Deeming manufacture for relabelling and repacking did not justify extended limitation or penalty absent suppression to evade duty.

Chapter Note 4 to Chapter 62 treats labelling, relabelling, repacking from bulk to retail packs, and similar treatment rendering goods marketable as manufacture. On that interpretation, repacking, relabelling and affixing bar code stickers on imported ready-made garments were treated as manufacture for the limited purpose discussed, and the Revenue's broader challenge failed. For limitation and penalty, the extended period under Section 11A required proof of suppression or wilful misstatement with intent to evade duty; absent such evidence, mere non-registration or a mistaken view of law was insufficient. On the same reasoning, mandatory penalty under Section 11AC was not sustainable, and the Commissioner (Appeals) order was sustained.

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Issues: (i) Whether repacking, relabelling and affixing bar code stickers on imported ready-made garments amounted to manufacture under Chapter Note 4 of Chapter 62 of the Central Excise Tariff Act, 1985; (ii) whether the extended period under Section 11A of the Central Excise Act, 1944 and the penalty under Section 11AC of the Central Excise Act, 1944 were attracted on the allegation of suppression with intent to evade duty.

Issue (i): Whether repacking, relabelling and affixing bar code stickers on imported ready-made garments amounted to manufacture under Chapter Note 4 of Chapter 62 of the Central Excise Tariff Act, 1985.

Analysis: Chapter Note 4 to Chapter 62 treats labelling or relabelling, repacking from bulk to retail packs, and other treatment rendering the goods marketable to the consumer as manufacture. The dispute turned on whether the processes undertaken on the imported garments fell within that deeming provision. The issue was considered to be one of legal interpretation, and the Supreme Court authority relied upon supported the view that such activities, in the absence of further manufacturing activity, do not automatically justify a wider demand beyond the period already sustained by the appellate authority.

Conclusion: The processes were treated as manufacture for the limited purpose already upheld, and the Revenue's challenge to that finding failed.

Issue (ii): Whether the extended period under Section 11A of the Central Excise Act, 1944 and the penalty under Section 11AC of the Central Excise Act, 1944 were attracted on the allegation of suppression with intent to evade duty.

Analysis: The demand beyond the normal period required proof of suppression of facts or wilful misstatement with intent to evade duty. The record did not disclose evidence showing a deliberate attempt to evade duty; the matter was held to involve interpretation of the law relating to Chapter Note 4, and mere non-registration or failure to appreciate the legal position was not enough to establish suppression. On the same reasoning, mandatory penalty under Section 11AC could not survive.

Conclusion: The extended period was not available and the penalty under Section 11AC was not sustainable.

Final Conclusion: The Revenue's appeal failed, and the order of the Commissioner (Appeals) was sustained in substance.

Ratio Decidendi: Where the liability depends on an arguable interpretation of a deeming manufacture provision and the record does not prove deliberate suppression or intent to evade duty, the extended limitation period and mandatory penalty cannot be invoked.

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