2011 (4) TMI 675 - AT - Central Excise

Manufacture - Marketable - section 2(f) - manufacture of various food products and one of those products being infant foods which is sold under the brand name lectogen and cerelac - held that - the process of intermixing of vitamins is not done in the course of process of manufacture of final product i.e. baby food. But it is an independent process, as a result of which a distinct commodity emerges which is thereafter utilized as and when required as the input for the manufacture of final product. - the activity undertaken by the assessee is nothing but the manufacture. Regarding marketability - Identical product versus Similar product - the intermixture of vitamin produced on completion of the process of intermixing is captively used - intermixture of vitamin has shelf life - it is absolutely clear that the product in question is for all purposes a complete product, and it does not require any further processing for its consumption in the manufacture of the final product. Similar such product was procured by the appellants from the market which is established by the invoices placed on record, and the fact stands corroborated by the statement of the officers of the appellant company. All the ingredients of the marketability aspect of the product in question stand fully satisfied and established. Meaning and scope of the term Consumer - Charter Note 11 to Chapter 29 - held that - Merely because the product in question is not being bought and sold in the market or that there is no activity of repacking from the bulk packs to the retail packs, the product cannot escape the applicability of the latter portion of the Note 11 of the said Chapter. It is not only the activity of mixing of different vitamins but the collection thereof in containers and labeling with specific name followed by the product being stored in the shelf and used as and when required by the appellants and thus is captively consumed and at the same time. The word consumer in the said Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985 means any consumer including an industrial consumer and the said word is not related exclusively to retail consumer. The expression any other treatment is not confined to treatment in the nature adopting the attributes of the marketability to a product having absolutely no marketability prior to such treatment. The said expression includes any treatment including the treatment adopted to acquire of those attributes of marketability which the product did not possess prior to such treatment even though the product might have possessed other attributes of marketability. It is immaterial whether the product which are to be treated for rendering them marketable were having any attribute of marketability or not prior to adoption of any such treatment. The expression retail pack does not relate to retail consumer. It refers to the circumstances in which the retail pack is made available to a consumer who may procure such goods even in bulk.

Summary

Issues Involved:
1. Whether the activity undertaken by the assessee constitutes manufacture conceptually/first principle while applying the twin test of manufacture and marketability.
2. Whether the activity undertaken by the assessee stands covered by the provisions of Section 2(f) of the Central Excise Act, 1944 read with Note 11 of Chapter 29.
3. What is the meaning of the word 'consumer' in Note 11 to Chapter 29.

Detailed Analysis:

Issue 1: Conceptual Manufacture and Marketability
The Tribunal examined whether the process of mixing various vitamins to create an intermixture constitutes manufacture. The process involves mixing vitamins in predetermined ratios using an electromechanical device, resulting in a product with distinct characteristics and uses compared to the individual vitamins. The Tribunal concluded that the process met the criteria for manufacture as defined under Section 2(f) of the Central Excise Act, 1944. The resultant product, known as a vitamin mix, has a distinct identity and use, different from the individual vitamins, thereby satisfying the twin tests of manufacture and marketability.

Issue 2: Coverage under Section 2(f) and Note 11 of Chapter 29
The Tribunal analyzed whether the activity fell within the scope of Section 2(f) of the Central Excise Act, 1944, and Note 11 of Chapter 29. Note 11 states that any treatment rendering a product marketable to the consumer amounts to manufacture. The Tribunal noted that the process of mixing vitamins, labeling, and storing the resultant product for use in manufacturing infant foods constitutes a treatment that renders the product marketable. The Tribunal emphasized that the term 'treatment' includes any process that confers marketability attributes to a product, even if it already possesses some marketability attributes. Therefore, the activity undertaken by the assessee is covered by the provisions of Section 2(f) read with Note 11 of Chapter 29.

Issue 3: Meaning of 'Consumer' in Note 11 to Chapter 29
The Tribunal interpreted the term 'consumer' in Note 11 to mean any consumer, including industrial consumers, and not exclusively retail consumers. The Tribunal rejected the argument that the term 'consumer' should be limited to retail consumers, stating that the Note does not impose such a restriction. The Tribunal clarified that the term 'consumer' refers to anyone who uses the product, including the manufacturer who captively consumes the product. This interpretation aligns with the purpose of Note 11, which is to expand the scope of 'manufacture' to include any treatment rendering the product marketable.

Conclusion:
The Tribunal concluded that the activity of mixing vitamins to create an intermixture constitutes manufacture under Section 2(f) of the Central Excise Act, 1944, and Note 11 of Chapter 29. The product is marketable and satisfies the criteria for excisability. The term 'consumer' in Note 11 includes any consumer, not just retail consumers. The Tribunal upheld the demand for duty and penalties, subject to re-quantification based on the Supreme Court's ruling on the extended period of limitation. The appeals were disposed of accordingly.