2022 (9) TMI 1277 - AT - Central Excise

Area Based Exemption - activity of the appellant of making nail polish from base liquer and colour solution - process amounting to manufacture or not - eligibility of Notification dated 10.06.2003 - HELD THAT - The issue involved in this appeal was considered and decided by a Division Bench of the Tribunal in GS PHARMABUTORS PVT. LTD. (UNIT-II) VERSUS ADDITIONAL DIRECTOR GENERAL, (ADJUDICATION) 2022 (2) TMI 615 - CESTAT NEW DELHI . It was held that the appellant was entitled to the benefit of the area based notification dated 10.06.2003. The appellant, therefore, for all the reasons stated in the aforesaid Division Bench decision of the Tribunal in GS Pharmabutors, would be entitled to the benefit of the area based exemption Notification dated 10.06.2003 - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of area-based exemption under Notification dated 10.06.2003 to the appellant.
2. Whether the activity of manufacturing nail polish by the appellant excludes them from availing the exemption.
3. Interpretation of the relevant clause in the exemption notification regarding the manufacturing process.
4. Comparison of the appellant's manufacturing process with the definition of manufacture under the Excise Act.

Analysis:
The appeal filed by M/s Avon Beauty Products India Pvt. Ltd. challenged the order confirming the demand of excise duty with penalty and interest, invoking the extended period of limitation under section 11A(4) of the Central Excise Act 1944. The issue revolved around the denial of area-based exemption under the Notification dated 10.06.2003 to the appellant, specifically concerning the manufacturing of nail polish. The appellant, located in Uttarakhand, commenced commercial production within the stipulated time frame and expanded its production to include nail polish. The dispute centered on whether the manufacturing process of nail polish by the appellant met the conditions of the exemption notification.

The appellant's manufacturing process involved procuring base lacquer and color solution, testing them, mixing them in a specific manner, adding colors as per formula, using a viscometer for consistency, and adding pearls for desired effects. The Department contended that the activities undertaken by the appellant did not amount to manufacturing, only basic processes like packaging and labeling. However, a Division Bench precedent was cited where it was held that the treatment given to the goods by the appellant rendered them marketable as nail enamel, thus entitling the appellant to the exemption under the notification.

The Tribunal, relying on the precedent, concluded that the appellant's manufacturing process indeed amounted to the creation of a new marketable product, making them eligible for the area-based exemption. The Tribunal set aside the order confirming the demand of excise duty, penalty, and interest, allowing the appeal in favor of the appellant. The judgment emphasized the interpretation of the manufacturing process in light of the exemption notification and the definition of manufacture under the Excise Act, ultimately ruling in favor of the appellant based on the precedent set by the Division Bench.