Repacking into retail packs treated as manufacture; nondisclosure justified extended limitation and penalties.

Repacking soda ash from 50/75 kg packs into 500 g/1 kg retail packs was treated as manufacture under Chapter Note 10 of Chapter 28 read with Section 2(f), because the process converted bulk industrial packs into retail packs and rendered the goods marketable to consumers; duty was therefore exigible. The demand was also held within the extended limitation period under Section 11A(1) because the repacking activity was not clearly disclosed to the department, and that suppression sustained the penalties. The order confirming duty, extended limitation, and penalties was upheld.

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Issues: (i) whether repacking soda ash from 50/75 kg packs into 500 g/1 kg packs amounted to manufacture under Chapter Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985 read with Section 2(f) of the Central Excise Act, 1944; (ii) whether the demand was barred by limitation and the penalties were unsustainable.

Issue (i): whether repacking soda ash from 50/75 kg packs into 500 g/1 kg packs amounted to manufacture under Chapter Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985 read with Section 2(f) of the Central Excise Act, 1944

Analysis: Chapter Note 10 treats labelling or relabelling of containers and repacking from bulk packs to retail packs, or any other treatment rendering the product marketable to the consumer, as manufacture. The expression "bulk pack" must be read as a whole and in contrast to "retail pack". On the facts, the goods were moved from larger packs meant for industrial consumers into smaller packs meant for retail consumers, thereby enhancing marketability in a different market segment. The process therefore fell within the deeming provision.

Conclusion: The repacking activity constituted manufacture and duty was exigible.

Issue (ii): whether the demand was barred by limitation and the penalties were unsustainable

Analysis: The records and challans did not clearly disclose that the goods sent to the unregistered premises were being repacked into retail packs for sale without duty. The registered premises was only a dealer's premises, and the unregistered repacking activity was not adequately revealed to the department. The facts justified invocation of the extended period under Section 11A(1), and the same suppression supported the penalties.

Conclusion: The demand was not time-barred and the penalties were sustainable.

Final Conclusion: The order confirming duty, extended limitation, and penalties was upheld, and both appeals failed.

Ratio Decidendi: Repacking goods from larger packs intended for industrial sale into smaller packs intended for retail sale amounts to manufacture when it renders the product marketable to the consumer, and nondisclosure of that repacking activity can justify the extended limitation period and penalties.

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