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TMI Blog2018 (6) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... ods in a unit container would be deemed manufacture for the purposes of Section 2(f)(iii). So also, labeling or relabeling of containers would attract mischief; such labeling or relabeling could include the declaration or alteration of the retail sale price. There is yet another interesting “other than the above” category that would fall within the ambit of deemed manufacture, namely, “adoption of any other treatment on the goods” to render the product marketable to the consumer”. Rendering the product “marketable” is a catch-all phrase that in our view would include any treatment to make the product attractive to potential buyers and enhance its ‘marketability quotient. This could encompass many strategies e.g. replacing a dated packing / wrapper with a brand new one to ensure more eyeball display or affixation of a nationally or internationally known trademark or certifying mark. ( e.g. ‘3M’ product, ‘Intel’ Inside, ‘Apple’ compatible, ‘De Beers’ certified diamonds, Woolmark, Agmark, BIS hall mark etc.). As per section 2(f)(iii) ibid, one of the process which would result in “deemed manufacture” is labeling or relabeling of containers. There is no conditionality indicated therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They claimed that these activities amount to manufacture as under Section 2(f)(iii) of Central Excise Act, 1944 and paid excise duty thereon and availed CENVAT credit of the same. According to department, the appellants are not eligible for credit as these activities do not amount to manufacture. The practice adopted by appellants was not agreed with by the department for various reasons, inter alia:- i) The assessee imported certain automobile spare parts and affixed the label containing information of part no. description, MRP etc. in the Port itself and adopted valuation under section 4A (MRP / RSP Valuation) of the Central Excise Act, 1944 in the Bills of Entry; ii) After receipt of imported parts, they had availed CENVAT credit of excise duty (CVD), Education Cess / HR. Edu Cess and SAD. iii) At their factory, they are affixing a sticker mentioning "Marketed by" at the time of clearances without changing the MRP mentioned in the label affixed at the Port. iv) At the time of clearance of spare parts from their factory, they do not change MRP. When there is increase in MRP, they had paid differential duty. v) All manufacturing activities had been completed in Port. vi) Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsonal penalty Honda Motors ₹ 3,00,00,000/- (R. 15(1) of CCR) No personal penalty Interest Not quantified (R.14 CCR) Not quantified (R.14 CCR) r/w section 11AB/ 11AA of the Act Not quantified (R.14 CCR) r/w section 11AA of the Act Appeal Nos. E/40357/2014 (Honda) E/40359/2014 (R. Reddy) E/40362/2014 (Atul Gupta) E/41552/2014 (Honda) E/41246/2015 (Honda) 4. On 4.4.2018, when the matter came up for hearing, the appellants were represented by Ld. Advocate Shri Lakshmi Kumaran who made various oral and written submissions which can be broadly summarized as under:- i) The appellant is procuring duty paid automobile parts in bulk from local vendors, assessed under section 4 of the Act and takes CENVAT credit. The goods are retail packed with MRP label and cleared on payment of excise duty under Section 4A. ii) In some cases, the appellant affixes revised MRP. Since alteration of MRP amounts to manufacture under section 2(f)(iii), excise duty is paid on clearance of such goods. iii) In case of damage to packages during transit, the appellant replaces the package / soiled label. As packing and labeling amount to manufacture under section 2(f)(iii), excise duty is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities deemed to be "manufacture" and thereby CENVAT credit taken on the impugned goods is legal and correct. ix) Section 2(f)(iii) does not contain any qualification as to the nature and extent of packing / repacking, labeling/relabeling to hold a particular activity to be manufacture. It creates a legal fiction by which any process in relation to goods specified in the Third Schedule, involving packing or repacking of such goods in a unit container or labeling or relabeling of containers amounts to manufacture. x) Therefore, the term "labelling" includes the activity of affixing any label on the packaged commodity. This legal position has been upheld in the following decisions:- a. Jindal Drugs Ltd. Vs. Commissioner of Central Excise - 2015-TIOL-857-CESTAT-MUM b. Glovis India P. Ltd. Vs. Commissioner of Central Excise - 2017-TIOL-3363-CESTAT-MAD xi) Impugned order relies upon the TRU letter dated 08.12.2011 to hold that there should be change in MRP and value addition for treating the person as a manufacturer. The aforesaid TRU letter is not in accordance with Section 2(f)(iii) as it is imposing conditions which are not prescribed in the section. Reliance is placed on fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in their favour:- In a case involving the Mumbai Unit of the Appellant, similar activity of packing, re-packing, labelling, re-labelling and affixing of MRP was being undertaken. There were some instances where the MRP declared at the time of clearance of the goods from the warehouse was less than the MRP declared before the Customs authorities. While adjudicating the matter against the Appellants, the Assistant Commissioner, Raigad held the activity undertaken amounted to manufacture. This Commissioner (Appeals) upheld the OIO and no appeal has been filed by the Department