Placed In The Decision In The Matter Of Xi Telecom Ltd. V. Superintendent Of Central Excise, Hyderabad Reported In 1999 (105) ELT 263 (A.P.) And Narang Latex And Dispersions Pvt. Ltd. V. Commissioner Of Central Excise, Mumbai Reported In 2001 (134) ELT 482 Read With 2002 (139) ELT A302 (S.C.).

  9. It Is His Further Contention That There Is No Evidence About Manufacturing Activity Produced On Record By The Department. He Further Submitted That Mere Installation Of The Machines Does Not Amount To Manufacture. According To Ld. Advocate, It Involves Very Simple Process And, Therefore, No Manufacturing Activity Was Done. As Regards, The Domestic Parts, It Is Sought To Be Contended That The Appellants Used To Procure Some Local Goods Such As Pin-Top Software Upgradable Kits/Ram Stabilizers, Packing Material, Stand For Some Selected Models And Paper. Sometimes Customers Desired Stabilizers Due To Fluctuations In The Electric Voltage Supply. Pin Tops Are Nothing But Adapter For Power Supply To Meet The Local Conditions. Packing Material Was Used For The Sake Of Proper Transportation Bearing In Mind The Road Conditions. The Stands For Various Articles Like Coolers, Refrigerators, Tv Trolleys, Etc., Were Supplied Along With Some Models Which Were Domestically Procured. All These Items Cannot Be The Basis To Hold That The Appellants Were Involved In The Manufacturing Activities.

  10. He Further Submitted That The Appellants Did Not Undertake Any Manufacturing Activity At Jolly Godown Due To Lack Of Facilities Such As Optical Alignment Fixture Which Was Required To Align The Mirror And Lenses. Besides, Some Old Serial Numbers Were Given To The Machines As Old Machines Were Showing The Need Of Cannibalization For Having New Machines With Cannibalized Parts. Such Activities Were Carried Out At The Factory And On The New Product So Manufactured, Duty Was Duly Paid. However, At The Jolly Godown, Even If, It Is Assumed To Have Conducted Manufacturing Activity, The Appellants Would Have Credit Far In Excess Of Duty Demanded As Per The Provisions Of Rule Xvi Of Central Excise Rules. He Further Submitted That Cenvat Credit On The Inputs Used In Or In...

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