1990 (9) TMI 161 - AT - Central Excise

Issues Involved:
1. Whether affixing of labels with the aid of power amounts to a process in or in relation to manufacture and packing within the meaning of Notification 101/66.
2. Whether the appellants are entitled to the benefit of Notification 101/66 and Notification 80/80.
3. Whether the appellants are considered manufacturers or job workers under the Central Excises and Salt Act, 1944.
4. Whether the demand confirmed on M/s. Reckitt & Colman of India Ltd. is justified.

Issue-Wise Detailed Analysis:

1. Whether affixing of labels with the aid of power amounts to a process in or in relation to manufacture and packing within the meaning of Notification 101/66:

The appellants argued that labelling is neither a process of manufacture nor of packing, as it only indicates the name or identity of the product. They contended that the manufacture and packing into plastic bottles were done manually, and power was used only for affixing labels. The Tribunal found that the Collector erred in relying on Rule 51 of the Central Excise Rules and Rule 6 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, which apply only to wholesale and retail sale, not job workers. The Tribunal cited the decision in Bata India Ltd. v. CCE, Calcutta, and the Gujarat High Court's judgment in Ninna Chemical Works & Others v. Union of India, concluding that labelling does not amount to a process of manufacture as it does not bring about any change in the raw material. Thus, labelling is not a process in or in relation to the manufacture and packing of the product.

2. Whether the appellants are entitled to the benefit of Notification 101/66 and Notification 80/80:

The Tribunal held that labelling is not part of the process of packing, as the goods can be delivered without labels. Therefore, the appellants, as job workers and manufacturers, are eligible for the benefit of exemption under Notification 101/66. The requirement of obtaining a licence does not apply to the appellants by virtue of Notification 111/78, which exempts manufacturing units producing goods totally exempt from excise duty from licensing procedures. Consequently, the appeal was allowed with consequential relief.

3. Whether the appellants are considered manufacturers or job workers under the Central Excises and Salt Act, 1944:

The Tribunal noted that M/s. Reckitt & Colman of India Ltd. argued they were not the manufacturers, but the appellants were. The Additional Collector held that the appellants were a dummy concern, only undertaking the manufacture of the said goods on a job charges basis payable by M/s. Reckitt & Colman of India Ltd. The Tribunal found that the appellants were indeed the manufacturers, as they carried out manufacturing operations with their own plant, machinery, and workforce. The Tribunal cited the case of Nocil v. Collector of Central Excise, Bombay, which established that the job worker is the manufacturer.

4. Whether the demand confirmed on M/s. Reckitt & Colman of India Ltd. is justified:

The Tribunal held that the demand confirmed on M/s. Reckitt & Colman of India Ltd. was not justified, as the appellants were the manufacturers. The Tribunal found that the appellants were entitled to claim the exemption under Notification 101/66, as power was used only for labelling, not for any process of manufacture or packing. The exemption could be denied only if power was used for heating during the process of manufacture and packing, which was not the case here. Therefore, the appeal was allowed, and the penalties and demands imposed by the Additional Collector were set aside.

Conclusion:
The appeal was allowed with consequential relief, and the Tribunal held that labelling does not amount to a process of manufacture or packing. The appellants were considered the manufacturers and were entitled to the benefit of Notification 101/66 and Notification 80/80. The demand confirmed on M/s. Reckitt & Colman of India Ltd. was not justified.

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