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TMI Blog2023 (2) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant into retail packs in respect of three IE coded products, namely (i) Diesel Engine Conditioner; (ii) Fuel System Cleaner; and (iii) Intake System Cleaner, for which the appellant pays job charges to the job worker and the purchase orders placed on the job worker indicate that NIL excise duty would be payable and service tax @ 12.36% would be payable - Section 2(f) of the Excise Act defines manufacture . In terms of section 2(f)(ii) manufacture would include any process which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff as amounting to manufacture. Chapter note 6 of Chapter 34 and Chapter note 10 of Chapter 38 provide that in relation to products of the concerned Chapter, labeling or relabeling of containers or 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. The impugned order holds that the activity undertaken by the job worker of repacking raw material received from the appellant into retail packs would amount to manufacture. There is no finding that the job worker undertakes the activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Managing Director, General Manager and Senior General Manager of the appellant to assail the order dated January 19, 2016 to the extent it seeks to impose a penalty of Rs. 30 lacs on each them under rule 26 of the Rules. 3. Excise Appeal No. 20825 of 2016 has been filed by M/s Indi Cans [the job worker] to assail the order dated January 19, 2016 insofar as it confirms the demand of central excise duty amounting to Rs. 3,02,87,970/- on the goods said to have been manufactured by it as a job worker, with interest and penalty. 4. Excise Appeal No. 20826 of 2016 has been filed by the Chief Executive Officer of M/s Indi Cans to assail the order dated January 19, 2016 insofar as it imposes a penalty of Rs. 25,00,000/- on him under rule 26 of the Rules. 5. The appellant is engaged in the manufacture and trading of various products in diverse sectors, such as transportation, health care, electrical and communications. The appellant inter alia engages various job workers for performing product services by supplying raw materials and packing materials. The appellant contends that where the activity undertaken by the job worker amounts to manufacture, it discharges the applicable excise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the appellant. 9. However, a show cause notice 22.05.2015 was issued by the Additional Director General to the job worker, the appellant, and some of the employees of the appellant and the job worker proposing: (i) demand of central excise duty amounting to Rs. 3,02,87,970/- on the goods manufactured by the job worker [Excise Appeal No. 20825 of 2016] during the period 01.05.2010 to 31.12.2014 by classifying the impugned goods under Central Excise Tariff Heading [CTH] 3403 and adopting M.R.P. based assessment; and (ii) penalty under rule 26 of the Rules on the appellant [Excise Appeal No. 20847 of 2016] as well as on the employees of the appellant [Excise Appeal Nos. 20841 to 20846] and the employee of the job worker [Excise Appeal No. 20826 of 2016]. 10. Replies were filed, denying the charges alleged in the show cause notice dated May 22, 2015. An order dated January 19, 2016 was thereafter passed by the Commissioner holding that: (i) The activity undertaken by the job worker would amount to 'manufacture' under section 2(f)(ii) of the Central Excise Act, 1944 [the Excise Act] read with Chapter note 6 to Chapter 34 of the Central Excise Tariff contained in the First Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, it would be useful to examine the relevant provisions of the Excise Act and the Central Excise Tariff. 15. Section 2(f) of the Excise Act defines 'manufacture'. It is, as it stood at the relevant time, reproduced: "2(f) "manufacture" includes any process, - (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the section or Chapter notes of The First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, and the word "manufacture" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;" (emphasis supplied) 16. The definition of manufacture in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibitors, viscosity improvers, anti-corrosive preparations and other prepared additives, for mineral oils (including gasoline) or for other liquids used for the same purposes as mineral oils 20. Rule 26 of the Rules is as follows : "Rule 26. Penalty for certain offences - (1) Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater." 21. The issues that arise for consideration in these appeals are whether the activity undertaken by the job worker would amount to manufacture under section 2(f)(ii) of the Excise Act read with Chapter note 6 of Chapter note 34 or Chapter note 10 of Chapter 38 of the Central Excise Tariff; and whether the products, namely, (i) Diesel Engine