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TMI Blog2012 (8) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... t will provide two types of services to the merchants who use its website and associated services, for which it would charge a fee to the merchants. First, the platform will furnish listing services to such merchants who will list and market their products on the website of the applicant. The same website will enable customers to place orders for purchase and delivery of the products selected by them. Secondly, the applicant would also provide logistical services (storage, packing and shipping) in relation to the goods sold by the merchants. For this the applicant proposes to establish a warehouse to store the merchants‟ products for their sale and onward shipment to merchants‟ customers. The activities that would be undertaken by the applicant in the warehouse are stated mainly to be assortment, packing and stickering (affixing of stickers) in relation to the goods purchased by the customers of the various merchants through the applicant‟s website. The merchants who wish to sell their goods through the applicant‟s website have to enter into an agreement with the applicant that sets out the terms and conditions of the contract between the two. It is necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is .unrelated to any regulatory requirements. 4. After completion of the above activities the goods are stored in the applicant‟s warehouse. Upon a merchant‟s customer placing a purchase order on the merchant‟s product through the applicant‟s online platform, the goods are boxed appropriately and dispatched to the customer. 5. The applicant also states that in addition to the foregoing activities certain other kinds of stickering is done for inventory management and warehouse operations. These are pallet label stickering, which refers to stickers put on the pallet to identify inbound shipments, goods to be returned to the merchant in some cases, and quality check stickering. 6. The applicant further states that none of the activities proposed to be performed alter the primary packing or the original labeling affixed by the merchant under applicable regulations. Also no change is made in the MRP/RSP of any item received in the warehouse. All the labeling requirements are required to be fulfilled by merchants themselves and the goods as received in the applicant‟s warehouse would have the MRP/RSP already pre-affixed or pre-printed. The applicant cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that contrary to the AR‟s submission, the primary definition of "manufacture" vide S. 2(f)(i) is relevant, albeit only for a few items, namely printed books, sunglasses and sporting/gaming articles. However, given the nature of activities, and considering that there is no serious argument even from the Revenue that S. 2(f)(i) is attracted, we feel that no purpose would be served by going into the amplitude of this provision. The issue really arises in the context of the special meaning assigned to "manufacture" through the legal fiction created in clauses (ii) and (iii) of the definition and it is with this aspect that we shall deal. 10. Clauses (ii) and (iii) of Sec. 2(f) create legal fiction in two situations. First, according to Cl. (ii), a process is deemed to be manufacture if it is so specified in any of the section or chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (the Tariff, for short). Secondly, according to Cl. (iii), in relation to the goods mentioned in the Third Schedule to the Tariff, any process that involves packing or repacking of such goods in a unit container or labeling or relabeling of containers including the declaration or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77) ELT 49 (SC)] it was held that the definition of manufacture is expansive and includes processes deemed to be manufacture even if they were not actually manufacture. Deemed manufacture has been upheld by the Supreme Court in CCE, Goa vs M/s Phil Corporation Ltd. [2008 (223) ELT 9(SC)]. C. processes of the applicant clearly fall within the scope of "labeling or relabeling", "packing or repacking" or "adoption of any other treatment to render the products marketable to the consumer". Hence, they would be squarely covered by the definition of manufacture in the Act. 14. During the hearing the learned AR argued that all the activities of the applicant are designed to make the goods available to the consumer and therefore they amounted to making the goods marketable. According to him, these are essential processes and without them goods would not be marketable. He submitted that each of the processes by itself could be regarded as satisfying the legal fiction as the goods as they are shipped to the warehouse of the applicant were not marketable in the given circumstances. He relied on the CBEC circular F. No. 576/13 - 2001 CX dated 16/5/2001. According to him, the term „marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the goods as they are received in the warehouse from merchants are clearly not marketable. The learned AR also submits that the CESTAT orders cited by the applicant, to the extent they are contrary to Supreme Court‟s decisions, cannot have any precedential value as has been held by the Supreme Court in Motor Industries Co. Ltd. vs Commissioner of Customs [2009 (244) ELT 4 (SC)]. Relying on Principles of Statutory Interpretation by Justice G.P. Singh, he reiterates that full meaning is to be given to the intention of legislature in interpreting statutes that create deeming fiction. Applicant 16. The applicant, on the other hand, contends that none of the activities occurring in its warehouse can come within the mischief of the deeming fiction. Their main arguments are: 1. Their activities do not come within the ambit of packing or repacking contemplated in either cl. (ii) or (iii) of S. 2(f) of the Act. These provisions contemplate either (a) packing or repacking from bulk to retail packs or (b) packing or repacking of goods in unit containers. In their case, they do not interfere with the retail packing of the goods received from merchants. The goods are already in