2020 (6) TMI 593 - AT - Central Excise

Redemption of confiscated goods - Process amounting to manufacture or not - activity of affixing holograms on the CFLs (revalidation process) carried out by the appellant in its warehouse - Section 2(f)(iii) of the Central Excise Act, 1944 - HELD THAT - All the proceedings initiated against the appellant pertaining to all the warehouses including Kolkata warehouse, have been dropped on merits. All the proceedings against the appellants have been dropped by the Commissioner by passing a common order holding that the said activity cannot be constituted as amounting to manufacture in terms of Section 2 (f)(iii) of the Central Excise Act, 1944. Since the main appeal has been allowed on merits in favour of the appellant, the present proceedings are only in respect of confiscation of the goods valued at ₹ 87,17,157/- with an option to redeem the same on payment of fine of ₹ 81,17,157/-. The impugned order ordering confiscation of the goods with an option to redeem the same, is not sustainable in law - Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Whether affixing holograms on CFLs in the warehouse amounts to manufacture under the Central Excise Act, 1944.

Detailed Analysis:

Issue 1: Affixing holograms on CFLs

The primary issue in this case was whether the activity of affixing holograms on CFLs in the warehouse constituted "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944. The Commissioner had held that this process of revalidation/affixation of holograms on CFLs rendered the products marketable to consumers by subjecting them to repacking/relabeling to extend guarantees/warranties, thereby amounting to manufacture. The appellant operated multiple warehouses across India where such activities were conducted, leading to demands for Excise duty and penalties. However, the Commissioner of Central Excise, Gurgaon I, in a separate order dated 23.05.2017, dropped all proceedings against the appellant, including those related to the Kolkata warehouse, holding that the said activity did not amount to manufacture under the Central Excise Act, 1944.

Issue 2: Legal Proceedings

The legal proceedings involved multiple show-cause notices and seizure notices against the appellant's warehouses in Chennai, Kolkata, Bhiwandi, and Gurgaon. These proceedings culminated in the Commissioner's order dated 23.05.2017, where all demands and proceedings were dropped in favor of the appellant, including those concerning the Kolkata warehouse. The appellant argued that since the issue on merits had been settled in their favor by the Commissioner's order, the confiscation of goods in the present case was unjustified. The Tribunal concurred with this argument, emphasizing that since the main appeal had been allowed on merits in favor of the appellant, the confiscation of goods valued at ?81,17,157 was unsustainable in law.

Conclusion:

After careful consideration of the facts and legal precedents, the Tribunal found that the impugned order for confiscation of goods with an option to redeem them was not legally sustainable. Consequently, the Tribunal allowed the appeal of the appellant, providing them with consequential relief. The judgment highlighted the importance of determining whether specific activities constitute "manufacture" under the Central Excise Act, 1944, and the significance of previous legal decisions in resolving similar disputes.