2018 (7) TMI 1523 - AT - Central Excise

Manufacture - activity of Re packing/relabelling - Section 2(f)(iii) of Central Excise Act, 1944 - appellant are carrying out activity of procuring spare parts from various vendors, packing/repacking them into unit containers, fixing MRP label on the same and clearing it to various Dealers/Customers etc under their brand. Held that - On perusal of third Schedule for the relevant period, the goods falling under Chapter heading 3208 is covered under Sr No. 34, the goods falling under Chapter 8536 is covered under Sr. No. 93 and the goods falling under Chapter 8539 is covered under Sr No. 94 of the third Schedule issued under Section 2(f)(iii) of the Central Excise Act, 1944. Therefore on this undisputed position the goods of 8208, 8536 and 8539 when repacked/relabelled and rendered the same for marketable shall amount to manufacture. Prior to 1-6-2006 goods falls under 3208, 8536 and 8539 indeed falling under third schedule, hence repacking and relabeling of these goods was amount to manufacture. Accordingly, appellant was liable to pay duty. Extended period of Limitation - penalty u/s 11AC - Held that - Since the appellant has not considered their activity as manufacture, they have not declared and disclosed the activity and removal of the said goods without payment of duty to the department, therefore there is clear suppression of facts on the part of the appellant, hence demand for longer period sustains - penalty also upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the activity of repacking/relabeling spare parts amounts to manufacture under Central Excise Act, 1944.
2. Whether the goods procured by the appellant are covered under the third schedule of the Central Excise Tariff Act, 1985.
3. Whether the demand is time-barred due to suppression of facts by the appellant.

Analysis:
1. The appellant, engaged in manufacturing three-wheeled motor vehicles and having a Spare Parts Division (SPD), repacks and relabels spare parts procured from vendors. The department argues that this activity amounts to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944, as specified in the third schedule. The Revenue contends that excise duty based on MRP is required. The Commissioner (Appeals) upheld this view. The appellant argues that the goods are spare parts covered under a specific entry in the third schedule effective from 1-6-2006. They rely on judgments to support their position and claim no suppression of facts. The Revenue maintains the findings of the impugned order.

2. The goods procured by the appellant fall under specific chapters of the Central Excise Tariff Act. The appellant only repacks and relabels the goods without changing their classification. The goods remain classified under their original chapters after repacking. As per Section 2(f)(iii), repacking/relabeling for marketability is considered manufacture if the goods are specified in the third schedule. The goods in question fall under specific entries of the third schedule, indicating they are liable for duty as deemed manufactured goods. The insertion of a specific entry effective from 1-6-2006 does not change the liability of goods already covered under the third schedule before this date. The judgments cited by the appellant are distinguished based on the issues of classification and disputes, which do not apply to the present case. The appellant's failure to declare their activity as manufacture and the removal of goods without duty payment constitute suppression of facts, justifying the longer demand period and penalty under section 11AC.

3. The Tribunal upholds the impugned order, dismissing the appeal on 28.6.2018. The appellant is held liable to pay duty for repacking and relabeling spare parts, as the goods were covered under the third schedule before 1-6-2006. The appellant's argument regarding time-barring due to no suppression of facts is rejected, as their failure to declare the activity as manufacture constitutes suppression. The penalty imposed under section 11AC is upheld.