Repacking of chemicals into drums and labelling them did not constitute manufacture; extended limitation and penalties also failed.

Filling chemicals from tankers into drums, jerry cans or carboys and merely labelling them did not amount to repacking from bulk packs into retail packs under Chapter Note 11 of Chapter 29, because the goods were sold to industrial buyers and were not made up for consumer retail sale. The activity therefore did not constitute manufacture. As the substantive demand on manufacture failed and the record showed no concealment or contumacious conduct, the extended period of limitation and consequential penalties were also unsustainable. The impugned orders were set aside and consequential relief followed.

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Issues: (i) Whether filling chemicals from tanker into drums/jerry cans and labelling them amounted to repacking from bulk packs to retail packs so as to constitute manufacture under Chapter Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985. (ii) Whether the extended period of limitation and penal consequences were invocable on the facts of the case.

Issue (i): Whether filling chemicals from tanker into drums/jerry cans and labelling them amounted to repacking from bulk packs to retail packs so as to constitute manufacture under Chapter Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985.

Analysis: The activity found on record was that the goods were received in tankers and transferred into drums, jerry cans or carboys for storage and dispatch. The materials were sold to industrial buyers and not put up in retail packs for consumer sale. Mere labelling of containers, without repacking from bulk packs into retail packs or any treatment to render the goods marketable to the consumer, did not satisfy the deeming fiction of manufacture under the chapter note.

Conclusion: The activity did not amount to manufacture and the chapter note was not attracted.

Issue (ii): Whether the extended period of limitation and penal consequences were invocable on the facts of the case.

Analysis: The record did not disclose concealment of facts or contumacious conduct. Since the substantive charge of manufacture failed on merits, the foundation for invoking the extended period and related penalties was also absent.

Conclusion: The extended period of limitation and the penal action were not sustainable.

Final Conclusion: The impugned orders were set aside and the appellants were entitled to consequential relief in accordance with law.

Ratio Decidendi: Mere transfer of goods from tanker into containers and labelling them, without repacking into retail packs or rendering them directly marketable to the consumer, does not constitute manufacture under the relevant chapter note.

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