The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, ruled that Larsen & Toubro Ltd. (L&T) was not liable to pay excise duty on repacking and labeling activities before April 29, 2010, holding that the amendment introducing such liability was prospective in nature.
Larsen & Toubro Ltd. (L&T) along with co-appellants J. Kumar and Proficient Equipment Solutions, was engaged in importing, repacking, and labeling spare parts of earthmoving equipment at its Nagpur warehouse before distributing them to customers. The company did not pay excise duty on these activities, believing they did not constitute “manufacturing” under the Central Excise Act, 1944.
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The department argued that repacking and labeling changed the character of the goods, classifying them under “Automobiles” and thus making them subject to excise duty under Section 2(f)(iii) of the Central Excise Act, 1944.
The Commissioner of Central Excise & Customs held that repacking and labeling amounted to manufacturing, making the goods liable for excise duty, confiscated the goods, and imposed redemption fines and penalties.
The company challenged the order before CESTAT, arguing that the amendment in the excise law, which brought such activities under the purview of excise duty, was introduced only on April 29, 2010, making it inapplicable to prior periods. They also argued that repacking and labeling did not change the nature of the goods and hence did not qualify as manufacturing.
The two members comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) examined the Larger Bench ruling in JCB India Ltd. (2023) and observed that earthmoving equipment is not classified as “Automobiles”, making excise duty demands for the pre-2010 period unsustainable.
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The tribunal observed that the amendment explicitly introduced liability from April 29, 2010, making it prospective and not applicable retrospectively. The tribunal set aside the excise duty demand for the pre-2010 period, ruling that L&T was not liable to pay excise duty on repacking and labeling activities before April 29, 2010. The tribunal also quashed all penalties, redemption fines, and confiscation orders, providing major relief to L&T and its co-appellants.
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