2023 (11) TMI 520 - AT - Central Excise

Activity amounting to manufacture or not - activity of packing of rechargeable batteries along with chargers and labelling the same is a process incidental or ancillary to the completion of a manufactured product - whether the activity undertaken by the Appellants would amount to 'manufacture' or not as defined under Section 2(f) of the CEA, 1944? - HELD THAT - In the present case, it is observed that after undertaking the activity of packing the chargers with the batteries and labelling them no different commercial commodity comes into existence. The goods viz. the charger and batteries remain exactly the same even after they are put together in a blister pack - In light of the decision of the Hon'ble supreme Court in M/S. SERVO-MED INDUSTRIES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI 2015 (5) TMI 292 - SUPREME COURT , it is held that the activity of mere packing of rechargeable batteries along with battery chargers and labelling the same as Eveready Rechargeable/Ultima and Uniross/Power Bank does not amounts to manufacture. Section 2(f)(ii) of the CEA, 1944 deems certain processes as amounting to manufacture, if there is a Section Note or a Chapter Note deeming the processes as amounting to manufacture. In the present case, neither under Section XVI nor under Chapter 85 there are any notes deeming activity of packing or repacking as amounting to manufacture. Further, in terms of Section 2(f)(iii) of the CEA, 1944 goods specified in 3rd schedule to the CEA, various processes like packing or repacking, labelling or relabelling is deemed to be the manufacturing process - the demand confirmed in the impugned order dated 02.12.2009 is not sustainable. Since the demand is not sustainable, the question of demanding interest and imposing penalty does not arise. The activity undertaken by the Appellant would not amount to manufacture as defined under Section 2(f) of Central Excise Act, 1944.The same discussion holds good for the Appellant also, since they are the job workers who have undertaken the activity of packing and labelling. Thus, the demand of central excise duty from the Appellant M/s New Engineering Company is not sustainable, as the activity undertaken by them does not amount to 'manufacture' as defined under Section 2(f) of CEA, 1944. Since, the demand itself is not sustainable, the question of demanding interest and imposing penalty on the Appellant does not arise. Appeal allowed.

Issues Involved:
1. Whether the activity of packing and labeling undertaken by the Appellants amounts to 'manufacture' under Section 2(f) of the Central Excise Act, 1944.
2. The sustainability of the demand for central excise duty, interest, and penalty imposed on the Appellants.

Summary:

1. Definition of 'Manufacture':
The primary issue to be decided was whether the activity undertaken by the Appellants amounts to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944. The definition includes any process incidental or ancillary to the completion of a manufactured product and processes specified in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985.

2. Appellant's Argument:
The Appellant, M/s Eveready Industries, contended that the activity of packing and labeling does not amount to 'manufacture' as it does not result in a new product with a distinct name, character, and use. They relied on the Supreme Court's decision in Servo-Med Industries Pvt. Ltd. vs. CCE, Mumbai, which outlines criteria for determining 'manufacture'.

3. Tribunal's Analysis:
The Tribunal observed that after packing and labeling, no new commercial commodity comes into existence. The goods, i.e., the charger and batteries, remain the same even after being put together in a blister pack. The Tribunal referred to several rulings, including Commissioner of Central Excise vs. M/s Sony Music Entertainment India Pvt Ltd and Commissioner of Central Excise, Faridabad vs. Kapoor Lamp Shade Company, where similar activities were held not to amount to 'manufacture'.

4. Applicability of Section 2(f)(ii) and (iii):
The Tribunal noted that neither Section XVI nor Chapter 85 of the Central Excise Act contains notes deeming the activity of packing or repacking as 'manufacture'. Moreover, the goods in question were not specified in the 3rd schedule of the CEA, 1944, which would deem such processes as 'manufacture'.

5. Decision on M/s Eveready Industries:
The Tribunal held that the activity of packing and labeling by M/s Eveready Industries does not amount to 'manufacture' under Section 2(f) of the CEA, 1944. Consequently, the demand for central excise duty, interest, and penalty was not sustainable. The impugned order dated 02.12.2009 was set aside, and the appeal was allowed.

6. Decision on M/s New Engineering Company:
The Tribunal extended the same reasoning to the appeals filed by M/s New Engineering Company, who acted as job workers for M/s Eveready Industries. It was held that their activity of packing and labeling also did not amount to 'manufacture'. Hence, the demands for central excise duty, interest, and penalty were not sustainable. All three impugned orders were set aside, and the appeals were allowed.

Conclusion:
The appeals filed by both M/s Eveready Industries and M/s New Engineering Company were allowed, with the Tribunal ruling that the activities undertaken did not constitute 'manufacture' under Section 2(f) of the Central Excise Act, 1944. The demands for duty, interest, and penalties were set aside.

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