2013 (9) TMI 242 - AT - Central Excise

Packing of Goods From Regular to Small Packages - Whether the packing of soda ash from regular marketable packages into smaller packs was a manufacture or not - Held that - The soda ash in bags of 50/75 kgs. were mainly meant for industrial consumers to whom the appellants had sold from their Registered premises at Rishra by raising dealer s excise invoices and passed on the element of excise duty paid by the manufacturer M/s. Tata Chemicals Ltd. - the customers were eligible to avail Modvat credit/Cenvat credit on the duty paid on soda ash - It was admitted by the Appellants that the soda ash were repacked into smaller packs of 500 gm/1 kg to cater the needs of the small household customer i.e. retail consumers at the behest of M/s. Tata Chemicals - Obviously, these customers were not interested in availing Modvat/Cenvat credit on the amount of duty paid on the soda ash. Therefore, the activity of re-packing from bags of 75/50 kgs., even if these were termed as standard packs , cannot lose the characteristic of bulk packs , since these were meant for Industrial consumers, whereas smaller packs of 500 gm/1 kg made out of such bulk packs, were to meet the requirement of retail customers and hence safely be concluded as retail pack . The process of transferring/converting the bulk packs of soda ash in bags of 75/50 kg into smaller/retail packs of 500 gms/1 kg and affixing with the brand name of M/s. Tata Chemicals would result into manufacture within the meaning of Section 2(f) of Central Excise Act, 1944 and leviable to duty - The Adjudicating Authority had rightly confirmed the demand invoking the extended period - Also since, there was an element of suppression and non-disclosure of the activity of re-packing from bulk pack to smaller packs and selling the same affixing brand name of M/s. Tata Chemicals Ltd. from their unregistered premises, without payment of duty and without disclosing their said activity to the department, the penalties imposed on both the appellants were also justified - Decided against the assessee.

Summary

Issues Involved:
1. Whether repacking of soda ash from bulk or standard packages of 75/50 kgs. into smaller packing of 500 gm/1 kg falls within the scope of Chapter Note 10 of Chapter 28 of CETA, 1985 and results into "manufacture" as defined under Section 2(f) of the Central Excise Act, 1944.
2. Whether the demand is barred by limitation.

Issue-wise Detailed Analysis:

1. Whether repacking of soda ash from bulk or standard packages of 75/50 kgs. into smaller packing of 500 gm/1 kg falls within the scope of Chapter Note 10 of Chapter 28 of CETA, 1985 and results into "manufacture" as defined under Section 2(f) of the Central Excise Act, 1944:

The Tribunal examined the argument that the repacking of soda ash from 75/50 kgs. bags into smaller packs of 500 gm/1 kg constitutes "manufacture" under Chapter Note 10 of Chapter 28 of CETA, 1985. The relevant Chapter Note states: "In relation to products of this chapter, labelling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to 'Manufacture'."

The appellants contended that the soda ash was repacked from "standard packs" and not "bulk packs," arguing that "bulk" implies an unmeasured quantity. However, the Tribunal found that the term "bulk pack" should be read in contrast to "retail pack" and not in isolation. The Tribunal noted that the soda ash in 75/50 kg bags was intended for industrial consumers, while the smaller packs were aimed at retail consumers. Therefore, the activity of repacking from bulk packs to retail packs enhances marketability and falls within the scope of Chapter Note 10.

The Tribunal referenced the Supreme Court decision in Air Liquide North India Pvt. Ltd. v. Commissioner of Central Excise, Jaipur-I, which held that if a product assumes a distinct marketability after a process, it amounts to "manufacture." Applying this principle, the Tribunal concluded that repacking soda ash from 75/50 kg bags into 500 gm/1 kg packs constitutes "manufacture" under Section 2(f) of the Central Excise Act, 1944.

2. Whether the demand is barred by limitation:

The appellants argued that the demand issued on 9-4-2002 for the period from 1-4-1997 to 31-3-2001 is barred by limitation under Section 11A(1) of the Central Excise Act, 1944. They claimed that they maintained proper records and that the Department was aware of their activities through periodic audits.

However, the Tribunal found that the appellants did not disclose the repacking activity in their statutory/private documents. The delivery challans did not specify that the soda ash was being transferred for repacking into smaller packs. The Tribunal noted that the appellants' premises at Rishra were registered as a dealer, not as a manufacturer, and thus were subject to less stringent audit norms.

Given the non-disclosure and the element of suppression, the Tribunal upheld the invocation of the extended period for demand. The penalties imposed on both the appellants were also deemed justified due to the suppression of facts and non-disclosure of the repacking activity.

Conclusion:

The Tribunal concluded that the repacking of soda ash from 75/50 kg bags into 500 gm/1 kg packs constitutes "manufacture" under Chapter Note 10 of Chapter 28 of CETA, 1985 and Section 2(f) of the Central Excise Act, 1944. The demand was not barred by limitation due to the appellants' non-disclosure and suppression of facts. The order of the lower authority was upheld, and both appeals were dismissed.