2015 (5) TMI 700 - SC - Central Excise

Supreme Court clarifies manufacturing criteria for excise duty exemption

Commissioner of Central Excise Versus M/s. Amritlal Chemaux Ltd.

Commissioner of Central Excise Versus M/s. Amritlal Chemaux Ltd. - 2015 (321) E.L.T. 5 (SC) Issues:- Whether the process undertaken by the respondent-assessee in three products amounts to manufacture.- Interpretation of Chapter Note 11 of Chapter 29 and Chapter Note 3 of Chapter 32.- Application of conditions for labeling, relabeling, and repacking as per the Chapter Notes.- Assessment of repacking and labeling processes for napthols & fast bases and chrome pigments.- Determination of excise duty liability based on the fulfillment of conditions.Analysis:The Supreme Court addressed the issue of whether the process carried out by the respondent-assessee on three products constituted manufacturing. The products in question were dyes & dye bases, napthols & fast bases, and chrome pigments falling under Chapter 29 and Chapter 32 of the Central Excise Tariff Act, 1985. The dispute arose from the process of repacking and labeling undertaken by the assessee after purchasing the products in bulk from manufacturers. The appellant sought to include the respondent-assessee under Chapter Notes 11 and 3, which extend the definition of 'manufacture' to processes like labeling, relabeling, and repacking to make the product marketable to consumers.The Court analyzed Chapter Note 11 of Chapter 29 and Chapter Note 3 of Chapter 32, which mention that labeling, relabeling, or repacking from bulk to retail packs amount to manufacture. The appellant argued that fulfilling either of the processes should be considered manufacturing. However, the Court disagreed, emphasizing that both conditions must be met for the process to qualify as manufacture. The legislative intent, as reflected in the language of the Chapter Notes, required satisfying both conditions simultaneously.Regarding the specific products, the Court found that for napthols & fast bases, repacking was not done into retail packs but supplied to industrial consumers wholesale, failing to meet the conditions for manufacture. Similarly, for chrome pigments, although relabeling was done, repacking did not occur, leading to non-compliance with the eligibility criteria for manufacturing. Consequently, the Court dismissed the appeal, as the requirements under the Chapter Notes were not fulfilled for the products in question, resulting in no excise duty liability being imposed on the respondent-assessee.In conclusion, the judgment clarified the interpretation of Chapter Notes 11 and 3, emphasizing the need to satisfy both labeling, relabeling, and repacking conditions for a process to constitute manufacturing under the Central Excise Tariff Act. The decision provided a detailed analysis of the specific processes undertaken by the respondent-assessee on the products in question, highlighting the importance of meeting all eligibility criteria outlined in the Chapter Notes to determine excise duty liability accurately.