2014 (2) TMI 60 - HC - Central Excise

Re-labelling of products - inscription of the name and other details on imported goods - Miscellaneous Chemical Products - whether the operations carried on by the first respondent/assessee amounted to manufacture in terms of Note 5 to Chapter 38 of the CETA Schedule - Held that - it is evidently clear that the inscription of the name and other details by the first respondent/assessee was a statutory requirement and cannot be said to be covered under Note 5 of Chapter 38 of CETA Schedule. All the barrels have not been tested and samples are drawn from one barrel in each consignment with a view to ensure with the quality of the product which has been imported. Since the cap which was used to seal the barrel had been removed while taking the samples such barrels have to be re-capped. That apart the Original Authority noticed that the entire activities done by the first respondent/assessee is with the knowledge of the customers and not at the back of them and the activity was not for the purpose of rendering the product marketable since the product was assured by a buyer and there was no uncertainty about its sale. Therefore what has been done by the first respondent/assessee was totally unrelated to the sale of the product and such activity would fall outside the scope and purview of Note 5 of Chapter 38 of the CETA Schedule. Activities done by the first respondent/assessee is not in any way transform the imported product into different product which was distinct in name character and use and were not incidental or ancillary to the completion of the finished product and thus not covered by the definition of manufacture under Section 2(f) of the Central Excise Act 1944 read with Note 5 of Chapter 38 of the CETA Schedule - Revenue has not made out any ground to interfere with the order passed by the Tribunal - Decided against Revenue.

Summary

Issues Involved:
1. Whether the labelling and re-labelling activity performed by the respondent amounts to "manufacture" as per Note 5 of Chapter 38 of the Central Excise Tariff Act, 1985.
2. Whether the first respondent was obliged to follow the Standards of Weights and Measures Act, 1976 and the Rules made thereunder.

Detailed Analysis:

Issue 1: Labelling and Re-labelling as "Manufacture"
The primary question was whether the activities performed by the first respondent, which included labelling and re-labelling, amounted to "manufacture" under Note 5 of Chapter 38 of the Central Excise Tariff Act (CETA), 1985. Note 5 states, "In relation to products of this Chapter [other than products of heading No.38.08] labelling or re-labelling of containers and re-packing from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture."

The first respondent imported additives in barrels with the name and identity of the foreign supplier. These were removed and replaced with the first respondent's name, address, and brand name. Samples were tested, and test reports were prepared, but the respondent treated this activity as trading and did not pay excise duty. The Department issued show cause notices alleging that these activities amounted to "manufacture" and invoked the extended period of limitation, alleging suppression of facts by the respondent.

The Tribunal rejected the Department's appeal, relying on the Board's instructions and the Supreme Court's decision in Paper Products Ltd. vs. Commissioner (1999 (112) ELT 765 (SC)), which clarified that pasting stickers to comply with statutory requirements did not amount to "manufacture." The Tribunal found that the re-labelling was to meet the Standards of Weights and Measures [Packaged Commodities] Rules, 1977 and not to render the goods marketable. The imported barrels were sold as such in India, and the re-labelling did not involve re-packing from bulk to retail packs.

Issue 2: Compliance with Standards of Weights and Measures Act, 1976
The Revenue argued that the first respondent did not comply with Rule 33 of the Standards of Weights and Measures [Packaged Commodities] Rules, 1977, which requires the name and address of the manufacturer to be declared on the package. The respondent had deleted the manufacturer's details and declared only the importer's details. However, the Original Authority found that the respondent had sold the goods under dealer invoices, which included the original supplier's particulars, and these documents were pre-authenticated by the Central Excise Inspector. The inscription of the respondent's name and other details was to comply with statutory requirements and not to render the product marketable.

The Tribunal, supported by the Supreme Court's decision in Commissioner of Central Excise vs. Johnson & Johnson Ltd. (2005 (188) ELT 467 (SC)), held that the re-labelling did not transform the imported product into a different product distinct in name, character, and use, and thus did not constitute "manufacture" under Section 2(f) of the Central Excise Act, 1944, read with Note 5 of Chapter 38 of the CETA Schedule.

Conclusion:
The court concluded that the activities performed by the first respondent did not amount to "manufacture" under Note 5 of Chapter 38 of the CETA Schedule. The re-labelling was to comply with statutory requirements and did not involve re-packing from bulk to retail packs. Consequently, both appeals were dismissed, and the questions were answered in favor of the assessee. No costs were awarded.