TMI Blog2018 (6) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or alteration of the retail sale price. There is yet another interesting “other than the above” category that would fall within the ambit of deemed manufacture, namely, “adoption of any other treatment on the goods” to render the product marketable to the consumer”. Rendering the product “marketable” is a catch-all phrase that in our view would include any treatment to make the product attractive to potential buyers and enhance its ‘marketability quotient. This could encompass many strategies e.g. replacing a dated packing / wrapper with a brand new one to ensure more eyeball display or affixation of a nationally or internationally known trademark or certifying mark. ( e.g. ‘3M’ product, ‘Intel’ Inside, ‘Apple’ compatible, ‘De Beers’ certified diamonds, Woolmark, Agmark, BIS hall mark etc.). As per section 2(f)(iii) ibid, one of the process which would result in “deemed manufacture” is labeling or relabeling of containers. There is no conditionality indicated therein that such labeling or relabeling should necessarily result in enhancement or alteration of price - affixation of the “Marketed By” label and especially the “HONDA” trademark label, enhances the marketability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities amount to manufacture as under Section 2(f)(iii) of Central Excise Act, 1944 and paid excise duty thereon and availed CENVAT credit of the same. According to department, the appellants are not eligible for credit as these activities do not amount to manufacture. The practice adopted by appellants was not agreed with by the department for various reasons, inter alia:- i) The assessee imported certain automobile spare parts and affixed the label containing information of part no. description, MRP etc. in the Port itself and adopted valuation under section 4A (MRP / RSP Valuation) of the Central Excise Act, 1944 in the Bills of Entry; ii) After receipt of imported parts, they had availed CENVAT credit of excise duty (CVD), Education Cess / HR. Edu Cess and SAD. iii) At their factory, they are affixing a sticker mentioning Marketed by at the time of clearances without changing the MRP mentioned in the label affixed at the Port. iv) At the time of clearance of spare parts from their factory, they do not change MRP. When there is increase in MRP, they had paid differential duty. v) All manufacturing activities had been completed in Port. vi) Similarly, they re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.29,26,62,179/- (CVD/ED/ST) Rs.53,13,635/- (Education Cess) Rs.26,56,814/- (SHE Cess) Rs.77,14,726/- (SAD) Penalty Honda Motors ₹ 28,84,83,307/- (R. 15(2) of CCR) M. Ramakrishna Reddy ₹ 5,000/- (R.15A) Atul Gupta ₹ 5,000/- (R.15A) Honda Motors ₹ 8,00,00,000/- (R. 15 of CCR) No personal penalty Honda Motors ₹ 3,00,00,000/- (R. 15(1) of CCR) No personal penalty Interest Not quantified (R.14 CCR) Not quantified (R.14 CCR) r/w section 11AB/ 11AA of the Act Not quantified (R.14 CCR) r/w section 11AA of the Act Appeal Nos. E/40357/2014 (Honda) E/40359/2014 (R. Reddy) E/40362/2014 (Atul Gupta) E/41552/2014 (Honda) E/41246/2015 (Honda) 4. On 4.4.2018, when the matter came up for hearing, the appellants were represented by Ld. Advocate Shri Lakshmi Kumaran who made various oral and written submissions which can be broadly summarized as under:- i) The appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal Metrology Act / Rules, to declare on the package thereof the retail sale price of goods, are assessable to value based on MRP. Serial No. 108 of the Notification No.49/2008-CE (NT) dated 24.12.2008 issued under Section 4A covers automobile parts falling under any chapter. A combined reading of Section 3, Section 2(f)(iii), Third Schedule, Section 4A and provisions of Legal Metrology Act and Rules, make it mandatory for the appellant to take registration and pay excise duty. Therefore, the impugned activities of inspection of goods, affixing label on the pack and affixing brand name by adhesive tape are activities deemed to be manufacture and thereby CENVAT credit taken on the impugned goods is legal and correct. ix) Section 2(f)(iii) does not contain any qualification as to the nature and extent of packing / repacking, labeling/relabeling to hold a particular activity to be manufacture. It creates a legal fiction by which any process in relation to goods specified in the Third Schedule, involving packing or repacking of such goods in a unit container or labeling or relabeling of containers amounts to manufacture. x) Therefore, the term labelling includes the activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods is to be treated as reversal of credit. Thus, the entire exercise is revenue neutral. Reliance is placed on the following decisions a. CCE v. Narmada Chematur Pharmaceuticals Ltd., 2005 (179) ELT 276 (SC). b. CCE Vs. Narayan Polyplast - 2005 (179) ELT 20 (SC) c. Punjab Tractors Ltd. Vs. CCE [2005 (181) ELT 380 (SC)] d. CCE v. Indeos ABS Ltd [2010 (254) E.L.T. 628 (Guj.)] e. Bekaeret Solutions v. CCE, Pune [2012 (286) E.L.T. 420 (Tri. - Mumbai)] f. Minda Auto Gas v. CCE [2013 (287) E.L.T. 101 (Tri. - Del.)] g. Asian Color Coated Ispat v. CCE [2015 (317) E.L.T. 538 (Tri. - Del.)] xvi) Proceedings against another unit of the Appellant decided in their favour:- In a case involving the Mumbai Unit of the Appellant, similar activity of packing, re-packing, labelling, re-labelling and affixing of MRP was being undertaken. There were some instances where the MRP declared at the time of clearance of the goods from the warehouse was less than the MRP declared before the Customs authorities. While adjudicating the matter against the Appellants, the Assistant Commissioner, Raigad held the activity undertaken amounted to manufacture. This Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 