2010 (7) TMI 1124 - HC - Central Excise

Summary

Issues Involved:
1. Whether the processes undertaken by the assessee amount to manufacture as per Chapter Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985.
2. Whether the relabelling of Histic tablets constitutes manufacture.
3. Whether the rectification of Pen-G Acylase constitutes manufacture.

Issue-wise Detailed Analysis:

1. Whether the processes undertaken by the assessee amount to manufacture as per Chapter Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985:

The primary legal question raised is whether the processes of re-labelling, repacking, reblending, milling, blending, sifting, washing, and chemical solvent treatment undertaken by the assessee in their factory amount to manufacture under Chapter Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985. According to Section 2(f) of the Central Excise Act, 1944, manufacture includes any process incidental or ancillary to the completion of a manufactured product and any process specified in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985, as amounting to manufacture. Chapter Note 11 specifies that labeling, relabelling of containers, repacking from bulk packs to retail packs, or any treatment to render the products marketable to the consumer shall amount to manufacture.

2. Whether the relabelling of Histic tablets constitutes manufacture:

The court examined the case of Histic tablets, where the only process undertaken was the correction of the maximum retail price (MRP) on the containers/strips. The court held that this action does not amount to relabelling of the containers as per Chapter Note 11 of Chapter 29. The court emphasized that relabelling must be coupled with repacking from bulk packs to retail packs to fall within the ambit of the Chapter Note. Since the process did not involve repacking from bulk to retail packs, the court upheld the Tribunal's order that the relabelling of Histic tablets did not constitute manufacture.

3. Whether the rectification of Pen-G Acylase constitutes manufacture:

In the case of Pen-G Acylase, the substance was returned to the assessee for rectification due to defects. The assessee argued that the rectification did not amount to manufacture as the nature of the goods did not change, and excise duty had already been paid. The court, however, noted that the defective material underwent processes such as milling, blending, sifting, and repacking, resulting in a new batch number, lot number, and expiry date. The court held that these processes rendered the product marketable, thus amounting to manufacture under Chapter Note 11 of Chapter 29. The court emphasized that the treatment given to the defective material to make it marketable constituted a manufacturing process by deemed fiction of the Chapter Note.

The court also addressed the argument regarding Rule 173 (4) of the Central Excise Rule, 1944, which allows goods to be removed without payment of duty if not subjected to any process amounting to manufacture. The court clarified that since the rectification process amounted to manufacture, the product was exigible to duty.

Conclusion:

The court concluded that the processes undertaken for Histic tablets did not constitute manufacture, thus ruling in favor of the assessee for this issue. However, the processes undertaken for Pen-G Acylase constituted manufacture, thus ruling in favor of the Revenue for this issue. The appeal was disposed of accordingly with no costs.