Binding Board circular barred excise demand on relabelling imported medicines until withdrawal; retrospective section 11A amendment did not apply.

Affixing labels or stickers on imported medicines was treated as manufacture under Chapter Note 5 to Chapter 30, but the binding Board circular then in force stated that such activity did not amount to manufacture. The Tribunal held that demands raised for periods covered by that circular could not be sustained, because the department was bound by the clarification until it was withdrawn in May 2001. It also held that the retrospective amendment to section 11A of the Central Excise Act, 1944 did not validate these demands, as the matter did not involve approval, acceptance, or assessment under the Act or Rules, but payment authorised by the Board's own clarification. The show cause notices were quashed and the assessee succeeded.

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Issues: Whether duty could be demanded for affixing labels on imported medicines for the period when the Board's circular treated the activity as not amounting to manufacture, and whether the retrospective amendment to section 11A of the Central Excise Act, 1944 validated the demands.

Analysis: Chapter Note 5 of Chapter 30 of the Central Excise Tariff Act, 1985 treats labelling or relabelling of containers intended for consumers as manufacture. However, the Board had earlier issued a circular stating that affixing stickers or labels on imported medicines did not amount to manufacture, and that clarification governed the field until it was withdrawn in May 2001. The demand notices were issued for periods when the earlier circular was in force, and the Tribunal held that actions contrary to a binding Board circular cannot be sustained for the earlier period. The amendment to section 11A of the Central Excise Act, 1944 was held inapplicable because the case was not one of approval, acceptance, or assessment under the Act or Rules, but one where non-payment had been authorised by the Board's own clarification.

Conclusion: The demands for the period up to 16-5-2001 were not sustainable, the show cause notices were quashed, and the impugned order was set aside in favour of the assessee.

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