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TMI Blog2005 (2) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; it was ordered to pay interest under Section 11AB of the Central Excise Act, 1944, on the ground that the imported RMG were subjected to 'refinishing work' which would amount to manufacture as per Chapter Note. Since they were not cleared on payment of Central Excise duty, demands were confirmed by invoking the larger period of limitation. 2.Brief facts of the case, relevant for determining the issues herein are, - (i) the appellants are manufacturers of RMG falling under Chapter 6201.00 of the CETA 1985 and have taken Central Excise Registration and are complying with the provisions under the same. Apart from the activity of manufacturing RMG, they are also engaged in the activity of importing RMG from different countries like Bangladesh, Indonesia etc. and after the import, they sell the same in India. The dispute herein is with reference to RMG imported and sold. (ii) For this imported RMG, they place purchase orders on foreign suppliers to manufacture and supply different brands such as Louis Phillippe, Van Heusen and Peter England. They ensure that the fabric is sourced/supplied and used by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact of refinishing of the ready-made garments with the sole intention of evading payment of Central Excise duty and thereby contravened the provisions of Rules 4, 5, 6, 8 10, 11 and 12 of the Central Excise Rules. 3. Note 4 (i) to Chapter 62 of the Central Excise Tariff Act, 1985 reads as under : "4. In relation to products of this Chapter, affixing a brand name on the product, labelling or relabelling of its containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to 'manufacture'." This Note is an artificial definition, relating to levy of duty and therefore it has to be construed strictly. This is more so when such artificial definition is in the nature of a charging provision relating to imposition of tax. Therefore, the submission that the artificial definition of manufacture as per Chapter Note is to be strictly incorporated and following case laws has been relied upon : (a) Commissioner of Income Tax v. Manilal Dhanji - (1962) 44 ITR 876 (S.C.) (b) Commissioner of Income tax v. Keshavlal Lallubhai Patel - (1965) 55 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003 and therefore sub-clause (iii) in the definition of "manufacture" as it stands with effect from 1-3-2003 is irrelevant in these proceedings. Similarly, sub-clause (iii) as it stood during the period from 11-5-2002 to 28-2-2003 is also irrelevant for the present proceedings inasmuch as the Central Government has not issued any notification specifying any particular process as amounting to manufacture. Thus, what is left for consideration is the 1.6 definition of "manufacture" as defined in Section 2(f)(i) and (ii) only. Thus, in order to treat a process as amounting to 1.7 manufacture, it should be incidental or ancillary to the completion of a manufactured product and it should be specified in relation to any goods in Section or Chapter Note of the Schedule to Central Excise Tariff Act as amounting to manufacture. 1.8 In other words, it is not enough that the process should be specified in relation to a product in the Chapter Note of Central Excise Tariff Act, but it must also be a process incidental or ancillary to the completion of a manufactured product. The word "and" appearing in between clause (i) and clause (ii) of Section 2(f) would only mean that the process re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lector of Central Excise; (ii) all drying grounds and storage platforms and storehouses appertaining to any such place; (iii) land on which salt is spontaneously produced." In the aforesaid definition of salt factory, there 1.14 is no word "and" connecting clause (i), clause (ii) and clause (iii). Therefore, each of the places specified in clause (i), clause (ii) or clause (iii), would separately be included within the definition of salt factory. However, in the definition of "manufacture", clause (i) and clause (ii) are joined by the word "and" and, therefore, the process which is included within the term "manufacture" should satisfy both clause (i) and clause (ii). This submission is fortified by the amendment made 1.15 by Section 126 of the Finance Act, 2002 by which the word 'manufacture' appearing at the end clause (i) of Section 2(f) was substituted by the words 'manufacture' "or" and by Section 127 of the Finance Act, 2002 by which clause (iii) was inserted in the Section 2(f) of the Central Excise Act, 1944. The Commissioner has observed in para 42 of the 1.16 impugned order that Chapter Note 4 under Chapter 62 has been incorpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coating/covering the same with cotton or fibreglass or paper. The Central Excise Department took the view that this process undertaken by them would amount to manufacture. The Assistant Collector who passed the order relied upon the definition of Section 2(f) and held that the process undertaken by the respondents was incidental or ancillary to the completion of manufactured product and, therefore, the process undertaken by them would amount to manufacture. The Tribunal rejected this view of the Assistant Collector and held in paras 9 and 10, as under : "9.....The Assistant Collector has not understood the meaning of the section and what it refers to. The section speaks of any process incidental or ancillary to the completion of a manufactured product. It does not give independent status and character to any process which might appear to be incidental or ancillary. Indeed, the Assistant Collector does not say what these processes are incidental or ancillary to - if they are ancillary or incidental to the manufacturing of a product, he does not tell us what is the product he has in mind. It is not the intention of the section to turn every "incidental" and "ancillary" process into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the process specified in relation to any goods in the Section or Chapter Note of Central Excise Tariff Act, per se cannot be treated as manufacturing process by applying the ratio of the aforesaid decision of the Tribunal as upheld by the Apex Court. We find that in the order impugned before us there (ii) is no finding arrived at by the Commissioner on this aspect. These submissions have to be considered by the Commissioner as it would be in the interest of justice that Revenue gets some opportunity to give their findings, on these submissions which go to the root of the levy by interpreting Chapter Note 4. Therefore, the matter is required to be remitted back to the Commissioner to arrive at a finding on these submissions, as recorded hereinabove in the de novo proceedings which we propose to order after setting aside the order impugned. We find that it is an admitted position that in (iii) majority of the cases the alleged processes amounting to manufacture as per Chapter Note 4 have been conducted at the job workers premises, a job worker in fact in his statement stated so the same has been relied upon. This would go to indicate that the place where the 'swig tag' is put/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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