Mere assembly of airline meal components does not amount to manufacture without proof of a marketable excisable product

Mere later assembly of prepared and bought-out food items by airline staff does not, by itself, amount to manufacture of branded edible preparations for central excise purposes unless the department proves that a complete marketable product emerged on clearance from the assessee's premises. Where the food was cleared in separate bowls, trays and cutlery pouches, with the label not accompanying the cleared goods, the manufacturing nexus was not established. The note also states that extended limitation requires proof of fraud, wilful misstatement or suppression with intent to evade duty; registration for other products alone is insufficient. In the absence of such evidence, the demand and penalty were unsustainable.

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Issues: (i) Whether the assembly and clearance of prepared and bought-out food items in trays for airline service amounted to manufacture of branded edible preparations liable to central excise duty. (ii) Whether the demand and penalty were sustainable by invoking the extended period of limitation.

Issue (i): Whether the assembly and clearance of prepared and bought-out food items in trays for airline service amounted to manufacture of branded edible preparations liable to central excise duty.

Analysis: The food items prepared by the assessee were cleared separately in bowls and trays, while other bought-out items were supplied in a separate set of trays. The airline staff combined the items later for serving passengers. The label carrying the assessee's name and logo was placed in a cutlery pouch supplied separately and did not accompany the prepared food as cleared from the factory. The adjudicating authority had not examined the actual process of manufacture or established that the complete meal tray emerged as a manufactured product on removal from the assessee's premises. Classification could not be sustained merely by treating the final served tray as the excisable article when the necessary manufacturing nexus was not shown.

Conclusion: The alleged branded food preparations were not proved to have been manufactured by the assessee, and the duty demand on this basis was unsustainable.

Issue (ii): Whether the demand and penalty were sustainable by invoking the extended period of limitation.

Analysis: The dispute was one of legal interpretation arising from the manner in which airline catering items were supplied and served. The record did not establish fraud, wilful misstatement, or suppression of facts with intent to evade duty. The assessee was already registered for other excisable products, but that circumstance alone did not justify extended limitation for the present demand. In the absence of evidence supporting suppression, invocation of the extended period could not be upheld.

Conclusion: The extended period of limitation and the connected penal action were not sustainable.

Final Conclusion: The impugned order failed both on the question of manufacture and on limitation, and the assessee obtained complete relief.

Ratio Decidendi: Mere subsequent assembly of food items by airline staff does not constitute manufacture of branded excisable goods unless the department proves that such a marketable excisable product emerged on clearance from the assessee's premises; in the absence of suppression or intent to evade duty, the extended period of limitation cannot be invoked.

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