The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) held that the demand of excise duty along by invoking an extended period was not valid in the absence of intention to evade tax and set aside the demand of duty.
The appellants, M/s Pearl Enterprises, have undertaken the activity of inserting one 100 gm toothpaste tube and one toothbrush into a promo pack containing one tube of 200mg toothpaste, one tube of 100mg toothpaste and toothbrush.
The promo pack, wherein one tube of 200mg toothpaste is already packed and on which MRP is printed, is received by the appellants, from M/s Colgate Palmolive India Limited (Colgate), along with tubes of 100mg toothpaste and toothbrushes in cartons; the appellant inserts 100gm toothpaste tubes and one toothbrush in the blank slots provided in the promo pack at their facility/ factory.
M/s Colgate manufacture the toothpaste in their factory situated at Baddi, District Solan, Himachal Pradesh and purchases the toothbrush manufactured in Goa; M/s Colgate sends the manufactured tubes of 100gm toothpaste and purchased toothbrush to the appellants for completing the packing.
M/s Colgate avail the exemption contained under Notification No.50/2003 dated 10.06.2003 as amended. The appellants under the impression that they are providing “Business Auxiliary Service” to M/s Colgate have registered themselves for payment of service tax and have been duly discharging the applicable service tax on the job charges received by them from M/s Colgate.
It was argued that Revenue was under an erroneous assumption that the appellant was engaged in manufacture and had given a declaration, in terms of Notification No.50/2003, under Protest. Two show-cause notices proposing to recover Central Excise duty of about Rs.14.93 crores along with interest and penalty, were issued to the appellants. The proposals in the show-cause notices were confirmed along with interest and penalties vide impugned order
Shri Jitendra Motwani, Counsel for the appellant, submitted that the activity of just inserting toothpaste and toothbrush in the promo pack does not amount to manufacture as no activity of labelling or re-labelling; re-packing from bulk packs to retail packs and fixing of MRP is taking place.
It was stated that the appellants are eligible for exemption contained under Notification No.50/2003 as they have fulfilled the substantial condition of the Notification. Further argued that the benefit cannot be denied just because the declaration was not on the letterhead of the appellant.
The counsel contended that the condition for furnishing a declaration is the mere procedural and substantive benefit of exemption cannot be denied for the same as held by the Apex Court in the case of Harichand Shrigopal.
Shri Rajeev Gupta, assisted by Shri Siddharth Jaiswal, Shri Nikhil Kumar Singh and Shri Aneesh Dewan, Authorized Representatives, submitted that the letters given by M/s Colgate cannot be overstretched to mean a declaration by the manufacturer in terms of the Notification No.50/2003.
The department argued that the appellant is not entitled to exemption even after filing a declaration on 20.02.2009, given the amendment dated 18.01.2008, as the toothbrush is not manufactured in the State of Himachal Pradesh and Uttrakhand; the clarification vide Circular No.908/28/2009-CX dated 23.12.2009 does not apply to the facts of the case;
A two-member bench of Mr S S Garg, Member (Judicial) And Mr P Anjani Kumar, Member (Technical) observed that either on the strength of the declaration filed by the principal manufacturer i.e. M/s CPIL or on the strength of the declaration filed by the appellants themselves though belatedly, the appellants are eligible to avail the exemption contained in the Notification No.50/2003
It was found that the Department was kept informed about the activities of the appellants by their principal manufacturer as early as 2007. Therefore, there is no positive act on the part of the appellants to show intent to evade payment of duty. Further, the appellant has entertained a bona fide opinion that the said activity did not amount to manufacture but was exigible to service tax.
The CESTAT held that the Department has not made out any case for the invocation of an extended period and set aside the impugned order while allowing the appeal.
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