2016 (9) TMI 418 - AT - Central Excise

Whether re-packing of the goods after marking the supply order No., No. of objects inside the packet and other necessary details for due identification at the consignee s end would be tantamount to manufacture as per the definition of manufacture given in Section 2(f)(iii) of Central Excise Act, 1944 - Held that - as per definition packing or re-packing or Labeling or re-labeling container including declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to tender the product marketable to the consumer has been included in the definition of deemed manufacture as the goods are admittedly includes in the Third Schedule . Given the wide scope of above definition re-packing of the goods after marking that with the supply order No. and number of objects inside the package and other necessary details for easy identification at the consignee s end would be squarely covered under the definition of manufacture because without such markings the product could not have been sold to the Customer which in this case is the Defence Department of Government of India because the agreements between the Ordinance Factory and the respondent, required the respondent to do so. Whether the respondent is entitled to the benefit of Notification No.64/95-CE even though, it had not followed the procedure prescribed under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods), Rule 2001 - Held that - as regards the contention of the respondent that had it been aware that this process would amount to manufacture, it would have taken the benefit of Notification No.64/95- CE because the goods were supplied to Defence Department of Government of India for manufacture of vehicles falling under Chapter heading 87 and that the procedure prescribed, namely, the procedure under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 was just a procedural requirement and therefore, the substantive benefit would not be deniable on account of non-following of the same. Invokation of extended period of limitation - clandestine manufacturing of excisable goods - intentional terming of goods as Trading goods just to mislead the department - evasion of central excise duty and education cess - willful clearance of same without the cover of Central Excie invoice/Challan and without payment of Central Excise duty and without following the procedure - Held that - from the show cause notice, it is difficult to detect the sustainable grounds on which the willful misstatement or suppression of facts can be alleged, leave alone sustained. The facts are that the goods were supplied to the Ordnance Factory, which is a part of Government of India and all the payment received by Cheque. Further, there is force in the contention of the respondent that had it been of the view that the process undertaken by it amounted to manufacture, it was easy for it to follow the Chapter 10 Procedure and claim the benefit of Notification No. 64/95 - CE. In this regard, it is also pertinent to mention that observance of chapter 10 Procedure for claiming the exemption Notification benefit is a mandatory requirement has been settled by the Five Member Bench of the Hon ble Supreme Court in the case of Commissioner vs. Harichand Shri Gopal 2010 (11) TMI 13 - SUPREME COURT OF INDIA and prior thereto there were some decisions of the lower courts to the effect that observance of said procedure was only procedural requirement in which case during the relevant period the appellant could possibly have legitimately claimed the exemption benefit even without following the said Procedure. Thus, there is force in the respondent s contention that there was no reason for it to indulge in wilfull misstatement or suppression of facts. Thus, the sufficient grounds do not exist in this case to sustain the allegation of willful misstatement or the suppression of facts, and therefore, the extended period cannot be invoked. The show cause notice in this case was issued on 07.05.08 and a period of demand involved is 2006-07 and therefore, the one year period (normal period) expired by the end of April 2008 while the show cause notice was issued in May, 2008. Therefore, the entire demand is beyond the normal period of one year and hit by time bar. - Decided against the Revenue

Summary

Issues:
1. Whether re-packing of goods amounts to manufacture under Section 2 (f) (iii) of Central Excise Act, 1944.
2. Entitlement to benefit under Notification No.64/95-CE without following prescribed procedure.
3. Invoking the extended period for demand.

Analysis:

Issue 1:
The definition of "manufacture" under Section 2 (f) (iii) of the Central Excise Act includes packing or re-packing of goods. In this case, re-packing with necessary details for identification at the consignee's end falls under this definition. The re-packing was essential for selling the goods to the Defence Department, making it a manufacturing activity. The respondent's argument of being unaware of this being classified as manufacture was dismissed, citing a Supreme Court judgment mandating adherence to prescribed procedures for availing exemptions.

Issue 2:
The respondent claimed entitlement to Notification No.64/95-CE despite not following the prescribed procedure under Central Excise Rules. The Supreme Court precedent emphasized the mandatory nature of following procedures for exemption benefits, leading to the denial of the claimed exemption. Consequently, duty was deemed payable on the goods supplied.

Issue 3:
The extended period was invoked based on allegations of willful evasion of excise duty through misrepresentation and suppression of facts. However, the Tribunal found insufficient grounds to support these allegations. Precedents highlighted the necessity of positive actions or deliberate withholding of information for invoking the extended period. As no evidence of willful misstatement or suppression was found, the extended period was deemed inapplicable, and the demand was considered time-barred.

In conclusion, the Revenue's appeal was dismissed as unsustainable, and the cross objections were also disposed of. The Tribunal found no basis for invoking the extended period due to lack of evidence supporting willful misstatement or suppression of facts, rendering the demand beyond the normal limitation period and time-barred.