Deeming manufacture under excise law: corrected label slips are not enough, but reprocessing to restore marketability can attract duty.

Affixing only a corrected price slip on already packed Histic tablets did not amount to manufacture, because there was no relabelling in the statutory sense and no repacking from bulk to retail packs; the excise demand and penalty on that product were unsustainable. By contrast, rectification and reprocessing of Pen-G Acylase through milling, blending, sifting, repacking and fresh labelling restored marketability and fell within the deeming fiction in Section 2(f)(ii) read with Chapter Note 11 of Chapter 29; the process therefore amounted to manufacture and attracted central excise duty. The result was mixed, with relief for one product and duty liability upheld for the other.

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Issues: (i) Whether affixing a slip correcting the maximum retail price on containers or strips already packed with Histic tablets amounted to manufacture under Chapter Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985. (ii) Whether rectification and reprocessing of Pen-G Acylase, followed by repacking and restoration of marketability, amounted to manufacture and attracted central excise duty.

Issue (i): Whether affixing a slip correcting the maximum retail price on containers or strips already packed with Histic tablets amounted to manufacture under Chapter Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985.

Analysis: Section 2(f)(ii) of the Central Excise Act, 1944 enlarges the concept of manufacture where a Chapter Note specifies a process as amounting to manufacture. Chapter Note 11 of Chapter 29 treats relabelling and repacking from bulk packs to retail packs, as well as treatment rendering the product marketable, as manufacture. On the facts, only a corrected label slip was affixed to already packed tablets; there was no relabelling of containers in the statutory sense and no repacking from bulk packs to retail packs.

Conclusion: The process did not amount to manufacture and the demand and penalty relating to Histic tablets were not sustainable.

Issue (ii): Whether rectification and reprocessing of Pen-G Acylase, followed by repacking and restoration of marketability, amounted to manufacture and attracted central excise duty.

Analysis: The returned material underwent milling, blending, sifting and other processing, was repacked, and was given a fresh batch number, lot number and expiry date. The statutory definition under Section 2(f)(ii) of the Central Excise Act, 1944 and Chapter Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985 covers processes specified in the Chapter Note, including treatment to render goods marketable. The material was not marketable in its defective form and the reprocessing changed its condition sufficiently to bring it within the deeming provision. Rule 173(3) of the Central Excise Rules, 1944 also permitted removal without duty only if no process amounting to manufacture had been undertaken.

Conclusion: The process amounted to manufacture and the duty demand relating to Pen-G Acylase was upheld.

Final Conclusion: The questions were answered differently for the two products, with relief granted on Histic tablets and the Revenue succeeding on Pen-G Acylase, resulting in a partly favourable outcome for both sides.

Ratio Decidendi: Under the excise deeming provision, a process amounts to manufacture when the Chapter Note specifically treats it as such, including treatment that renders goods marketable; mere correction of a label on already packed goods does not, by itself, satisfy that test.

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