Commisioner Cgst Central Excise vs. M/S Wws Sky Shop(P) Ltd Through Shri Manish Singhal

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CEA/73/2018HC Madhya Pradesh18 February 2020Author: HON'BLE SHRI JUSTICE S.C.SHARMA7 pages
For Petitioner: Prasanna Prasad
AI SummaryDismissed

What did the High Court hold?

The High Court held that the activity undertaken by the assessee did not amount to 'manufacture' in terms of the Central Excise Act, 1944. The Court relied on the Board's Circular F.No. 354/285/2011-TRU dated 8th December, 2011, which clarified that in cases where goods are received in a pre-packed, duty-paid retail form, and the vendor merely transfers them to another packing for safe transit without altering the retail pack or its declarations, excise duty is not attracted. The Court found that the assessee's activities, which involved receiving duty-paid medicines, affixing holograms and barcodes, and using an outer cover for safe transportation, were analogous to the activities described in the circular. The Court noted that there was no value addition, and the goods were sold at or below the MRP. Therefore, the impugned order of the Tribunal, which had allowed the assessee's appeal, was upheld. The Court found no substantial question of law arising from the appeal.

What were the facts?

The Commissioner of CGST & Central Excise filed appeals against an order of the Central Excise and Service Tax Appellate Tribunal (CESTAT). The respondent, M/s. WWS Sky Shop Pvt Ltd., was engaged in packing, marketing, and telemarketing of excisable products. Intelligence suggested they were repacking goods received from M/s. Davo Laboratories and M/s. Balchem Laboratories without payment of Central Excise Duty. Searches led to the registration of a case for duty evasion. The authorities concluded that repacking bulk goods into individual bottles with holograms and barcodes, followed by marketing, amounted to 'manufacture' under Chapter Notes to Chapters 30 and 33 of the Central Excise Tariff Act, 1985. A demand of ₹11,65,17,091 was raised against M/s. Sky Shop Pvt Ltd. for the period 2002-2003 to 2006-2007. The adjudicating order and subsequent appeal by the respondent were dismissed by the appellate authority.

What were the issues?

1. Whether the activity of affixing holograms and barcodes to pre-packed, duty-paid medicines received from manufacturers and placing them in an outer cover for safe transportation amounts to 'manufacture' under the Central Excise Act, 1944, attracting excise duty. Assessee's Contention: The assessee argued that their activities did not constitute 'manufacture' as defined by the relevant Chapter Notes. They contended that the goods received were already duty-paid, pre-packed, and bore the MRP. Their actions merely involved affixing a hologram and barcode to prevent duplication and using an outer cover for transit, which did not add value. They relied on the Board's Circular F.No. 354/285/2011-TRU dated 8th December, 2011. Revenue's Contention: The revenue contended that the repacking and affixing of holograms and barcodes, coupled with marketing, amounted to 'manufacture' as per Chapter Note 6 to Chapter 30 and Chapter Note 5 to Chapter 33 of the Central Excise Tariff Act, 1985, thus attracting excise duty and penalty.

Which sections of the Income-tax Act were involved?

Section 35G, Central Excise Act, 1944, Chapter Note 6 to Chapter 30, Chapter Note 5 to Chapter 33, Central Excise Tariff Act, 1985

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
--- 1 --- HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE D.B.: HON'BLE MR. S. C. SHARMA AND HON'BLE MR. SHAILENDRA SHUKLA, JJ CENTRAL EXCISE APPEAL No. 73 / 2018 COMMISSIONER, CGST & CENTRAL EXCISE Vs. SHRI MANISH SINGHAL A N D CENTRAL EXCISE APPEAL No. 74 / 2018 COMMISSIONER, CGST & CENTRAL EXCISE Vs. WWW SKY SHOP (P) LTD. * * * * *

