2013 (5) TMI 379 - HC - Central Excise

Activity of packing carried on at godown at Bhivandi - Whether would amount to manufacture as per Section 2(f)(iii) of the Central Excise Act, 1944? - Held that - The issue as to whether the Petitioners are engaging in the manufacture of excisable goods within the meaning of Section 2(f)(iii) would have to be determined on the basis of facts and after an adjudication in pursuance of a notice to show cause. This is not a matter which can be decided on the basis of affidavits, in a petition under Article 226. A notice to show cause shall be issued to the Petitioners within a period of three weeks from today and adjudication shall be completed after allowing an opportunity of being heard to the Petitioners within a period of three months thereafter. In the event that the Petitioners make an application, in the meantime, for the clearance of the goods which have been detained against payment of central excise duty, such a request shall be considered expeditiously.

Summary

Issues:
1. Whether the activity of packing at the godown amounts to manufacture under the Central Excise Act, 1944.
2. Validity of the detention memo dated 2 March 2013.
3. Whether the Petitioners were clearing spares parts without duty payment.
4. Determination of the nature of activities carried out by the Petitioners.
5. Interpretation of Section 2(f)(iii) of the Central Excise Act.
6. Jurisdiction of the High Court under Article 226 of the Constitution.
7. Issuance of a notice to show cause and completion of adjudication.
8. Rights and contentions of the parties to be kept open.

The petitioners sought a declaration that the packing activity at their godown does not constitute manufacturing under the Central Excise Act and requested the withdrawal of a detention memo dated 2 March 2013. The petitioners, engaged in material handling equipment trading, were accused of clearing vehicle parts without duty payment. The Revenue alleged evasion of duty amounting to Rs.1.93 crores and seized goods worth Rs.1.23 crores. The dispute centered on whether the packing and labeling activities constituted manufacturing under Section 2(f)(iii) of the Act, involving marketability of goods stored at the godown.

The Revenue argued that the packing and labeling activities were essential for making goods marketable, asserting that the stored goods were parts of vehicles falling under the Central Excise Tariff Act. The High Court declined to entertain the petition under Article 226, emphasizing the need for factual determination through adjudication post a show-cause notice. The court directed the Revenue to issue a show-cause notice within three weeks, with adjudication to be completed within three months, ensuring the parties' rights and contentions remained open for further proceedings.

The court clarified that its observations would not hinder the adjudication process and allowed the petitioners to apply for detained goods' clearance against central excise duty payment, which would be expedited according to the law. No further directions were deemed necessary, and the petition was disposed of, maintaining the parties' rights and contentions for the upcoming adjudication following the show-cause notice.