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2023 (2) TMI 729 - CESTAT BANGALOREProcess amounting to manufacture or not - activity of aerosol packing of products on job work basis, undertaken by the job worker - classification of goods - Diesel Engine Conditioner - Fuel System Cleaner - Intake System Cleaner - classifiable under CTH 3403 as lubricating preparations as contended by the department or under CTH 3811 or alternatively under CTH 3402 as contended by the appellant and the job worker? Whether the activity undertaken by the job worker would amount to ‘manufacture’ under section 2(f)(ii) of the Excise Act? - HELD THAT:- The present appeal concerns only the activity undertaken by the job worker involving repacking from bulk containers received from the 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 activity of repacking from bulk packs to retail packs nor does the appellant undertake such an activity. With regard to the activity of adopting any treatment to render the product marketable to the consumer, it is the case of the appellant and the job worker that such a treatment has not been undertaken on the raw materials supplied by the appellant in bulk containers to the job worker, as the raw materials are injected into aerosol cans and thereafter plastic caps are fitted and labels are affixed on the cans. This activity of injecting the raw materials into aerosol cans would not amount to adopting any treatment on the raw materials to render the product marketable - This is what was held by the Supreme Court in Vadilal Gases Ltd. [2017 (1) TMI 1311 - SUPREME COURT]. The inevitable conclusion, therefore, is that the process undertaken by the job worker would not amount to manufacture in terms of section 2(f)(ii) of the Excise Act read with note 6 of Chapter 34 or note 10 of Chapter 38 of the Central Excise Tariff. The second issue that requires to be examined is about the classification of the products said to have been manufactured by the job worker. As the first issue has been decided in favour of the job worker, namely that the process undertaken by the job worker would not amount to ‘manufacture’, it would not be necessary to decide this issue. Penalties - HELD THAT:- Once it is held that the activity undertaken by the job worker would not amount to manufacture under section 2(f)(ii) of the Excise Act, penalties could not have been imposed either upon the employees of the appellant or the employee of the job worker. Appeal allowed.
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