2007 (3) TMI 22 - AT - Central Excise

Manufacture Department contended that the appellant activity of re-labelling the goods by removing the supplier s label amount to manufacture and accordingly demanded duty and penalty Authority rejected the department contention and drop the demand of duty and penalty

Summary

Issues: Whether the operations carried out by the respondents on imported goods amount to "manufacture" in terms of Chapter Note 5 to Chapter 38 of the CETA Schedule.

Analysis:
1. The appeal was filed by the Revenue against the respondents, who were manufacturers of "Lubricating Oil Additives" and also registered dealers trading in imported additives. The Revenue alleged that certain operations conducted by the respondents on imported goods amounted to "manufacture" under Chapter Note 5 of the CETA Schedule, requiring payment of excise duty.
2. The Revenue issued show-cause notices (SCNs) for three periods, alleging that the respondents re-labelled imported additives, conducted sample testing, and sold the goods under their own brand name, which, according to the Revenue, transformed the goods into a new excisable product.
3. The key question was whether the activities of re-labelling, sample testing, and supplying test certificates constituted "manufacture" under Chapter Note 5. The Revenue argued that these operations made the goods marketable and, therefore, attracted excise duty.
4. The respondents, on the other hand, argued that the operations were superficial and done to comply with legal requirements, not to make the goods marketable. They relied on legal precedents and argued that the activities did not fall within the scope of Chapter Note 5.
5. The Tribunal analyzed the Board's instructions and circulars regarding similar activities in the past. It was noted that the circular withdrawing previous instructions had no retrospective effect. Therefore, the Tribunal applied the earlier instructions to determine whether the respondents' activities amounted to "manufacture" under Chapter Note 5.
6. The Tribunal held that the respondents' actions, such as labelling the barrels with their name and address, were done to comply with standards and legal requirements, not to render the goods marketable. The Tribunal found that the operations did not involve repacking from bulk to retail packs and did not meet the criteria for "manufacture" under Chapter Note 5.
7. Additionally, the Tribunal found that other operations, such as re-branding and sample testing, were also not aimed at making the goods marketable. These actions were deemed necessary for quality assurance and customer satisfaction, rather than for commercial purposes.
8. Ultimately, the Tribunal dismissed the Revenue's appeal, concluding that the respondents' activities did not amount to "manufacture" under Chapter Note 5, and therefore, excise duty was not applicable.