Manufacture by assembly and relabelling under excise law, with extended limitation upheld and SSI relief preserved for non-brand use.

After the 2003 amendment, assembly of imported and indigenous telephone parts into complete wired telephone instruments constituted manufacture, and relabelling imported telephones and fax machines by replacing RSP stickers with MRP labels also fell within manufacture under the Central Excise Act. Clearance of goods bearing the mark "TATA INDICOM" justified extended limitation and penalties where registration and SSI declaration requirements were not complied with and duty was not paid until investigation. By contrast, SSI exemption could not be denied for goods marked "SANTEL" because the record did not show that the mark was the brand name of another person used to indicate a trade connection.

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Issues: (i) whether the assembly of imported and indigenous telephone parts into basic wired telephone instruments amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944 and attracted duty; (ii) whether replacement of RSP stickers with MRP labels on imported telephones and fax machines amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944; (iii) whether clearance of telephone instruments bearing the mark "TATA INDICOM" attracted denial of SSI exemption, whether the extended period under Section 11A of the Central Excise Act, 1944 was invocable, and whether penalty was imposable; (iv) whether the use of the mark "SANTEL" disentitled the assessees to SSI exemption.

Issue (i): whether the assembly of imported and indigenous telephone parts into basic wired telephone instruments amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944 and attracted duty.

Analysis: The imported goods were declared as separate parts and the activity involved soldering, assembling, testing and packing. The relevant tariff note treated conversion of an incomplete article having the essential character of the complete article into a complete article as manufacture. The amended definition of manufacture also covered the process undertaken by the assessees for the relevant period.

Conclusion: The activity amounted to manufacture and the duty demand on this count was upheld.

Issue (ii): whether replacement of RSP stickers with MRP labels on imported telephones and fax machines amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944.

Analysis: The amendment to the definition of manufacture covered labelling, relabelling and alteration of retail sale price on goods specified in the Third Schedule. The process of changing the price declaration on the imported goods fell within that statutory expression for the material period.

Conclusion: The activity amounted to manufacture and the duty demand on this count was upheld.

Issue (iii): whether clearance of telephone instruments bearing the mark "TATA INDICOM" attracted denial of SSI exemption, whether the extended period under Section 11A of the Central Excise Act, 1944 was invocable, and whether penalty was imposable.

Analysis: The mark was used on telephones supplied to a telecom service provider that was not shown to be trading in branded excisable goods. However, the assessees had not taken central excise registration, had not filed the declaration required for SSI exemption and had cleared the goods without duty until departmental investigation brought the activity to light. The facts justified invocation of the extended period. The equivalent penalty and personal penalties were therefore sustained.

Conclusion: The extended period was rightly invoked and penalty was sustainable in the appeals where duty demand survived.

Issue (iv): whether the use of the mark "SANTEL" disentitled the assessees to SSI exemption.

Analysis: The record showed that "SANTEL" was not a registered brand name of another person and was not being used to indicate a connection with goods of some other manufacturer. In such circumstances, SSI exemption could not be denied merely because the same name had been used by different entities, and the demand based on brand-name disqualification could not stand.

Conclusion: The assessees were entitled to SSI exemption on goods cleared under the mark "SANTEL", and the corresponding demand and penalties were set aside.

Final Conclusion: The appeals produced a mixed result: the manufacture findings on assembly and relabelling were upheld, the Revenue's challenge to SSI benefit on "TATA INDICOM" failed, the "SANTEL" based denial of SSI exemption was rejected, and the Star Tech matter was allowed only to the extent of the revised duty and consequential relief.

Ratio Decidendi: After the 2003 amendment, assembly of incomplete telephone sets into complete instruments and labelling or alteration of retail sale price constituted manufacture, while SSI exemption could not be denied for use of a mark that was not shown to be the brand name of another person used to indicate a trade connection.

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