against this finding of manufacture. xvii) The Appellant had paid SAD on the import of goods, CENVAT credit of which has been availed by the Appellant. The goods after packing/re-packing, labelling/re-labelling were cleared from the warehouse of the Appellant on payment of applicable duty and VAT/Sales tax. Therefore, in case the activity undertaken by the Appellant is held not amounting to manufacture, in terms of Notification 102/2007-Cust dated 14.09.2007, Appellant will be entitled to refund of SAD amounting to ₹ 9,18,93,635/- [Rs. 7,64,19,309/- + ₹ 75,58,980/- + ₹ 77,14,726/-]. The sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no alteration in the labels already affixed on the packages of goods; and thus, cannot be equated with process of labelling or relabelling contemplated in the Act. Therefore, the different types of stickering done by them cannot come within the meaning of expression labelling or relabelling for the purposes of the Act and would not amount to manufacture. v) Since the Appellant had not changed the MRP, there could not be any value addition in the Warehouse and consequently there was no manufacture. vi) Apart from doing mere physical examination of the goods, the appellants have not done any particular type of quality testing. There was no value addition and no change in MRP, but appellant was only reaffixing the labels. The fixing of labels "HONDA" also does not change or bring out any marketability for the reason that, on the labels, while importing itself it is shown that the goods are imported by HONDA. The goods are already fully marketable and sold as such. By putting such labels / stickers does not in any way affect or enhance marketability. vii) He relied upon the decisions in case of Beltek (India) Ltd. Vs. Commissioner of Central Excise, Noida reported in 2014 (302) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marketable to the consumer" 7.3 The definition in Section 2(f)(iii) ibid thus deems the following / processes as amounting to manufacture:- * Packing or repacking of the goods in a unit container * Labeling or relabeling of containers including the declaration or alteration of retail sale price on it * Adoption of any other treatment on the goods to render the product marketable to the consumer 7.4 From the above definition, it becomes evident that even a standalone activity of packing or / repacking of goods in a unit container would be deemed manufacture for the purposes of Section 2(f)(iii). So also, labeling or relabeling of containers would attract mischief; such labeling or relabeling could include the declaration or alteration of the retail sale price. There is yet another interesting "other than the above" category that would fall within the ambit of deemed manufacture, namely, "adoption of any other treatment on the goods" to render the product marketable to the consumer". Rendering the product "marketable" is a catch-all phrase that in our view would include any treatment to make the product attractive to potential buyers and enhance its 'marketability quotient. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s will amount to manufacture within the meaning of section 2(f)(iii) of the Act. 7.9 In arriving at this conclusion, we are only reiterating the view taken earlier by us in Glovis India P. Ltd. (supra) wherein inter alia, we had held as under:- "14. The above process of labeling and packing explained by the learned Senior Advocate, in our view would satisfy the ingredients of deemed manufacture under Section 2(f)(iii) of Central Excise Act, 1944. The submission of learned AR that such packing is only for the purpose of transportation and that the labeling is only for the purpose of identification are too flimsy and not backed by any legal basis. It appears that the learned AR is confused with the mention of the words 'retail sale price' and 'labeling' in section 2(f)(iii) of the definition of manufacture. It is contended by the learned AR that since the label affixed does not give any information to a consumer and is only to facilitate assembly of vehicle at Hyundai, Turkey, the activity of labeling does not amount to manufacture. This argument does not find favour with us. The Standard of Weights and Measures Act, 1987 though provides for affixing the Retail Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d otherwise fall outside the scope of the definition of the said term under Section 2(f) of the said Act. Therefore, the purpose for which the said Chapter Note has been introduced in Chapter 29 is to widen the scope and the meaning of the term 'manufacture' in relation to the products covered by the said Chapter 29 of the Tariff Act. Mere process of labeling or relabelling of the containers and even repacking from bulk to retail pack are described as amounting to manufacture and, therefore, the resultant product would attract the duty under the said Act. Likewise, any process adopted for rendering the product marketable would also amount to manufacture even though such activity may not come within the purview of the definition of the term under Section 2(f). In other words, the Chapter Note attempts to remove any doubt the activity described therein as being manufacture and sufficient to attract duty under the said Act." 6.20 The above paragraph of the order of this Tribunal makes it clear that mere process of labelling or relabeling of container will amount to manufacture. It cannot be held that activity of labelling does not amount to manufacture merely because go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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