2020 (2) TMI 1200 - HC - Central Excise

Process amounting to manufacture or not - repacking of various excisable goods - goods were received in bulk and they were packed in individual bottles with hologram and barcodes - value addition taking place or not - HELD THAT - Facts of the case makes it very clear that the assessee / respondent before this Court were engaged in trading and telemarketing of various goods and also in selling medicines manufactured by M/s. Davo Laboratories and Balchem Laboratories through VPP. They were also giving advertisement on television and other media. The most important aspect of the case is that the assessee/ respondent before this Court received the medicines duly duty paid from the manufacturers in a packed form mentioning therein the retail price. The undisputed facts also reveal that after receiving bottles of medicines in the packets, the assessee has just fixed the hologram and the barcode to avoid duplicity and an outercover was placed to ensure safe transportation. It certainly does not amount to the process of manufacture. It is the process which is being carried out by the Companies like Flipkart, Amazon, etc,. The circular issued by the Board which has been referred by the Appellate Tribunal dated 08/12/2011 is very much applicable in the present case - Keeping in view the circular, there is admittedly no value addition. The goods are sold at the same MRP to the consumer. It is nobody s case that the goods are sold above the MRP to the consumer. The goods received by the vendor are already in a prepacked form and bears necessary declaration including MRP as prescribed under the statutory provisions and they have already been subjected to Excise Duty earlier. In the present case the respondent assessee, neither replaces nor alters the retail packet or the declaration affixed therein and, therefore, the Tribunal was justified in allowing the appeal preferred by the assessee - Decided in favor of assessee.

Summary

Issues involved:
Central Excise Duty evasion through repacking of excisable goods.

Analysis:
The judgment by the High Court of Madhya Pradesh involved the issue of Central Excise Duty evasion through repacking of excisable goods. The case arose from an order passed by the Central Excise and Service Tax Appellate Tribunal, where the respondent was alleged to be engaged in repacking excisable goods without paying the necessary duties. The authorities concluded that repacking the goods amounted to manufacturing under specific Chapter Notes of the Central Excise Tariff Act 1985. Several show cause notices were issued, and a substantial amount of Central Excise Duty was proposed to be recovered from the respondent.

The Appellate Authority considered the respondent's activities as amounting to manufacturing and demanded duty along with penalties. However, the High Court referred to a circular issued by the Board, clarifying that excise duty would not be attracted in cases where there is no value addition in repacking pre-packed duty paid retail goods. The Court found that the respondent's actions were similar to those of e-commerce companies like Flipkart and Amazon, where goods are received in prepacked form and simply repackaged for delivery without altering the retail pack or declarations affixed therein.

The Court emphasized that in the present case, there was no value addition, and the goods were sold at the same MRP to consumers. Since the goods were already duty paid and in prepacked form with necessary declarations, the Court agreed with the Tribunal's decision to allow the appeal filed by the respondent. The judgment concluded that no substantial question of law arose in the appeal, and admission was declined. The record was to be returned to the Department, and a copy of the order was to be placed in the record of the case.

In summary, the judgment addressed the issue of Central Excise Duty evasion through repacking of excisable goods. It highlighted the importance of considering value addition in determining the applicability of excise duty and referred to a circular clarifying that repacking pre-packed duty paid retail goods without value addition does not attract excise duty. The Court found the respondent's actions akin to those of e-commerce companies and upheld the Tribunal's decision to allow the appeal, declining the admission of any substantial question of law.