2018 (6) TMI 909 - AT - Central Excise

Manufacture/Deemed Manufacture - Valuation - Affixation of MRP on packages - after import of items the appellant affixes the MRP labels at port itself adopted valuation under Section 4A and brought to warehouses or by stock transfer to their premises and then undertook activities of packing / repacking affixing sticker / label such as marketed by HONDA etc. without revising the MRP mentioned in the label affixed at the port. Whether repacking inspection labeling affixation of MRP without price revision affixation of marketed by label affixing HONDA tape/sticker would be activities that could be brought within the ambit of manufacture as defined under section 2(f)(iii) of Central Excise Act 1944? Held that - Even a standalone activity of packing or / repacking of goods in a unit container would be deemed manufacture for the purposes of Section 2(f)(iii). So also labeling or relabeling of containers would attract mischief; such labeling or relabeling could include the declaration or alteration of the retail sale price. There is yet another interesting other than the above category that would fall within the ambit of deemed manufacture namely adoption of any other treatment on the goods to render the product marketable to the consumer . Rendering the product marketable is a catch-all phrase that in our view would include any treatment to make the product attractive to potential buyers and enhance its marketability quotient. This could encompass many strategies e.g. replacing a dated packing / wrapper with a brand new one to ensure more eyeball display or affixation of a nationally or internationally known trademark or certifying mark. ( e.g. 3M product Intel Inside Apple compatible De Beers certified diamonds Woolmark Agmark BIS hall mark etc.). As per section 2(f)(iii) ibid one of the process which would result in deemed manufacture is labeling or relabeling of containers. There is no conditionality indicated therein that such labeling or relabeling should necessarily result in enhancement or alteration of price - affixation of the Marketed By label and especially the HONDA trademark label enhances the marketability of these products. Trademarks are efficient commercial communication to capture customer attention. It speaks about the company its reputation and products and services. An internationally known trademark like HONDA will serve to allay any doubts on basic quality of the goods and make the goods more marketable. The processes carried out on the impugned goods received by the appellants from the port / other warehouses will amount to manufacture within the meaning of section 2(f)(iii) of the Act. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the activities of repacking, inspection, labeling, affixation of MRP without price revision, affixation of "marketed by" label, and affixing "HONDA" tape/sticker amount to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944.
2. Eligibility for CENVAT credit on the impugned goods.
3. Applicability of extended period of limitation for demand.

Detailed Analysis:

1. Whether the Activities Amount to Manufacture:
- Appellant's Argument: The appellant argued that their activities, including affixing MRP labels at the port, repacking, and labeling with "marketed by" and "HONDA" stickers, amount to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. They cited various judicial decisions to support that labeling and repacking activities are deemed manufacture.
- Department's Argument: The department contended that the activities do not amount to manufacture as the goods were fully marketable upon import with MRP labels affixed at the port. They argued that no significant alteration or value addition occurred at the appellant's premises.
- Tribunal's Finding: The Tribunal held that the activities of labeling and repacking carried out by the appellant fall within the ambit of manufacture as defined under Section 2(f)(iii) of the Central Excise Act, 1944. The Tribunal emphasized that labeling or relabeling and any treatment to render the product marketable are deemed manufacture, irrespective of price alteration.

2. Eligibility for CENVAT Credit:
- Appellant's Argument: The appellant claimed CENVAT credit on excise duty, CVD, SAD, and service tax paid on input services. They argued that their activities amount to manufacture, making them eligible for credit. They also cited decisions that even if the process is not considered manufacture, duty paid should be treated as credit reversal, making the exercise revenue-neutral.
- Department's Argument: The department argued that since no manufacturing activity occurred, the appellant was not eligible for CENVAT credit on the imported parts and parts received from other warehouses.
- Tribunal's Finding: The Tribunal ruled in favor of the appellant, allowing the CENVAT credit. It concluded that the activities undertaken by the appellant amount to manufacture under Section 2(f)(iii), making them eligible for credit. The Tribunal also noted that even if the activities were not considered manufacture, the duty paid would be treated as credit reversal, rendering the exercise revenue-neutral.

3. Applicability of Extended Period of Limitation:
- Appellant's Argument: The appellant argued that the extended period of limitation should not apply as they had informed the department about their activities through letters and during periodic audits. They contended that substantial demand was time-barred.
- Department's Argument: The department did not specifically address the limitation period in their arguments.
- Tribunal's Finding: The Tribunal did not explicitly address the limitation issue in the judgment. However, by ruling in favor of the appellant on the primary issue of manufacture and CENVAT credit eligibility, the Tribunal implicitly rejected the extended period of limitation for the substantial demand.

Conclusion:
The Tribunal concluded that the activities of repacking, inspection, labeling, affixation of MRP without price revision, affixation of "marketed by" label, and affixing "HONDA" tape/sticker amount to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. Consequently, the appellant is eligible for CENVAT credit on the impugned goods. The Tribunal set aside the impugned orders, allowing all appeals with consequential relief as per law. The miscellaneous applications filed by the Revenue for change of cause title were also allowed.