Manufacture by cutting and repacking goods can attract excise duty, but extended limitation fails without proved suppression.

After the 1 March 2003 amendment to section 2(f) of the Central Excise Act, cutting, slitting, packing and repacking jumbo rolls into smaller consumer packs can amount to manufacture where the process results in a commercially distinct, marketable product. The extended limitation period could not be invoked because the Department was already aware of the activity and suppression with intent to evade duty was not established. Applicability of section 4A depended on the nature of the packing and the class of buyers, so the clearance valuation issue required fresh factual verification and de novo adjudication.

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Issues: (i) Whether cutting, slitting, packing and repacking of jumbo rolls into smaller consumer packs amounted to manufacture under the Central Excise law; (ii) whether the extended period of limitation under the excise demand provision could be invoked; (iii) whether the clearance value was to be assessed under section 4A or required fresh verification on the basis of the nature of buyers and packing.

Issue (i): Whether cutting, slitting, packing and repacking of jumbo rolls into smaller consumer packs amounted to manufacture under the Central Excise law.

Analysis: The definition of manufacture in section 2(f) of the Central Excise Act, 1944 was amended from 01 March 2003, and the Third Schedule with Chapter heading 4818 covered cleansing or facial tissues, handkerchiefs and towels. The process of cutting, slitting, packing and repacking of jumbo rolls into marketable smaller packs was, therefore, examined in the light of the amended definition and the later Supreme Court and Tribunal authorities, which treated such transformation as manufacture where the goods emerge in a distinct commercial form with a different use.

Conclusion: The activity amounted to manufacture and the assessee was liable to excise duty on the clearances.

Issue (ii): Whether the extended period of limitation under the excise demand provision could be invoked.

Analysis: The Department had earlier issued a similar notice and was already aware of the nature of the assessee's activity. In such circumstances, mere allegation of suppression or mis-declaration was insufficient to justify the longer limitation period, because the Department could not show the requisite intent to evade duty after the statutory amendment had come into force.

Conclusion: The extended period of limitation could not be invoked, though the normal period demand could be examined afresh.

Issue (iii): Whether the clearance value was to be assessed under section 4A or required fresh verification on the basis of the nature of buyers and packing.

Analysis: The record did not conclusively establish whether the finished goods were supplied predominantly to institutional consumers or in retail packs. Since the applicability of section 4A depended on the character of the packing and the class of buyers, the matter required factual verification by the field formation and reconsideration by the adjudicating authority on a de novo basis.

Conclusion: The question of assessment under section 4A was remitted for fresh determination.

Final Conclusion: The assessee's activity was held to be manufacture, but the extended limitation was ruled out and the assessment issue was sent back for fresh adjudication, resulting in only partial success for the Revenue.

Ratio Decidendi: After the statutory amendment to the definition of manufacture, cutting, slitting, packing and repacking of goods falling under the relevant tariff heading can amount to manufacture if the process brings about a commercially distinct, marketable product; however, the extended limitation period cannot be invoked absent established suppression with intent to evade duty, especially where the Department was already aware of the activity.

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