TMI Blog2023 (2) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by Chief Finance Officer, Vice-President, Manager, 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls the liquid in small aerosol containers and returns the IE coded goods to 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] re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the learned authorized representative appearing for the department have been considered. 14. Before dealing with the submissions, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bricating preparations (including cutting oil preparations, bolt or nut release preparations, anti-rust or anti-corrosion preparations and mould release preparations, based on lubricants) and preparations of a kind used for the oil or grease treatment of textile materials, leather, furskins or other materials , but excluding preparations containing, as basic constituents, 70% or more by weight of petroleum oils or of oils obtained from bituminous minerals xxxx xxxx xxxx 3811 Anti-knock preparations, oxidation inhibitors, gum inhibitors, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory to M/s. 3M after carrying out the aforesaid processes on job work. It also appeared during investigation that the Central Excise duty was not paid either by M/s. Indicans or by M/s. 3M in respect of products having product codes starting with alphabets IE manufactured and cleared on job work basis by M/s. Indicans. Regarding the manufacture and clearance of goods by M/s. Indicans, on job work basis to M/s. 3M, statements of the connected persons were recorded under Section 14 of the Central Excise Act, 1944, as follows:- xxxxxxxx 11.1 It appears that M/s. Indicans have carried out 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 pack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d activities, in their factory premises, by using their own workers and infrastructure. From the documents raised by M/s Indi Cans, it is seen that the subject goods manufactured by them are packed in fixed measured doses or packing meant for retail sale. Hence, I hold that all the aerosol filling/packing/labelling carried by M/s Indi Cans in their factory are basically to render the product marketable to the consumer by M/s 3M. Therefore, I hold that the activities carried out by M/s Indi Cans amount to manufacture by virtue of the chapter notes of both chapter Nos. 34 and 38) of the Central Excise Tariff Act, 1985 read 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 dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed authorised representative also submitted that even the third limb of the note relating to adoption of any other treatment to render the product marketable to the consumer would also be applicable. 31. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 39. In this connection, reference can be made to the decision of the Supreme Court in Commissioner of Central Excise, Vadodara vs Vadilal Gases Ltd. [2017 (346) ELT 161 (SC)] , wherein it was held that the gases supplied in tankers are not in bulk packs and, therefore, the activity of repacking from tankers to retail packs would not amount to manufacture. Reference can also be made to the decision of the Tribunal in Swastik Corporation vs. Commissioner of Central Excise, Puducherry [2018 (359) ELT 233 (Tri.-Chennai)] , wherein after placing reliance on the decision of the Supreme Court in Vadilal Gases Ltd., it was held: 4 . For convenience of reference 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 man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department has placed reliance upon the decision of the Tribunal in Nestle India Ltd. The said decision would not help the Department as in that case there was mixing of vitamins in required proportions which, the Tribunal held, would amount to adopting a treatment to render the goods marketable. 43. In this view of the matter, the activity undertaken by the job worker would not amount to manufacture even under the third limb of the Chapter note. 44. 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. 45. 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. 46. Once it is held that the activity undertaken by the job worker would not amount to manufacture under section 2(f)(ii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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