reta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/6/98, which explains "brand name" or "trade name" for the purpose of that notification, they submit that there a label has been used synonymously with a symbol, monogram etc. that indicate a connection in the course of trade between the goods and the person using such symbol etc. as noted by CESTAT in Ammonia Supply Co. vs CCE [2001 (131) ELT 626 (Tri). In Shreeleathers vs CCE [2012 (275) ELT 225 (Tri)] it was held that fixing of barcodes on card board boxes for delivery of footwear to showrooms etc. would not amount to manufacture. In Manisha International, Chemcrown and Panchsheel Soap Factory (supra) also it was held that fixing of stickers would not amount to labeling or relabeling. A similar view was expressed by the Supreme Court in CCE, Mumbai vs BOC (I) Ltd. [2008 (226) ELT 323 (SC)]. Following these decisions, the CESTAT in Chemcrown Export Ltd vs CCE [2010 (256) ELT 108 (TRI)] held that merely removing old label and putting a new label did not amount to manufacture. Again in disposing of government‟s appeal against CESTAT‟s order in German Remedies vs CCE [2006 (204) ELT A42 (SC)], the Supreme Court followed the decision in Johnson and Johnson case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir site by various factors such as discounts, pricing below the RSP, convenience of home delivery and other service offerings negotiated with the merchant. These are normal marketing or sales promotion activities which are dependent on the merchants‟ strategies and policies. In no way can the processes in their warehouse be regarded as a treatment to make the products marketable to the consumer. The goods as received in the warehouse are already marketable and any treatment done on goods that are already marketable cannot amount to manufacture. They rely on Mega Pro (India) vs CCE [2007 (216) ELT 637 (Tri)] in which it was held that "making the product marketable" could only mean making the product ready and fit for marketing and not making the product ready for every stage of sale. Similarly in Lupin Laboratories vs CCE [2002 (139) ELT 366 (Tri)], the Tribunal, relying on its earlier order in the case of Lakme Lever, held that the activity of putting tablets of different anti-TB drugs into a combination pack of a day‟s dosage for the convenience of users did not amount to manufacture as the tablet, individually were already marketable. This decision was affirmed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus the applicant is primarily a logistics service provider. The processes carried out by the applicant are already being carried out by a large number of businesses in the conventional supply chain without any excise implications. In fact their activities properly fall within the scope of "Business Auxiliary Service" and they propose to take registration and pay service tax accordingly. The entire question is therefore revenue neutral. 17. We have considered the submissions. As far as the cases relied upon by the Commissioner are concerned, viz Nitin Patki, Cipla, S.D. Fine Chemicals and Phil Corporation, they are clearly distinguishable on facts. They involved something more than just affixing of labels and cannot be compared with the facts of the present case. As regards the observation in these decisions ( i.e. S.D.Fine Chemicals and Phil Corporation) that, by virtue of the deeming fiction, processes that might not ordinarily be "manufacture" would be manufacture for the purpose of excise levy, it is to be noted that the issue here is not the validity of the deeming fiction but whether it applies to the facts at hand. Besides, S.D.Fine Chemicals was a case where the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture, shall be called into question. It is true that full effect has to be given to a piece of legal fiction. However, in doing so, one must be guided by the purpose for which the fiction has been created and "after ascertaining this, the Court is to assume all those facts and consequences which are incidental or inevitable corollaries to giving effect to that fiction. But in so construing the fiction it is not to be extended beyond the purpose for which it is created". As observed in Bengal Immunity Co. Ltd vs State of Bihar (AIR 1955 SC 661) "legal fictions are created only for some definite purpose", and a legal fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field" (vide Principles of Statutory Interpretation by Justice G.P.Singh. Emphasis added). It is this principle that courts have followed in interpreting these provisions. Based on the decisions cited, it is clear that each and every case of fixing a label or a sticker cannot come within the purview of S. 2(f) (ii) and (iii). Value addition is a relevant consideration. The operations of the applicant may introduce greater efficiencies by improved logistics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors. The contexts are completely different and, considering that the concept of marketability is well settled in excise law, we find no valid basis for arriving at a conclusion based on the definition of marketing as adopted in the study of business management. We also fail to see, in the facts of the case, what is the "treatment" that is being adopted on the goods to make them marketable. 22. We find that no reason has been given by the Ld. AR for the argument that the goods as they are received by the applicant are not marketable. The applicant‟s contention that the goods as received would be in retail packages with all required labeling and marking has not been disputed. We have to bear in mind that the applicant‟s facility is only one of the channels for distribution available to the merchants who use it. The products that they list on the applicant‟s website would also, in the vast majority of cases, get distributed and sold through other conventional channels of retail trade and in the very form in which they are received in the applicant‟s warehouse. Hence the conclusion that inexorably follows is that they are already marketable. 23. As far as reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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