O R D E R (18/02/2020) PER : S. C. SHARMA, J :- Regard being had to the similitude in the controversy involved in the present cases, both the appeals were analogously heard and by a common order, they are being disposed of by this Court. Facts of CEA No. 73/2018 are narrated hereunder. The present appeal is arising out of order dated 23/01/2018 passed by the Central Excise and Service Tax Appellate Tribunal, Principal Bench in appeal No. A/50353- 50354/2018-EX(DB). The appeal has been filed under sub- Section (2) of Sec. 35G of the Central Excise Act, 1944. Facts of the case as stated in the appeal, reveals that --- 2 --- the respondent M/s. WWS Sky Shop Pvt Ltd., is engaged in packing, marketing and telemarketing of various excisable products and an intelligence report was received by the DGCEI, RU, Indore that the respondent is engaged in repacking of various excisable goods and they are being packed at 136 and 137, Saket Nagar. The good were being received from M/s. Davo Laboratories Palda and M/s. Balchem Laboratories, Bhopal. It was alleged that the goods are being removed without payment of Central Excise Duty to different shops and distributors. Based upon the intelligence report, searches were carry out and case for evasion of duty was registered and statement of respondents / persons were recorded u/S. 14 of the Central Excise Act, 1944. Facts of the case further reveals that the Authorities have arrived at a conclusion that the goods were received in bulk and they were packed in individual bottles with hologram and barcodes and thereafter marketing of the goods took place and it was amounting to manufacture in terms of Chapter Note 6 to Chapter 30 and Chapter Note 5 to Chapter 33 of the First Schedule of the Central Excise Tariff Act 1985. The respondents have quoted the relevant statutory provision of law and the same reads as under: (a) Chapter Note 6 (Chapter Note 5 prior to 1/3/2005) to the Chapter 30 of the 1st Schedule to the Central excise Tariff Act, 1985. “In relation to products of heading 30.03 (or 30.04) conversion of powder into tablets or capsules, --- 3 --- labelling or re-labelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption or any other treatment to render the product marketable to the consumer, shall amount to “manufacture”. *w.e.f. 1/3/2005. (b) Chapter Note 5 (Chapter Note 4 prior to 1/3/2005) to the Chapter 33 of the 1st Schedule to the Central Excise Tariff Act, 1985. “In relation to products of heading 33.03, 33.04 and 33.05, conversion of powder into tablets or capsules, labelling or re-labelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to “manufacture”. Accordingly, four show cause notices were issued in the present case and the details of the show cause notices are as under: (i) Show Cause Notice bearing F.No. DGCEI/AZU/30-44/2005/Pt.I/2528 dated 13/9/2006 was issued to M/s. Davo Laboratories, Govindpura, Bhopal (ii) Show Cause Notice bearing F.No. DGCEI/AZU/30-44/2005/2513-17 dated 13/9/2006 was issued to M/s. Davo Laboratories, Palda, Indore (iii) Show

Cause

Notice F. No.IV(6)INV/RUI/20/2006/2100 dated 18/12/2006 was issued to M/s. Balchem Laboratories, Govindpura, Bhopal and (iv) Show

Cause

Notice F.

No. DGCEI/AZU/36-46/2006/3841 dated 27/12/2006 was issued to M/s. WWS Sky Shop Pvt. Ltd., Indore Finally demand of Central Excise 116517091 was proposed to be recovered from M/s. Sky Shop Pvt Ltd. for the period w.e.f. 2002-2003 to 2006-2007. The adjudicating order was passed on 30/07/2008 and thereafter an appeal --- 4 --- was preferred by the respondents and the same has also been dismissed. The order passed by the Appellate Authority reads as under :

2.

The brief facts of the case are that, during the period under consideration, the assessee-Appellants were engaged in trading and tele-marketing of various goods and also selling the medicines manufactured by M/s Davo Laboratories and M/s Balchem Laboratories through the VPP. They were also giving advertisement on television and other media. The assessee-Appellants received the medicines, duly duty paid, from the manufacturer in the packed form mentioning therein the retail price. After receiving the bottles of the medicines in the packets, they just affix the hologram & bar code to avoid duplicity and put in an outer cover box to ensure safe transportation. The Department is of the view that the activity of the assessee-Appellants amounts to manufacture and demanded the duty along with the penalty. Being aggrieved, the assessee- Appellants have filed the present appeals.

