B.tax+Case Studies[1][1]

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Excise & CustomsExcise & CustomsDeepak Kumar Jain B

B.Com., FCA., ACS., LLB

Deepak Kumar Jain BB.Com., FCA., ACS., LLB

17 Aug 200917 Aug 2009

Case StudiesCase Studies


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Case Study 1; manufacture meansCase Study 1; manufacture means

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Appellant Union of India

Respondent Delhi Cloth Mills Co. Ltd

Citation 1977 (1) ELT (J199) SC (5 member constitutional bench)

Facts of thecase

The respondent undertook certain process whichconverts raw groundnut and til oil into refined oil

(vanaspati)Question Whether the process undertaken by the respondent

amounts to manufacture?Conclusion In holding that the process amounts to manufacture, the

SC held that manufacture means bring into existence anew substance and that manufacture is the end result of

one or more processes thru which original commoditypasses. that manufacture implies change but everychange is not manufacture and to result in manufacture, anew product and different article must emerge havingdistinctive name, character or use.


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Case Study 2; recording of musicCase Study 2; recording of music

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Appellant Gramophone Co. of India Limited

Respondent Commissioner

Citation 1999 (114) ELT (770) SC

Facts of thecase

The Appellant was engaged in recording of music onaudio cassettes, which is an activity akin to photocopying

Question Whether the activity undertaken by the assessee is serviceor does the process amount to manufacture?

Conclusion Yes process amounts to manufacture

Reasons Recording of audio cassettes amounts to manufacture as

blank audio cassette is distinct and different from pre-recorded audio cassette and two have different use andname. The process brings into existence a new product,having distinctive name, character or use.


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Case Study 3; water to iceCase Study 3; water to ice

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Appellant Goel Industries

Respondent Commissioner

Citation 1971 (28) STC (729) All HC DB

Facts of thecase

The appellant undertook commercial activity of makingice from water

Question Whether a new product comes into existence?

Conclusion Yes process amounts to manufacture

Reasons Chemically water and ice have same composition but incommerce and popular sense, ice and water are

recognized as different products. The processundertaken by the appellant, may be however small, butit brings into existence a new product or commodity.


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Case Study 4; instant softy ice-creamCase Study 4; instant softy ice-cream

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Appellant Connaught Plaza Restaurant (P) Ltd.

Respondent Commissioner of Central Excise, New Delhi

Citation 2003 (154) ELT (187) Tribunal

Facts of thecase

The appellant is engaged in the business of sellingburgers, nuggets, shakes, soft-serve, etc. through its fast

foods restaurants, known as McDonalds FamilyRestaurants. The vending machine can simultaneouslydispense with milk shakes as also soft serves of differentflavours. For this, the liquid mix is pumped into themachine where freezing takes place along with theincorporation of air and the semi-solid soft-serve is

drawn through the nozzle into a wafer cone or a plasticcup and served to the customer on the spot. Similarlymilk shake is drawn through the nozzle and served to thecustomer straightaway


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Case Study 4; instant softy ice-creamCase Study 4; instant softy ice-cream

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Question Whether the process amounts to manufacture?

Whether SSI exemption available?

Conclusion Yes the process amounts to manufacture & SSIexemption would be available

Reasons The court held that if by application of labour and skill anobject is transformed to the extent that it is commerciallyknown differently it will suffice to say that manufacturehas taken place for the purpose of Central Excise. Thedegrees of transformation and labour and skill spent areirrelevant.

The Appellant will be entitled to SSI exemption andmerely because the product is being sold from the outletof McDonald, it cannot be said as bearing a brand nameof another.


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Case Study 5; cream to butterCase Study 5; cream to butter

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Appellant State of Tamil NaduRespondent Bharat Dairy Farm

Citation 1992 (61) ELT (25) Mad HC

Facts of thecase

The respondent converted cream into butter by stirring.

Question Whether the process amounts to manufacture? Questionframed in the context of sales tax.

Conclusion No process does not amount to manufacture

Reasons Cream and butter are not different commodities but only

two forms of the same commodity. When cream is leftfor few days, it would automatically get converted intobutter. Between the two, stirring as a process, onlyaccelerates the change.


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Case Study 6; presented unfinishedCase Study 6; presented unfinished

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Appellant Commissioner of CustomsRespondent Hindustan Motors Limited


Facts of thecase

The respondent imported all most all components thatwould make an engine. The import was made in one

consignment and some components were procuredlocally. Assembly of components into engine, was acomplex process

Question Whether the imported components are classifiable asparts of engine or as engine

Conclusion Classifiable as engineReasons The components, when considered together, had the

essential character of engine. Merely because the processof assembly is complex & few components were locallyprocured, it would not fail the test.


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Case Study 7; presented unfinishedCase Study 7; presented unfinished

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Appellant New Century ImpexRespondent Commissioner of Customs


Facts of thecase

The appellant imported certain essential parts ofphotocopying machine, which together constituted 60%

to 70% of the finished product.Question Whether the imported components are classifiable as

parts of photocopier or as photocopier

Conclusion Classifiable as parts

Reasons Though what was imported were essential parts of photocoping machine, but together, in the absence of balance30% to 40% of the parts, they cannot essentially be said asphotocopier in parts.


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Case Study 8; specific Vs. generalCase Study 8; specific Vs. general

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Appellant ANagaraju BrosRespondent State ofAndhra Pradesh


Facts Assessee is a manufacturer of VIP brand suitcases madeof plastic

Question What is the appropriate classification?- Entry 113: Plastic Sheets and Articles- Entry 163: All kinds of suitcases

Conclusion Entry 163

Reasons Suit cases may be made of leather, cloth, rexine or anyother material and in this case is made of plastic. Articleof plastic is generic description of any article whilesuitcase gives specific meaning. Specific description willprevail over general meaning.


