2023 (12) TMI 374 - CESTAT CHANDIGARH

Activity amounting to manufacture or not - appellant inserts 100gm toothpaste tube and one toothbrush in the blank slots provided in the promo pack at their facility/ factory - eligibility for the exemption contained in the Notification No.50/2003 as the declaration was filed late - activity undertaken by the appellants attracts service tax or central excise duty - invocation of extended period of limitation - HELD THAT:- Having given the entire description of the combi pack received by the appellants and their activity of inserting 100 gm toothpaste and a toothbrush in the combi pack and closing the pack, learned Commissioner comes to the conclusion that the pack with complete contents is only marketable to the ultimate consumer and the job undertaken by the appellants amounts to manufacture - it is found that as per Chapter Note 6 cited above, the following processes amount to manufacture: (a) labelling or re-labelling of containers. (b) packing from bulk packs to retail packs. (c) adoption of any other treatment to render the product marketable to the consumer.

The appellant’s activity is not clearly covered by (a) or (b) above and it is not the case of the Department also. It is the contention of the Department that the process undertaken by the appellants falls under (c) and thus, amounts to manufacture - It is M/s CPIL that manufactures the toothpaste and purchases toothbrush on payment of duty and supplies the same to the appellant. The goods have already become marketable before they reach the premises of the appellants. It is the case of the Department that the process undertaken by the appellants makes them marketable as the combi pack contains a disclaimer that “individual items are not for sale”.

The marketability of the goods and the manner in which they are marketed by an individual manufacturer are quite different. The manner in which the goods are marketed does not at all make them marketable. If that is the case, no toothpaste or toothbrush should have been marketed not only by M/s CPIL but also by others, in a standalone condition. However, it is everybody’s knowledge that toothbrush and toothpaste are also sold as individual pieces. The scheme of offering them in a combi pack does not make them marketable only as a combo. To that extent, we find that learned Commissioner has failed to distinguish between “marketability” and the manner in which the said product is “marketed”. The appellants are merely completing the process of combi pack manufactured by the principal manufacturer i.e., M/s CPIL - the process undertaken by the appellants takes care of the manner in which the said product is marketed and in no case makes the goods marketable. Therefore, the process undertaken by the appellant does not amount to manufacture.

Whether the appellants are eligible for the exemption contained in the Notification No.50/2003 as the declaration was filed late? - HELD THAT:- In terms of the Notification No.50/2003, a manufacturer who intends to avail of the exemption under the notification shall exercise his options in writing before affecting the first clearance and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year. Further, the manufacturer shall while exercising the option under Condition as above inform in writing to the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise giving the following particulars viz. (a) Name and address of the manufacturer, (b) Location/ locations of factory/ factories; (c) description of inputs used in manufacturer of specified goods; (d) description of the specified goods produced; (e) date on which option under this Notification has been exercised - by undertaking the activity in the specified area, the appellants have made themselves eligible as per the substantial condition of the notification. In such circumstances, it has to be held that the declaration is only procedural. Moreover, all the details as required as per the notification have been furnished by M/s CPIL. The appellants are eligible for the exemption contained in the Notification No.50/2003 as the declaration was filed late.

Extended period of limitation - HELD THAT:- The Department was kept informed about the activities of the appellants by their principal manufacturer as early as 2007. Therefore, we find that there is no positive act on the part of the appellants to show intent to evade payment of duty. Further, the appellant has entertained a bona fide opinion that the said activity did not amount to manufacture but was exigible to service tax. At no point of time even though a couple of audit inspections were conducted, Department did not raise any objection as to the payment of service tax on the activity undertaken by the appellants. Therefore, Department has not made out any case for invocation of extended period.

The impugned order set aside - appeal allowed.