Repacking recovered mercury into sale cans was not manufacture, and the duty demand was also barred by limitation.

Packing recovered mercury into 30 kg cans did not amount to manufacture under Chapter Note 10 to Chapter 28, because the process was only transfer into sale containers and was not shown to be repacking from bulk pack to retail pack or a similar treatment making a pre-packed commodity marketable to consumers; the duty demand therefore failed on merits. The show cause notice was also beyond the normal limitation period, and in the absence of proof of suppression of facts with intent to evade duty, the extended period was unavailable; the demand was time-barred and penalty under Section 11AC was not leviable.

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Issues: (i) Whether packing of re-generated mercury into 30 Kg cans amounted to manufacture under Chapter Note 10 to Chapter 28 of the Central Excise Tariff Act, 1985. (ii) Whether the demand was barred by limitation and the penalty under Section 11AC of the Central Excise Act, 1944 was sustainable.

Issue (i): Whether packing of re-generated mercury into 30 Kg cans amounted to manufacture under Chapter Note 10 to Chapter 28 of the Central Excise Tariff Act, 1985.

Analysis: Chapter Note 10 treats labelling or relabelling and repacking from bulk pack to retail pack, or any similar treatment to render the product marketable to the consumer, as manufacture. The packing in question was only transfer of recovered mercury into 30 Kg cans for sale, and there was nothing to show that the cans were pre-packed retail commodities satisfying the criteria of the Board's circular relied upon in earlier decisions. The reasoning adopted in prior tribunal rulings supported the view that such transfer did not amount to repacking from bulk pack to retail pack.

Conclusion: The process did not amount to manufacture, and the duty demand failed on merits.

Issue (ii): Whether the demand was barred by limitation and the penalty under Section 11AC of the Central Excise Act, 1944 was sustainable.

Analysis: The show cause notice was issued beyond the normal limitation period, so the extended period could apply only on proof of suppression of facts with intent to evade duty. On the facts, such intent was not established. In the absence of the necessary ingredient for invoking the extended period, the demand could not survive, and the penalty provision also could not be invoked.

Conclusion: The demand was time-barred, and the penalty under Section 11AC was not leviable.

Final Conclusion: The Revenue's appeal failed both on merits and on limitation, leaving the assessee's relief intact.

Ratio Decidendi: Mere transfer of recovered material into sale containers does not constitute manufacture under Chapter Note 10 unless it is shown to be repacking from bulk pack to retail pack or a comparable process rendering a pre-packed commodity marketable to the consumer; the extended period cannot be invoked without proof of suppression of facts with intent to evade duty.

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