2015 (5) TMI 700 - SC - Central Excise

Manufacturing process or not - Repacking and / or labelling - Products purchased in bulk quantities in bulk packing & thereafter process is undertaken - dyes & dye bases, napthols & fast bases, and chrome pigments - Held that - It is clear from the plain language of the Chapter Notes which use both the expression or as well as and at different places. Thus, by using the two expressions, the intention of the legislature is manifest that insofar as the process of label or relabeling of containers is concerned, it would amount to manufacture only if the other condition, viz., repacking from bulk to retail pack is also satisfied. The aforesaid view gains credence from other fact, i.e., where the second process is treated as manufacture, viz., adoption of any other treatment to render the product marketable to the consumer , the expression any other treatment and that too, with intention to render it marketable clearly shows that insofar first part is concerned, both the conditions have to be satisfied. Insofar as the napthols & fast bases is concerned, even from the order of the Commissioner, it becomes clear that though there was repacking and even relabeling, the repacking of bulk was not into retail packing as the goods after repacking were supplied to industrial consumers on wholesale basis. It is specifically stated so by the assessee which fact is not denied by the Commissioner.Therefore, both the conditions mentioned in the Chapter Notes are not satisfied.Insofar as the chrome pigments are concerned, the assessee only obliterated the name which was appearing on containers and the name of the assessee along with the logo is stenciled on such container that may amount to relabeling. However, the process of repacking was not undertaken at all by the assessee. Thus, here also both the eligibility conditions which are to be fulfilled have not been satisfied. - Decided against the revenue.

Summary

Issues:
- Whether the process undertaken by the respondent-assessee in three products amounts to manufacture.
- Interpretation of Chapter Note 11 of Chapter 29 and Chapter Note 3 of Chapter 32.
- Application of conditions for labeling, relabeling, and repacking as per the Chapter Notes.
- Assessment of repacking and labeling processes for napthols & fast bases and chrome pigments.
- Determination of excise duty liability based on the fulfillment of conditions.

Analysis:
The Supreme Court addressed the issue of whether the process carried out by the respondent-assessee on three products constituted manufacturing. The products in question were dyes & dye bases, napthols & fast bases, and chrome pigments falling under Chapter 29 and Chapter 32 of the Central Excise Tariff Act, 1985. The dispute arose from the process of repacking and labeling undertaken by the assessee after purchasing the products in bulk from manufacturers. The appellant sought to include the respondent-assessee under Chapter Notes 11 and 3, which extend the definition of 'manufacture' to processes like labeling, relabeling, and repacking to make the product marketable to consumers.

The Court analyzed Chapter Note 11 of Chapter 29 and Chapter Note 3 of Chapter 32, which mention that labeling, relabeling, or repacking from bulk to retail packs amount to manufacture. The appellant argued that fulfilling either of the processes should be considered manufacturing. However, the Court disagreed, emphasizing that both conditions must be met for the process to qualify as manufacture. The legislative intent, as reflected in the language of the Chapter Notes, required satisfying both conditions simultaneously.

Regarding the specific products, the Court found that for napthols & fast bases, repacking was not done into retail packs but supplied to industrial consumers wholesale, failing to meet the conditions for manufacture. Similarly, for chrome pigments, although relabeling was done, repacking did not occur, leading to non-compliance with the eligibility criteria for manufacturing. Consequently, the Court dismissed the appeal, as the requirements under the Chapter Notes were not fulfilled for the products in question, resulting in no excise duty liability being imposed on the respondent-assessee.

In conclusion, the judgment clarified the interpretation of Chapter Notes 11 and 3, emphasizing the need to satisfy both labeling, relabeling, and repacking conditions for a process to constitute manufacturing under the Central Excise Tariff Act. The decision provided a detailed analysis of the specific processes undertaken by the respondent-assessee on the products in question, highlighting the importance of meeting all eligibility criteria outlined in the Chapter Notes to determine excise duty liability accurately.