Prima facie manufacture and exemption for repacked toothpaste combo packs justified waiver of pre-deposit and stay of recovery.

Repacking toothpaste tubes into combo packs with a toothbrush was treated, prima facie, as manufacture under the Central Excise Act because the toothpaste was packed for retail sale with changed presentation and retail price, while the toothbrush remained only a free add-on. The assessee was also held, prima facie, entitled to exemption under Notification No. 50/2003-C.E. since the unit was in the notified area, the relevant activity and job-work arrangement had already been disclosed, and the department had prior knowledge; the absence of a separate prior declaration was treated as substantially complied with. On that prima facie case, pre-deposit was waived and recovery stayed.

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Issues: (i) Whether the appellant's activity of repacking toothpaste tubes and a toothbrush into combo packs amounted, prima facie, to manufacture under the Central Excise Act, 1944; (ii) whether the appellant, on the facts, was entitled, prima facie, to exemption under Notification No. 50/2003-C.E. despite the absence of a separate declaration by the appellant before the first clearance; and (iii) whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery under Section 35F of the Central Excise Act, 1944.

Issue (i): Whether the appellant's activity of repacking toothpaste tubes and a toothbrush into combo packs amounted, prima facie, to manufacture under the Central Excise Act, 1944.

Analysis: The process involved packing and repacking of toothpaste, a product covered by the Third Schedule, into unit packs with a change in retail sale price and presentation for marketability. The toothbrush was only a free add-on and did not alter the character of the manufactured product. On that basis, the activity was treated, at least prima facie, as manufacture within Section 2(f)(iii).

Conclusion: The activity was held, prima facie, to amount to manufacture.

Issue (ii): Whether the appellant, on the facts, was entitled, prima facie, to exemption under Notification No. 50/2003-C.E. despite the absence of a separate declaration by the appellant before the first clearance.

Analysis: The unit was located in the notified area and the goods were covered by the notification. The relevant details of the appellant's activity, location, and job-work arrangement had already been disclosed by the principal manufacturer, the appellant had registered as a service provider and paid service tax on the job charges, and the department had prior knowledge of the arrangement. In these circumstances, the requirement of prior declaration was treated as substantially complied with and the exemption could not be denied merely on that technical ground. The presence of a toothbrush supplied free with the pack did not, prima facie, defeat the exemption.

Conclusion: The appellant was held, prima facie, entitled to the exemption under Notification No. 50/2003-C.E.

Issue (iii): Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery under Section 35F of the Central Excise Act, 1944.

Analysis: Since the appellant established a prima facie case on both manufacture and exemption, insisting on pre-deposit was considered to cause undue hardship. The balance of convenience, at the interim stage, favoured granting stay of recovery pending disposal of the appeal.

Conclusion: Pre-deposit was waived and recovery stayed pending disposal of the appeal.

Final Conclusion: Interim relief was granted in favour of the appellant, and the matter was permitted to proceed without pre-deposit while the appeal remained to be heard on merits.

Ratio Decidendi: Where the department already has material particulars of the unit and the job-work arrangement, a prior-declaration condition in an exemption notification may be treated as substantially complied with for interim purposes, and a prima facie case for exemption can justify waiver of pre-deposit under Section 35F.

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