Duty on value addition outside factory denied for duty-paid goods sent for non-manufacturing packing, with interim stay granted.

Duty-paid goods sent for packing outside the factory did not justify a further demand on the value addition where the activity was not manufacture. A Board circular issued after the Supreme Court's ruling in Sidharth Tubes clarified that such outside processing cannot attract central excise duty on the added value. On that basis, the applicants established a strong prima facie case for interim protection, and waiver of pre-deposit was granted while recovery of the duty and penalty was stayed during the pendency of the appeal.

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Issues: Whether the applicants were entitled to waiver of pre-deposit and stay of recovery of the demanded central excise duty and penalty during pendency of the appeal.

Analysis: The goods had been cleared on payment of duty and the packing activity was carried out outside the factory premises. The Board's circular, issued after the Supreme Court's ruling in Sidharth Tubes, clarified that where duty-paid goods are sent for further processing not amounting to manufacture, duty cannot be demanded on value addition outside the factory of clearance. On that basis, the applicants established a strong prima facie case for interim relief.

Conclusion: Waiver of pre-deposit was granted and recovery of the duty and penalty was stayed during the pendency of the appeal.

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