CESTAT removes central excise duties, penalties arising from the contract for the retail packaging of “baby and clinic diapers”, “sanitary napkins”


Godrej - CESTAT - Customs duties - penalties - clinical diapers - sanitary napkins - Taxscan

In the great relief given to Godrej, the Customs, Excise and Service Tax Appeals Tribunal (CESTAT), Mumbai Bench removed central excise duties, penalties arising from a contract for l ‘retail packaging of’ baby and clinic diapers’ and ‘sanitary napkins’.

The appellants, namely Godrej Hygiene Products Ltd. and Y & Associates, entered into a contract on June 22, 2007 for the retail packaging of “baby and clinic diapers” and “sanitary napkins” which continued until June 2011. Pursuant to the agreement, M / s Godrej Hygiene Products supplied “diapers” and “packaging material” as well as specifications to Y & Associates who were to take care of packaging and storage with the responsibility to comply with legal requirements .

In notification no. 10/2010-CE of February 27, 2010 by inserting these descriptions to the serial number. 96B and serial number. 96C in notification no. 4/2006-CE of March 1, 2006 despite which the goods were cleared without payment of the resulting levy.

M / s Y & Associates were held liable for a fee of ₹ 1,26,51,977 for undertaking “manufacture” within the meaning of Section 2 (f) (iii) of the Central Excise Act, 1944, read with the third schedule, as well as with interest under Article 11AB of the Central Excise Law of 1994, as well as a fine of a similar amount under Article 11AC of the Law on Excise central excise duty of 1944 while M / s Godrej Hygiene Products Ltd was imposed with a fine of 25,000,000. The goods, valued at 4,30,25,400 which were cleared between February 27, 2010 and June 30, 2011, were confiscated but could be redeemed upon payment of a fine of 1,000,000. Therefore, these two appeals have been filed and which, due to common issues, are being addressed for resolution in these proceedings.

Lawyer Rajesh Ostwal, on behalf of the appellants, challenges coverage under Schedule 3 of the Central Excise Act, 1944 without whose components which constitute the “manufacture” in section 2 (f) of the Central Excise Act, 1944 are not relevant in determining the excise

Mr. Ostwal added that it was intended to be covered by section 2 (f) (iii) of the Central Excise Act, 1944 at serial number. 55 of the third annex, is only the part of the description corresponding to heading no. 4818 of the schedule to the Central Excise Tariff Act, 1985 which does not relate to the disputed goods corresponding to the tariff item. 4818 4010 and 4818 4090 and others.

On the other hand, the Department argued that the appellants had neither challenged the imposition of the tax on the disputed goods with effect from February 27, 2010, nor that the goods imported, in bulk by M / s Godrej Hygiene Products Ltd , were repackaged in the retail trade. units by M / s Y & Associates.

Judicial Member’s Coram, Ajay Sharma, and Technical Member, CJ Mathew, considered that a partial inclusion in Schedule 3 of the Central Excise Act, 1944 did not justify the entire heading, of which this extraction is undeniably part, to be legislated as the extent to which “deemed” manufacturing can be extended. Thus, “baby diapers” and “sanitary napkins” are not “paper handkerchiefs or handkerchiefs, handkerchiefs and napkins of paper pulp, paper, cellulose wadding or fiber webs. of cellulose ”in the third annex of the Central Excise Law, 1944.

The Tribunal found that the impugned order erred in disregarding the scope of the legislative intent of the “deemed” manufacture of goods listed in Schedule 3 to the Central Excise Act, 1944, and thereupon fragile livelihood, demand for rights and imposition of penalties cannot afford to survive

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