Repacking and relabelling of bulk camphor treated as manufacture; separate penalties upheld for distinct defaults.

Prior departmental knowledge was not proved on the record, so the limitation plea failed. Repacking bulk Saraswati brand camphor into smaller packs and repackaging or relabelling it was treated as manufacture under the relevant chapter note, making the goods duty-liable. Separate penalty under Rule 173Q was also sustained alongside penalty under Section 11AC because the two penalties arose from distinct defaults: one for duty short-payment on clandestine clearances and the other for confiscated goods and the duty attributable to them. The challenge to the revised demand and penalties was therefore rejected in full.

---

---

Issues: (i) Whether the demand was barred by limitation on the ground that the department had prior knowledge through a visit of the Superintendent and a letter dated 9-4-1997; (ii) whether repacking and relabelling of Saraswati brand camphor amounted to manufacture and attracted duty; and (iii) whether separate penalty under Rule 173Q could be imposed in addition to penalty under Section 11AC.

Issue (i): Whether the demand was barred by limitation on the ground that the department had prior knowledge through a visit of the Superintendent and a letter dated 9-4-1997.

Analysis: The record did not support the claim that the alleged letter had been received by the department or that the Superintendent had visited the factory in the manner asserted. The plea had not been raised at the earlier stage and was treated as an afterthought. On the facts, the claim of prior disclosure was not accepted.

Conclusion: The plea of limitation failed, and the demand was not barred.

Issue (ii): Whether repacking and relabelling of Saraswati brand camphor amounted to manufacture and attracted duty.

Analysis: The packing material and statements on record showed that the camphor received in bulk was opened, repacked into smaller packs, and labelled or relabelled in the appellant's factory. In view of the relevant chapter note, such repacking constituted manufacture, and the goods were liable to duty. The contention that the goods were merely sold as such was therefore rejected.

Conclusion: Repacking and relabelling was held to be manufacture and duty was payable.

Issue (iii): Whether separate penalty under Rule 173Q could be imposed in addition to penalty under Section 11AC.

Analysis: The penalty under Section 11AC related to duty short-paid on clandestine clearances, whereas the penalty under Rule 173Q related to seized goods liable to confiscation and the duty attributable to them. As the two penalties were founded on different defaults and different goods, the separate penalty was held sustainable.

Conclusion: Separate penalty under Rule 173Q was upheld in addition to penalty under Section 11AC.

Final Conclusion: The challenge to the adjudication order was rejected in full, and the duty demand as revised together with the impugned penalties was sustained.

Ratio Decidendi: Where bulk goods are repacked and relabelled in smaller retail packs, such activity constitutes manufacture under the relevant chapter note, and a separate penalty may be sustained for confiscated goods in addition to a penalty for duty short-payment when the two liabilities arise from distinct defaults.

---