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2025 (4) TMI 688 - AT - Central ExciseActivity amounting to manufacture - exemption under Notification No. 88/1988-C.E. dated 01.03.1988 - products repacked by the appellants qualify as Synthetic Detergents or not - activity of repacking bulk goods into retail packages with the addition of materials such as fragrances and colors - HELD THAT - On perusal of the certificate dated 31.05.2012 furnished by the Chemical Examiner Gr.I it is found that the said laboratory has confirmed the composition of the product as Organic Surface Active Agents Fragrances and Additives. Since those materials were used by the appellants in their factory while undertaking the activities of repacking of the purchased goods from bulk to retail packs it is opined that they are confirming to the HSN explanatory notes in order to fall within the scope and ambit of Chapter sub-heading 3402 90 as claimed by them. Conclusion - Since the products in dispute are confirming to Synthetic Detergents as per the HSN explanatory notes the benefit claimed by the appellants under Notification dated 01.03.1988 should be available to them for non-payment of Central Excise duty in respect of the clearances made by them to the Khadi and Village Industries. The impugned orders to the extent the adjudged demands are confirmed therein against the appellants are not sustainable and as such are liable to be set aside - appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Qualification as 'Synthetic Detergents' Relevant legal framework and precedents: The appellants sought exemption under Notification No. 88/1988-C.E., which provides duty exemption for specific products, including 'Synthetic Detergents.' The classification of goods under the Central Excise Tariff Act and the Harmonized System of Nomenclature (HSN) Explanatory Notes is central to determining eligibility for this exemption. Court's interpretation and reasoning: The Tribunal examined evidence, including a certificate from the Chemical Examiner, confirming that the products contained Organic Surface Active Agents, Fragrances, and Additives. Based on this composition and the HSN Explanatory Notes, the Tribunal concluded that the products fell within the scope of 'Synthetic Detergents' under Chapter sub-heading 3402 90. Key evidence and findings: The Chemical Examiner's certificate dated 31.05.2012 was pivotal, confirming the product's composition. Additionally, periodic testing by other laboratories supported the appellants' claim that their products were 'Synthetic Detergents.' Application of law to facts: The Tribunal applied the HSN Explanatory Notes to the product composition, determining that the appellants' products met the criteria for 'Synthetic Detergents,' thus qualifying for the exemption. Treatment of competing arguments: The Revenue argued that the original manufacturer's classification should prevail and that repacking did not constitute manufacturing. However, the Tribunal focused on the product's composition and the HSN criteria, rather than the original classification. Conclusions: The Tribunal concluded that the appellants' products qualified as 'Synthetic Detergents,' thus allowing them to claim the duty exemption under the relevant notification. 2. Repacking and Manufacturing Activity Relevant legal framework and precedents: The legal question was whether repacking and adding materials like fragrances constituted a manufacturing process under the Central Excise Tariff Act, affecting the product's classification. Court's interpretation and reasoning: The Tribunal considered whether the repacking activity resulted in a new, distinct commodity. The Tribunal found that the addition of materials and repacking did not result in a distinct commodity but rather enhanced the existing product. Key evidence and findings: The Tribunal relied on the product's unchanged fundamental nature despite repacking and the addition of fragrances and colors. Application of law to facts: The Tribunal determined that the repacking activity did not constitute manufacturing, as no new product emerged from the process. Treatment of competing arguments: The Revenue contended that the appellants were not independent manufacturers due to the original classification. However, the Tribunal focused on the nature of the repacking activity and its impact on the product's classification. Conclusions: The Tribunal concluded that the repacking activity did not amount to manufacturing, supporting the appellants' classification and exemption claim. SIGNIFICANT HOLDINGS The Tribunal held that the products repacked by the appellants qualify as 'Synthetic Detergents' under the relevant legal framework, thereby entitling them to the duty exemption under Notification No. 88/1988-C.E. The Tribunal emphasized the importance of product composition and the HSN Explanatory Notes in determining classification and exemption eligibility. Preserve verbatim quotes of crucial legal reasoning: "Since, the products in dispute are confirming to 'Synthetic Detergents' as per the HSN explanatory notes, the benefit claimed by the appellants under Notification dated 01.03.1988 (supra), in our considered view, should be available to them for non-payment of Central Excise duty in respect of the clearances made by them to the Khadi and Village Industries." Core principles established: The Tribunal established that product classification for exemption purposes should be based on composition and relevant explanatory notes, rather than solely on the original manufacturer's classification. Final determinations on each issue: The Tribunal set aside the impugned orders confirming the demands against the appellants, allowing the appeals in favor of the appellants and affirming their entitlement to the duty exemption.
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