Re-labelling by altering retail sale price can constitute manufacture, while extended limitation needs proof of suppression.

For electric fans covered by the Third Schedule, packing in outer master cartons did not by itself amount to manufacture because it was not packing in a unit container; however, affixing stickers that altered the retail sale price amounted to re-labelling and therefore manufacture under Section 2(f)(iii). The record did not establish mens rea, deliberate suppression, or a pre-planned intent to evade duty, so the extended limitation period and penalties were not sustainable. Duty survived only to the extent of the normal limitation period, with re-quantification directed on that basis.

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Issues: (i) Whether the activity of packing/re-packing of electric fans in outer master cartons and affixing enhanced MRP stickers in the godown amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. (ii) Whether the extended period of limitation and penalties under Section 11AC of the Central Excise Act, 1944 and Rule 26 of the Central Excise Rules, 2002 were invocable.

Issue (i): Whether the activity of packing/re-packing of electric fans in outer master cartons and affixing enhanced MRP stickers in the godown amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944.

Analysis: Electric fans fell within the Third Schedule to the Central Excise Act, 1944. The definition in Section 2(f)(iii) covers packing or re-packing in a unit container and also labelling or re-labelling of containers, including declaration or alteration of retail sale price. On the admitted facts, the goods were packed in outer master cartons and the MRP stickers were altered to higher values for dispatch to different States. The packing done in the master carton was not packing in a unit container, but the act of changing the MRP sticker amounted to re-labelling with alteration of retail sale price.

Conclusion: The activity of re-labelling and alteration of MRP amounted to manufacture, while the outer master-carton packing by itself did not satisfy the unit-container limb.

Issue (ii): Whether the extended period of limitation and penalties under Section 11AC of the Central Excise Act, 1944 and Rule 26 of the Central Excise Rules, 2002 were invocable.

Analysis: The record did not establish mens rea. The goods could have been cleared with the relevant MRP stickers from the factory itself, and the circumstances did not support a finding of deliberate suppression or a pre-planned intent to evade duty. In the absence of mala fide intent, the extended period was not sustainable and penalty could not be imposed.

Conclusion: The extended period was not invocable and penalties were not sustainable.

Final Conclusion: The adjudication was set aside and the matter was sent back only for re-quantification of duty for the normal limitation period, with the duty demand surviving only to that limited extent.

Ratio Decidendi: Re-labelling of goods by altering the retail sale price on containers of goods specified in the Third Schedule constitutes manufacture under Section 2(f)(iii), but extended limitation and penal consequences require proof of mens rea or deliberate suppression.

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