2002 (4) TMI 135 - AT - Central Excise

Summary

Issues involved: Determination of excisability of new product created through packaging, interpretation of manufacturing process u/s Section 2(f) of the Central Excise Act, 1944, applicability of notes to Chapters 33 and 34 of the Central Excise Tariff Act, 1985, consideration of marketability of products, and assessment of limitation period and Modvat credit eligibility.

Summary:

1. The case involved Adi Enterprises, a job worker for Johnson & Johnson, where various cosmetic products were packed into gift boxes. The primary issue was whether this packaging process created a new excisable product liable for duty, as determined by the Commissioner's order imposing duty and penalty on the appellants.

2. The Commissioner found the packaging process to constitute manufacture u/s Section 2(f) of the Act and notes to Chapters 33 and 34 of the Tariff, emphasizing the emergence of new products with distinct names. However, the Tribunal questioned the necessity of deeming provisions if the activity already qualified as manufacture, highlighting the lack of a new article with distinctive characteristics.

3. The products in question were classifiable under Chapter 33 or 34 of the Tariff, with notes stating that treatments rendering products marketable constitute manufacture. The Tribunal noted the need for the process to enhance marketability significantly to qualify as manufacture.

4. Despite arguments that the packaging made products marketable to a new consumer class, the Tribunal held that the individual items were already marketable, and combining them into sets did not increase their marketability, thus not meeting the requirements of the notes.

5. Regarding limitation, the Tribunal found the appellant's declarations sufficient, except for one item, indicating no intent to evade duty. Additionally, the Tribunal supported the appellant's entitlement to Modvat credit on inputs for duty paid on the final product, despite procedural lapses.

6. Consequently, the Tribunal allowed the appeals, setting aside the impugned order and ruling in favor of the appellants, including the non-imposition of penalties.