2003 (7) TMI 116 - AT - Central Excise

Summary

Issues:
1. Whether the processes undertaken by the appellant amount to manufacture.
2. Whether the extended period of limitation is applicable.
3. Whether the treatment rendered to the imported goods amounts to manufacture.
4. Whether the activities undertaken by the appellant constitute incidental or ancillary processes to the completion of the manufactured product.

Analysis:
1. The appellant was engaged in marketing recorded compact discs after importing them in boxes of 50, repacking each disc in jewel boxes with an inlay card, and shrink-wrapping them for wholesale. The department alleged these processes amounted to manufacture, invoking the extended period of limitation. The appellant argued that mere packing did not constitute manufacture, supported by the test from U.O.I. v. Delhi Cloth & General Mills, emphasizing the emergence of a new article. The Tribunal found no new article emerged, maintaining the discs' original form, thus ruling against manufacture.

2. The Commissioner justified the extended limitation period based on departmental acknowledgments and Note 6 to Section XVI of the tariff. However, the Tribunal disagreed, stating the appellant's activities did not involve converting incomplete articles, and the packing was not transformative. Consequently, the extended limitation period was deemed inapplicable.

3. The Tribunal referenced the Supreme Court's decision in CCE v. Eastend Paper Industries Ltd., highlighting that activities necessary to make goods marketable constitute manufacture. However, the Tribunal differentiated the appellant's case, emphasizing that the packing was ancillary and incidental, not integral to the manufacturing process. Therefore, the packing and inlay card insertion did not amount to manufacture, exempting the appellant from duty and penalty.

4. The judgment emphasized that incidental activities, like packing and labeling, do not necessarily constitute manufacture unless they are integral to the production process. Citing precedents, the Tribunal clarified that activities like galvanization in a different shed were considered part of manufacturing, but mere incidental processes, like printing on glass bottles, were not. As the appellant's activities were deemed incidental and not transformative, they were not classified as manufacturing, leading to the appeal being allowed and the impugned order set aside.