2008 (5) TMI 486 - AT - Central Excise

Summary

Issues:
1. Differential duty demand for the period April 2002 to September 2006 on base paint.
2. Interpretation of whether the clearance made by the assessee was of a "pre-packed commodity for retail sale."
3. Validity of the permission granted by the Central Government to clear base paint in non-standard quantities.
4. Whether blending of base paint with colorant constitutes "manufacture" under Section 2(f) of the Central Excise Act.

Analysis:
1. The case involves a differential duty demand of over Rs. 8.8 crores on base paint for the period April 2002 to September 2006. The appellants, engaged in the manufacture of paints, varnishes, etc., faced penalties along with the duty demand. The Revenue objected to the MRP-based valuation done by the assessee, claiming that the clearance made was not of a "pre-packed commodity for retail sale."

2. The Tribunal found a prima facie case for the appellants based on the permission granted by the Central Government to clear base paint in non-standard quantities. The Central Government's orders in 1996 and 2002 permitted the assessee to declare the retail sale price on every package containing the base paint. Additionally, a circular clarified that blending base paint with colorant did not constitute "manufacture" under the Central Excise Act. The product received by the ultimate consumers was deemed not different from the one cleared by the assessee.

3. The Tribunal granted a waiver of pre-deposit and stay of recovery concerning the duty and penalty amounts, considering the established prima facie case for the assessee. The permission granted by the Central Government and the subsequent amendment to the Third Schedule to the Rules were crucial in determining the validity of the appellants' actions, which were not brought to the notice of the Bench in a previous stay order.

In conclusion, the judgment analyzed the differential duty demand on base paint, the interpretation of the clearance as a pre-packed commodity for retail sale, the validity of the Central Government's permission for non-standard quantities, and the determination of whether blending base paint with colorant constitutes "manufacture." The Tribunal's decision favored the appellants based on the permissions granted and the lack of differentiation between the product cleared and received by consumers.