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Case Study 9; specific Vs. generalCase Study 9; specific Vs. general

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Appellant Jyoti IndustriesRespondent Commissioner of Central Excise


Facts of thecase

Appellant is manufacturer of kitchen sink made of steel

Question What is the appropriate classification?- 7323: Table or other household articles made of iron

and steel- 7324: Sanitary ware

Conclusion Classifiable under 7324

Reasons A kitchen sink is not used as article of general natureeither on the table or the kitchen. The sink is connected tothe kitchen drainage system of a building and thereforeclearly known to be sanitaryware as it performs thefunction of sanitation.


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Case Study 10; last in the orderCase Study 10; last in the order

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Appellant Betts India LimitedRespondent Commissioner of Customs


Facts of thecase

The appellant manufactured plastic laminated filmscontaining two layers of plastic followed by aluminum

foil and thereafter plastic filmQuestion What is the appropriate classification?

- 3920: Other plates, sheets, films and strips of plastic- 7607:Aluminum foil whether or not backed with plastic

Conclusion Classifiable under 7607

Reasons Equally classifiable under 3920 or under 7607. Applyingthe last in the order rule, item to be appropriatelyclassified under 7607.


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Case Study 11; trade parlance testCase Study 11; trade parlance test

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Appellant Alpine IndustriesRespondent Commissioner of Central Excise


Facts of thecase

The appellant manufactured lip save, a cream to protectlips in high altitude areas. The product had medicinal

attributes.Question What is the appropriate classification?

- 3003: medicaments- 3304: preparations for the care of skin other than

medicaments

Conclusion Classifiable under 3304Reasons Lip Save is a kind of barrier cream or a protective

cream against skin irritants. Applying the trade parlancetest, the cream is essentially known as skin care creamand not a medicament.


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Case Study 12; MRP based valueCase Study 12; MRP based value

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Appellant Kripal DrinksRespondent Commissioner of Central Excise


Facts of thecase

The goods manufactured by the Appellant wereassessable under MRP. The Appellant advertised in

papers price for sale of their product, which was less thanthe price printed on the package

Question Whether to adopt the price advertised or the priceprinted on the package?

Conclusion Price printed on the package to be adopted

Reasons MRP under the provisions of SWMA means maximumoffer price to the customer and actual price of offer maybe lesser than such maximum. Further, SWMA providesMRP to be printed on package and the printed price onthe package is the price to be considered for valuation.


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Case Study 13; Not for retail saleCase Study 13; Not for retail sale

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Appellant Controls & Switchgears ContractorsRespondent Commissioner of Central Excise


Facts of thecase

The Appellant manufactured goods classfiable under8536.90, which was notified for assessment under MRP.

The goods so manufactured were specifically meant forindustrial use as raw material and disclosure to this effectwas also made on the package.

Question Whether assessable under MRP based valuation?

Conclusion Goods to be assessed under transaction value

Reasons Provisions of SWMA apply only when goods sold aremeant for retail sale. Considering the specific nature ofgoods, the transaction cannot be regarded as sale meantfor retail trade.


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Case Study 14; input or capital goodsCase Study 14; input or capital goods

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Appellant Associated Cement Company LimitedRespondent Commissioner of Central Excise


Facts of thecase

Assessee is a manufacturer of cement and it purchasedmaintenance items like oxygen gas (used for repair);

cement used for maintenance of building; steel, channels,pipes for structural maintenance.

Question Whether the goods purchased qualify as inputs or capitalgoods?

Conclusion Goods purchased are not inputs or capital goods and

therefore not entitled for cenvat credit.Reasons Maintenance items cannot be said as used in or in relation

to manufacture of goods. Though they are used in thefactory of manufacture, they are not connected to theprocess of manufacture.


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Case Study 15; meaning of inputCase Study 15; meaning of input

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Appellant J K Cotton Spinning & Weaving MillsRespondent STO, Kanpur


Facts of thecase

The Appellant is manufacturer of cotton textiles. Itpurchased drawing material for designing of textiles to be

manufacturedQuestion Whether the items purchased by the Appellant qualify as

inputs

Conclusion Yes, items purchased are inputs

Reasons The items purchased by the Appellant are used in themanufacture of goods. The process in the manufacturenot to be limited to production process but to encompassall processes from begin to end, which are directly relatedto actual production. In the instant case, designing is tobe considered part of the manufacturing process.


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Case Study 16; capital goodsCase Study 16; capital goods

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Appellant Ruchi Health Foods

Respondent Commissioner of Central Excise


Facts of thecase

The appellant purchased computer which helped inmonitoring the equipment involved in the manufacturing

process. Office equipments are not considered as capitalgoods

Question Whether credit is allowable on excise duty paid onpurchase of computer as capital goods?

Conclusion Yes

Reasons Computer was considered as necessary for manufacture,though not directly used in the process but which isrequired for effectively monitoring the equipments thatare involved in the manufacturing process. As such, theyare connected with the manufacturing process.


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Thank YouThank You

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Presenters Contact details:Presenters Contact details:

Deepak Kumar Jain BDeepak Kumar Jain B

Senior Manager, BSR & CoSenior Manager, BSR & Co

Tel: +91 98809 23240Tel: +91 98809 23240

Email :Email : [email protected]@kpmg.com

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