2012 (12) TMI 304 - AT - Central Excise

Demand of excise duty - manufacture - assembly of two or more products - manufacture of Razors and razor blades by way of assembling the components supplied by M/s. Gillette India Ltd. (GIL) Gillette Shave Gel Tubes (GSG) obtained from GIL under a promotional scheme and marketed those combination packs discounted on MRP of Rs. 85 - combination packs consisting of five twin blade cartridge having MRP of Rs. 66/- and 60 gms. tube Gillette shaving gel tube with MRP of Rs. 49 - appellant paid duty on the basis of MRP of five twin blade cartridge mainly for the reason that Gillette shaving gel tube procured by the appellant firm from GIL were duty paid. AR for respondent submits that admittedly this is a case of repacking twin blade cartridge as also the shaving gel tube in a combination pack and altering the retail sale price (MRP). As such the combination packs falls within the deemed definition of manufacture under Section 2(f)(iii) - held that - Above argument is of no avail to the respondent for the reason that Section 2(f)(iii) was introduced in the Central Excise Act, 1944 by way of amendment w.e.f. 1-3-2003, and the instant case relates to the period earlier to the amendment i.e. October and November 2003 as such deeming definition provided under Section 2(f)(iii) is not applicable to the present case. The activity of the appellant in packing the twin blade cartridge as also Gillette shaving gel tube in a combination pack and selling it at a discounted MRP of Rs. 85/- does not amount to manufacture. As no mere product has come into being the combination product does not attract incidence of excise duty. Admittedly, the appellant has paid duty on Gillette shaving gel tube while procuring them from GIL and he has paid excise duty on MRP of the twin blade cartridges while clearing the combination pack. - Demand and penalty set aside - decided in favor of assessee.

Summary

Issues Involved:
1. Whether the activity of assembling a combination pack of twin blade cartridges and Gillette shaving gel amounts to "manufacture" under Section 2(f) of the Central Excise Act, 1944.
2. Whether the appellant is liable to pay excise duty on the MRP of the combination pack as per Section 4A of the Central Excise Act, 1944.
3. Whether the penalties and interest imposed on the appellants are justified.

Issue-wise Detailed Analysis:

1. Whether the activity of assembling a combination pack of twin blade cartridges and Gillette shaving gel amounts to "manufacture" under Section 2(f) of the Central Excise Act, 1944:

The appellant argued that the activity of assembling a combination pack does not constitute "manufacture" as defined under Section 2(f) of the Central Excise Act, 1944. The Tribunal referred to several Supreme Court judgments, including D.C.M.'s case, South Bihar Sugar Mills Ltd. v. Union of India, Ujagar Prints v. Union of India, and Moti Laminates Private Ltd. v. Collector of Central Excise, Ahmedabad, which clarified that "manufacture" implies bringing into existence a new substance with a distinct name, character, or use. The Tribunal concluded that packing duty-paid shaving gel with twin blade cartridges did not transform the articles into a new product; hence, it did not amount to manufacture.

2. Whether the appellant is liable to pay excise duty on the MRP of the combination pack as per Section 4A of the Central Excise Act, 1944:

The department contended that the appellant should pay excise duty based on the MRP of the combination pack (Rs. 85/-), as per Section 4A of the Central Excise Act, 1944. The appellant had paid excise duty on the individual MRPs of the twin blade cartridges (Rs. 66/-) and the shaving gel (Rs. 49/-), totaling Rs. 115/-. The Tribunal noted that the combination pack was marketed at a discounted MRP of Rs. 85/-, and if the department's view was accepted, the appellant would be entitled to avail Cenvat credit for the excise duty paid on the shaving gel, resulting in a loss to the department. Therefore, the Tribunal found that the appellant had paid excise duty correctly, and there was no evasion of duty.

3. Whether the penalties and interest imposed on the appellants are justified:

Given the conclusion that the activity did not amount to manufacture and that the appellant had correctly paid excise duty, the Tribunal held that the penalties and interest imposed could not be sustained. The demand for excise duty, along with the interest and penalties, was set aside.

Conclusion:

The Tribunal allowed the appeals, concluding that the activity of packing twin blade cartridges and Gillette shaving gel in a combination pack did not amount to manufacture, and the appellant had correctly paid excise duty on the individual MRPs of the items. Consequently, the demand for excise duty, interest, and penalties imposed by the adjudicating authority and upheld by the Commissioner (Appeals) was set aside. The appeals were disposed of accordingly.