2024 (3) TMI 588 - AT - Central Excise

Process amounting to manufacture or not - activity of labelling or relabeling, declaration by affixing fresh Maximum Retail Price (MRP) stickers on each unit pack, by altering the retail price stickers already affixed on the watches - demand of central excise duty on the watches cleared by them after labelling/relabeling, affixing fresh MRP stickers - demand based on statements of Store Manager of Showroom at Hosur and General Manager (Commercial) - alleged wilful suppression with intent to evade payment of duty against the showrooms and CFA premises or not - Extended period of limitation - HELD THAT - The department does not have a case that appellant has for the first-time mentioned brand name Titan, or any such new details while affixing the fresh MRP stickers. The appellant has merely changed the MRP in fresh stickers. The distinction between a label and an MRP sticker was analysed in the case of COMMISSIONER OF C. EX., NEW DELHI VERSUS PANCHSHEEL SOAP FACTORY 2002 (4) TMI 152 - CEGAT, NEW DELHI . A sticker merely containing the name of importer and MRP was held to be not a label . In common parlance, a label on a product is understood to contain description of the goods, its character, usage, expiry date etc., A label is a brief and quick information to the consumer as to the details of the product. A MRP sticker is information about its price only. The Tribunal in the said case was considering Note 6 to the Chapter 34 which is similarly worded as 2 f (iii). It was held by Tribunal that simply putting a MRP sticker does not amount to manufacture. It was also observed that the products were already marketable and the activity of affixing the MRP sticker did not enhance its marketability. Again, the allegation is that the activity of affixing altered MRP amounts to deemed manufacture. There is no allegation that such activity has rendered the product marketable to the ultimate consumer. In the case of Lakme Lever Ltd., Vs CCE 2000 (10) TMI 96 - CEGAT, MUMBAI , the Tribunal observed that the process/activity should attribute marketability to the product which was otherwise not marketable. In the case of CCE Vs. Rafique Malik 2018 (1) TMI 109 - BOMBAY HIGH COURT similar issue was considered. It was held that affixing brand name on finished footwear received in labelled boxes affixed with MRP did not amount to manufacture. The meaning of marketability is that the goods must be capable of being bought and sold as such. In order to fall within definition of manufacture , the process or activity must bring some transformation to the article in such manner that was not present on the article earlier. In the present case the watches are already marketable and the affixing of MRP does not enhance marketability. From the discussions above and following the decisions there are no hesitation to conclude that the activity does not amount to manufacture. The factory at these places have not discharged duty as they have availed benefit of ABE notification. The demand, if any can be raised only against the manufacturer. As no manufacturing activity has taken place at Showrooms and CFAs, the duty demand raised against them cannot be sustained. The issue on merits is answered in favour of appellant and against the Revenue. Time Limitation - Suppression of facts or not - HELD THAT - The issue is purely interpretational. The issue as to whether the activity of affixing MRP amounts to manufacture has always been under litigation based on facts of each case. The department has not adduced any positive act of suppression against the appellant. The revised price list was available for perusal in the accounts maintained by appellant - there are no suppression of fact with intend to evade payment of duty on the part of the appellant. The show cause notice is time barred. The issue on limitation is answered in favour of appellants and against Revenue. The impugned orders are set aside. The appeals are allowed.

Summary

Issues Involved:
1. Whether the activity of affixing revised MRP tags and labels on the watches amounts to manufacture as per Section 2(f)(iii) of Central Excise Act, 1944.
2. Whether the extended period is invokable or not.

Summary:

Issue 1: Affixing Revised MRP Tags and Labels as Manufacture
The primary issue was whether affixing revised MRP tags and labels on watches constitutes "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944. The appellants argued that the activity of affixing MRP stickers and tags does not amount to labelling or relabelling and thus does not constitute manufacture. They cited several judgments, including C.C.E. vs Panchsheel Soap Factory and Lakme Lever Ltd. vs. CCE, which held that affixing MRP stickers does not enhance the marketability of the goods and thus does not qualify as manufacture. The Tribunal agreed with the appellants, stating that the watches were already marketable and the affixing of MRP stickers did not render them more marketable. Consequently, the activity did not amount to manufacture under Section 2(f)(iii).

Issue 2: Invocation of Extended Period
The second issue was whether the extended period for issuing show cause notices was applicable. The appellants contended that there was no suppression of facts as they had informed the department about their activities through a letter dated 20.05.2005. The Tribunal noted that the department had prior knowledge of the appellant's activities due to earlier proceedings and audits. The Tribunal found no evidence of wilful suppression with intent to evade duty and held that the show cause notices were time-barred. Therefore, the invocation of the extended period was not justified.

Conclusion:
The Tribunal concluded that the activity of affixing revised MRP stickers did not amount to manufacture and that the extended period for issuing show cause notices was not applicable. The impugned orders were set aside, and the appeals were allowed with consequential reliefs.