Re-packing of activated carbon from bulk to retail packs is treated as manufacture, but unsupported demand on retail-pack clearances cannot be restored.
Re-packing activated carbon from bulk packs into retail packs falls within Chapter Note 9 of Chapter 38 and is treated as manufacture where the process makes the goods marketable; on the facts noted, duty was sustained on clearances proved to have been so repacked. Where the adjudicating authority found that the remaining clearances were received and sold in retail packs, that factual finding was not displaced by contrary evidence, so the dropped demand could not be restored. The document therefore states that repacking from bulk to retail packs can attract duty, but a demand cannot be revived without proof that the disputed clearances also involved bulk packs or repacking.
Issues: (i) Whether repacking of activated carbon from bulk packs to retail packs amounted to manufacture under Chapter Note 9 of Chapter 38 and justified confirmation of duty on the quantity so cleared; (ii) Whether the Revenue established that the remaining clearances were also from bulk packs so as to warrant restoration of the demand dropped by the adjudicating authority.
Issue (i): Whether repacking of activated carbon from bulk packs to retail packs amounted to manufacture under Chapter Note 9 of Chapter 38 and justified confirmation of duty on the quantity so cleared.
Analysis: Chapter Note 9 of Chapter 38 treats labeling or re-labeling of containers and re-packing from bulk pack to retail packs, or any other process rendering the product marketable, as manufacture. The records showed that the confirmed demand related to goods received in 50 kg packs and subsequently repacked into smaller packs. The adjudicating authority had also recorded manipulation of purchase documents to support the contrary case. In that background, the cited Supreme Court decisions on repacking did not assist the appellant on the facts found.
Conclusion: The demand confirmed on the quantity found to have been repacked from bulk packs to retail packs was upheld, against the assessee.
Issue (ii): Whether the Revenue established that the remaining clearances were also from bulk packs so as to warrant restoration of the demand dropped by the adjudicating authority.
Analysis: The adjudicating authority had recorded a factual finding that the remaining goods were received and sold in retail packs, and the Revenue did not effectively dislodge that finding with evidence showing bulk packing or repacking. In the absence of such proof, the dropped demand could not be restored.
Conclusion: The Revenue's challenge to the dropped demand failed, in favour of the assessee.
Final Conclusion: Both appeals were rejected, leaving the confirmed demand intact and the balance demand undisturbed.
Ratio Decidendi: Under Chapter Note 9 of Chapter 38, re-packing of goods from bulk packs to retail packs amounts to manufacture, and a factual finding of retail-pack clearances cannot be displaced without evidence of bulk packing or repacking.
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AI Drafter ✕
TaxTMI 
