2016 (3) TMI 69 - AAR - Central Excise

Manufacture or deemed manufacture - activities undertaken by at the warehouse(s) prior to delivery of the goods to the merchant s customer - Tagging - Held that - It is observed that as per the clarification dated 02.03.2012 issued by CBEC, if brand name is not affixed or embossed on the jewellery but appears on the packing, such as jewellery box or pouch or warranty card or certificate of quality, such goods will not be treated as branded jewellery and thus will not be liable to excise duty. In the instant case, the applicant has submitted that the tag is applied by them while placing the jewellery in the box to prevent return of counterfeit items. Application does not mention that applicant would affix or emboss brand name on the jewellery. Tagging in this case is not embossing or affixing. Therefore, the activity of tagging of jewellery would not amount to manufacture under Section 2(f) ibid. In view of the above, we hold that following activities undertaken by the applicant would not amount to manufacture or deemed manufacture under Section 2(f) of the Central Excise Act, 1944, namely; Inspection, testing and installing batteries, Cleaning, lint brushing and deodorizing, Touching up and re-stitching, Filing, debundling and jewellery correction, Activities related to spectacles and frames, Folding, hanging and ironing, Polishing, shinning and coating, Tagging, Freebies, Protective stickering, Placing the products in original box, Inserting warranty card, Inserting moisture absorbing tablets, Inserting books mark and Replacing shoe laces.

Summary

Issues:
- Whether additional activities proposed by the applicant would be regarded as manufacture or deemed manufacture under Section 2(f) of the Central Excise Act, 1944.

Analysis:
1. The applicant, an IT-enabled platform, sought an advance ruling regarding activities at their warehouse(s) not constituting "manufacture" as per Section 2(f) of the Central Excise Act, 1944.
2. The applicant now seeks a ruling on additional activities like inspection, cleaning, and re-stitching at their warehouse(s) and other locations.
3. The applicant clarified that the proposed activities do not alter primary packaging or MRP/RSP of goods and do not involve value addition to products.
4. The applicant requested a ruling on various activities like tagging, inserting warranty cards, and placing products in original boxes, among others.

Revenue's Response:
5. Revenue opined that most proposed activities would not amount to manufacture, except for activities related to spectacles, frames, and tagging of jewellery.
6. Revenue highlighted that activities like placing spectacles in cases and tightening screws on eyewear do not constitute manufacture based on a High Court judgment.
7. Revenue differentiated between activities like putting freebies (not altering packaging) and preparing combo packs (may amount to manufacture based on MRP changes).
8. Revenue raised concerns about tagging jewelry with brand names and the need for samples to determine if it amounts to manufacture.

CBEC Clarification:
9. The applicant referenced a CBEC clarification stating that jewelry without affixed brand names on the product itself may not be treated as branded jewelry for excise duty purposes.
10. The clarification emphasized that brand names on jewelry packaging do not necessarily make it branded jewelry subject to excise duty.

Conclusion:
11. The Authority for Advance Rulings held that most proposed activities by the applicant would not amount to manufacture under Section 2(f) of the Central Excise Act, 1944, including activities like inspection, cleaning, tagging, and inserting warranty cards. However, activities related to spectacles, frames, and certain jewelry tagging may be considered manufacture.