Repacking and relabelling do not constitute manufacture; bona fide legal dispute bars extended limitation without suppression.
Repacking and relabelling of imported goods was treated as not amounting to manufacture under Chapter Note 10 of Chapter 29, because the activity was limited to repacking and relabelling and did not, on the settled position stated in the text, itself create a manufactured product. On limitation, the extended period could not be invoked where the liability issue turned on a bona fide and reasonably debatable interpretation of the chapter note, supported by consistent departmental practice, and there was no suppression or mala fide intent to evade duty. The demand was therefore time-barred and the impugned order was set aside.
Issues: (i) Whether repacking and relabelling of imported goods amounted to manufacture under Chapter Note 10 of Chapter 29 of the Central Excise Tariff Act, 1985. (ii) Whether the demand could be sustained by invoking the extended period of limitation.
Issue (i): Whether repacking and relabelling of imported goods amounted to manufacture under Chapter Note 10 of Chapter 29 of the Central Excise Tariff Act, 1985.
Analysis: Chapter Note 10 deems labelling or relabelling of containers and repacking from bulk packs to retail packs, or other treatment rendering the product marketable, to be manufacture. The activity carried out was only repacking and relabelling of the imported input and, applying the settled position, such activity alone did not amount to manufacture. The duty paid on clearance as if manufacture had occurred was therefore short of the credit availed on the input removed as such.
Conclusion: The activity did not amount to manufacture.
Issue (ii): Whether the demand could be sustained by invoking the extended period of limitation.
Analysis: The issue involved an interpretation of the chapter note and the department itself had taken a consistent stand in similar matters that such activity amounted to manufacture. In that background, the appellant's view was held to be a bona fide belief, and the circumstances did not justify an inference of suppression or mala fide intent to evade duty. Since the demand for the relevant period was raised beyond the normal limitation period, the extended period was not available.
Conclusion: The demand was time-barred and the extended period could not be invoked.
Final Conclusion: The demand failed on limitation and the impugned order was set aside, resulting in allowance of the appeal.
Ratio Decidendi: Where classification or liability turns on a bona fide and reasonably debatable interpretation of the law that was also accepted in departmental practice, the extended period cannot be invoked in the absence of suppression or mala fide intent.
TaxTMI 
AI Drafter ✕
TaxTMI 