Conditioner, (ii) Fuel System Cleaner, and (iii) Intake System Cleaner are classifiable under CTH 3403 as lubricating preparations as contended by the departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mixing/packing of 'IE' coded automobile (car/motor cycle) care products in their factory on job work basis for M/s. 3M. It appears that the products are basically Engine Conditioners, Fuel System Cleaners and Intake System cleaners. All the said products are the products of M/s. 3M for use in the automobiles like car and motorcycles. xxxxxxxx 11.6.2 In respect of the products falling under chapter 34 (and even Chapter 38) of the Central Excise Tariff Act, 1985, as per the respective chapter notes, any labelling or relabeling of containers or 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'. From the records and evidences discussed above, it appears that M/s Indicans have carried out the mixing/packing/repacking of the products received by them from M/s. 3M into retail packs and also affix labels printed with all the details including MRPs. The labels affixed on such retail packs were also containing the details like brand name of 3M, Net wt. batch no., date of packing, date of expiry, their concern name and address etc. Further, it appears from the invoices raised by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with Section 2f(ii) of the Central Excise Act, 1944." (emphasis supplied) 26. The Commissioner, thereafter, classified Diesel Engine Conditioner under Customs Tariff Item 3403 19 00; Fuel System Cleaner under Customs Tariff Item 3403 99 00; and intake System Cleaner under Customs Tariff Items 3403 99 00. 27. The first issue that arises for consideration in these appeals is as to whether the activity undertaken by the job worker would amount to 'manufacture' under section 2(f)(ii) of the Excise Act. 28. The impugned order has confirmed the duty demand against the job worker holding that the activity of aerosol filling/packing/labeling would amount to manufacture in terms of section 2(f)(ii) of the Excise Act read with Chapter note 6 of Chapter 34 or Chapter note 10 of Chapter 38. 29. As noticed above, the show cause notice alleges that the job worker carries out packing/re-packing of the products received from the appellant into retail packs and also affixes labels printed with details, including MRPs. The contention of learned counsel for the appellant and learned counsel appearing for the job worker is that the activity undertaken by the job worker would not amount to man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable and service tax @ 12.36% would be payable. 32. Section 2(f) of the Excise Act defines 'manufacture'. In terms of section 2(f)(ii) 'manufacture' would include any process which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff as amounting to manufacture. Chapter note 6 of Chapter 34 and Chapter note 10 of Chapter 38 provide that in relation to products of the concerned Chapter, labeling or relabeling of containers or 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. 33. The Chapter notes seeks to extend the definition of 'manufacture' and should be strictly interpreted in view of the decisions of the Supreme Court in Union of India & ors. vs. Bombay Tyre International Ltd. [1983 (14) ELT 1896 (SC)] and Commissioner of Customs (Import), Mumbai vs. Dilip Kumar [2015 (325) ELT 815 (SC)]. 34. For the activities undertaken by the job worker to amount to 'manufacture' under note 6 of Chapter 34, it should include any of the following activities : (i) labelling or relabelling of containers; or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence the entry under Note 11 of Chapter 29, as it stood at the relevant time, is reproduced below (effective from 22-9-1997): "In relation to products of this Chapter, labelling or relabelling of containers or re-packing from bulk packs to retail packs or adoption of any other treatment to render products marketable to the consumer shall amount to manufacture." 5. In respect of the very same issue, the Board has clarified vide Circular No. 910/30/2009-CX., dated 16-12-2009 that the activity does not amount to manufacture and is reproduced below: "Therefore, the tankers cannot be termed as bulk packs and therefore the activity of transferring the goods from tankers into smaller drums cannot be said to be covered by the said Chapter Note 10". 6. The Board has issued the above clarification pursuant to the judgment of the Hon'ble Tribunal in the case of Ammonia Supply Co. reported in 2001 (131) E.L.T. 626 as noted in para 3 of the Circular. 7. Further, by a very recent judgment the Hon'ble Supreme Court in the case of C.C.E. Vadodara v. Vadilal Gases Ltd. Reported in 2017 (346) E.L.T. 161 (S.C.) on identical facts and circumstances has categorically held as under : "Gas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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