dated 24.11.2000 and submitted that on import of goods, the appellants have to ensure that the goods comply with the mandatory Indian Quality Standards including the provisions of Legal Metrology law. These compliances have been completed at the port itself merely by putting stickers /labels, the appellant cannot content that they are undertaking manufacturing activity. (iii) Ld. AR drew our attention to the findings of the adjudicating authority that the goods as received by the assessee would be in unit containers and in no case the original retail packing is tampered with. iv) As far as affixing of stickers is concerned, the fixing of stickers (referred to as stickering) is entirely from an inventory management and logistical perspective and does not convey any information to customer or consumer. They make no alteration in the labels already affixed on the packages of goods; and thus, cannot be equated with process of labelling or relabelling contemplated in the Act. Therefore, the different types of stickering done by them cannot come within the meaning of expression labelling or relabelling for the purposes of the Act and would not amount to manufacture. v) Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout price revision, affixation of marketed by label, affixing HONDA tape/sticker would be activities that could be brought within the ambit of manufacture as defined under section 2(f)(iii) of Central Excise Act, 1944. 7.2 The issue in dispute in the present matter is concerned with the definition of manufacture under section 2(f)(iii) of the Central Excise Act, 1944 which lists out certain processes deemed as manufacture by legal fiction namely:- Section 2(f) manufacture includes any process, - xxxx xxxx xxxx (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 7.3 The definition in Section 2(f)(iii) ibid thus deems the following / processes as amounting to manufacture:- Packing or repacking of the goods in a unit container Labeling or relabeling of containers including the declaration or alteration of retail sale price on it Adoption of any other treatme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Marketed By label and especially the HONDA trademark label, enhances the marketability of these products. Trademarks are efficient commercial communication to capture customer attention. It speaks about the company, its reputation and products and services. An internationally known trademark like HONDA will serve to allay any doubts on basic quality of the goods and make the goods more marketable. 7.7 There can be then no doubt that these operations carried on the packages not only come within the mischief of deemed manufacture on account of the labeling or relabeling process included under section 2(f)(iii) ibid but also will become any other treatment to render the product marketable to the consumer . 7.8 Viewed in this light, we are convinced that the processes carried out on the impugned goods received by the appellants from the port / other warehouses will amount to manufacture within the meaning of section 2(f)(iii) of the Act. 7.9 In arriving at this conclusion, we are only reiterating the view taken earlier by us in Glovis India P. Ltd. (supra) wherein inter alia, we had held as under:- 14. The above process of labeling and packing explained by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice and in the impugned order that the Appellant have undertaken the activity of labelling, I agree with Member (Judicial) that that the activity of the appellant is covered by note 3 to Chapter 18 and the activity of the Appellant of labelling the goods received from Jammu factory amounts to manufacture. xxxx xxxx xxxx xxxx 6.19 In pursuance of a remand order passed by the Hon'ble Supreme Court of India, this Tribunal in its order reported in 2009 (235) ELT 577 held as under: 70. While applying the law laid down by the Apex Court in relation to legal fiction created by the statutory provision under Note 11 of Chapter 29 quoted above, we will have to primarily ascertain the purpose behind introducing the said Note 11. The Note certainly relates to connotation of the term manufacture and it seeks to widen the scope thereof by including the activities which would otherwise fall outside the scope of the definition of the said term under Section 2(f) of the said Act. Therefore, the purpose for which the said Chapter Note has been introduced in Chapter 29 is to widen the scope and the meaning of the term 'manufacture' in relation to the products covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing chassis number; whereas in the present case, we have found the activity involved is not merely labeling or relabeling but also adoption of branding process which renders the product more marketable to the customer and thereby falling within the mischief of deemed manufacture for the purpose of Section 2(f)(iii) ibid and on both these counts. The decision in Dhampur Alco-Chem Ltd. Vs. Commissioner of Central Excise, Ghaziabad 2017 (357) ELT 627 (Tri. All.), the issue involved was primarily whether the activity amounted to manufacture on account of alleged repacking of chemical from bulk pack to retail packs, hence this case law will not be applicable to the facts of the present case. In any case, the period of dispute was before the amendment brought about in sub-clause (iii) of Section 2(f) of the Act. 8. In the event, we are of the considered view that the impugned orders cannot sustain and will require to be set aside, which we hereby do. All the appeals are therefore allowed with consequential relief, if any, as per law. 9. Miscellaneous applications filed by Revenue for change of cause title are allowed. (Pronounced in open court on 17.05.2018) - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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