3.

With this background, we have heard Shri V. Lakshmikumaran, learned counsel for the assessee- Appellants and Shri S.K. Bansal, learned DR for the Department.

4.

After hearing both sides and on perusal of the material available on record, we find that the Board vide its Circular F.No. 354/285/2011-TRU dated 8th December, 2011 has clarified the position as under :

“2. It has been represented that they are in the business of marketing of consumer and other products. They facilitate the transaction sales of the vendors by making arrangements with third parties toward courier/delivery, advertisement and marketing of the products through television channel and web portal to procure order on behalf of the vendor‟s customers, collect payments on behalf of the vendors. Upon receipt of order from a customer, either an order is placed with the manufacturer/importer/trader of the specified goods or the vendor may import the goods directly. The „pre- packed duty paid retail goods‟ are put in an outward --- 5 --- transit box by the vendors and are wrapped with tamper proof wrapper and taped to ensue safe delivery to the customer. The repacking box bears the name of the HSN 18, call centre and the website address. Apart from this repacking, no other activity is being undertaken. The issue raised for clarification in this background is whether the levy of excise duty is attracted on this activity of repacking such „pre-packed duty paid retail goods‟.

3.

The matter has been examined. The purpose of “deeming” processes such packing, re-packing, labeling, relabeling etc. to be processes amounting to manufacture is to capture the value addition. In the instant case, there is admittedly “no value-addition”. The goods are sold either at or below the MRP to the consumer. More importantly, the goods when received by the vendor are already in a pre-packed form, bear the necessary declarations including the MRP as prescribed by the provisions of the Legal Metrology Act and have already been subjected to excise duty on the basis of value determined under Section 4A i.e. the Retail Sale Price less abatement. The vendor neither re-labels nor alters the retail pack or the declarations affixed therein. Under these circumstances, the activity undertaken in the instant case merely consists of transferring pre- packed duty paid retail goods into another packing.

4.

In view of the above, it is clarified that in such cases excise duty would not be attracted on the operations or processes carried out by the vendor.”

5.

In the present case, the situation is identical. By following the Board Circular (supra), we find no reason to sustain with the impugned order and the same is hereby set aside.

6.

In the result, both the appeals filed by the assessee- Appellants are allowed. Facts of the case makes it very clear that the assessee / respondent before this Court were engaged in trading and telemarketing of various goods and also in selling medicines manufactured by M/s. Davo Laboratories and Balchem --- 6 --- Laboratories through VPP. They were also giving advertisement on television and other media. The most important aspect of the case is that the assessee/ respondent before this Court received the medicines duly duty paid from the manufacturers in a packed form mentioning therein the retail price. The undisputed facts also reveal that after receiving bottles of medicines in the packets, the assessee has just fixed the hologram and the barcode to avoid duplicity and an outercover was placed to ensure safe transportation. It certainly does not amount to the process of manufacture. It is the process which is being carried out by the Companies like Flipkart, Amazon, etc,. They are also receiving the goods and they are just putting a cover over the goods received from various companies which have paid the duty and are being delivered to the consumers and therefore, the circular issued by the Board which has been referred by the Appellate Tribunal dated 08/12/2011 is very much applicable in the present case. Keeping in view the aforesaid circular there is admittedly no value addition. The goods are sold at the same MRP to the consumer. It is nobody’s case that the goods are sold above the MRP to the consumer. The goods received by the vendor are already in a prepacked form and bears necessary declaration including MRP as prescribed under the statutory provisions and they have already been subjected to Excise Duty earlier. --- 7 --- In the present case the respondent assessee, neither replaces nor alters the retail packet or the declaration affixed therein and, therefore, the Tribunal was justified in allowing

the appeal preferred by the assessee. No substantial question of law arises in the present appeal and, therefore, the admission is declined. The record be returned back to the Department. A copy of this order be placed in the record of CEA No. 74 / 2018. (S. C. SHARMA) J U D G E (SHAILENDRA SHUKLA) J U D G E KR

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