Foreign Trade Policy manufacture includes repacking and labelling, while EOU transfers and domestic olive sales were upheld.

Under the Foreign Trade Policy, inter-unit transfer of raw materials between two 100% EOUs was not denied notification benefit merely because separate customs permission had not been obtained in the facts found, and the Tribunal's view was upheld. Domestic sale of olives was treated as permissible because the CBEC circular on similar goods supported the Tribunal's interpretation of the policy. Repacking and labelling of imported goods was held to constitute manufacture under the Foreign Trade Policy, whose definition is broader than Section 2(f) of the Central Excise Act, and the Tribunal's order was sustained in full.

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Issues: (i) Whether inter-unit transfer of raw materials between two 100% Export Oriented Units without prior customs permission could deny the notification benefit; (ii) whether sale of olives in the domestic market could be treated as permissible on the basis of the circular on similar goods; (iii) whether repacking and labelling of imported goods amounts to manufacture for the purposes of the Foreign Trade Policy.

Issue (i): Whether inter-unit transfer of raw materials between two 100% Export Oriented Units without prior customs permission could deny the notification benefit.

Analysis: The dispute concerned transfer of raw materials from one 100% EOU to another 100% EOU. The legal position on such transfer was already covered by the governing precedent relied upon by the Tribunal. The Court found that the Tribunal had correctly followed that binding view and that the absence of separate permission, in the facts of the case, did not justify interference.

Conclusion: The issue was answered in favour of the assessee.

Issue (ii): Whether sale of olives in the domestic market could be treated as permissible on the basis of the circular on similar goods.

Analysis: The Tribunal's view on domestic sale of olives was found to be consistent with the Foreign Trade Policy and the relevant CBEC circular explaining the expression similar goods. The Court accepted that the circular supported the conclusion reached by the Tribunal on the facts proved before it.

Conclusion: The issue was answered in favour of the assessee.

Issue (iii): Whether repacking and labelling of imported goods amounts to manufacture for the purposes of the Foreign Trade Policy.

Analysis: The Court distinguished the line of authorities under Section 2(f) of the Central Excise Act, 1944, because the present controversy arose under the Foreign Trade Policy, which contains a broader definition of manufacture. Under that policy, manufacture expressly includes processes such as repacking and labelling. On that basis, the Tribunal's conclusion that such activity constituted manufacture was upheld.

Conclusion: The issue was answered in favour of the assessee.

Final Conclusion: The Tribunal's order was sustained in full and no substantial question of law warranted interference.

Ratio Decidendi: Where the governing export policy defines manufacture broadly, including repacking and labelling, and the binding circulars and precedent support the treatment of inter-unit transfers and domestic sale issues in the assessee's favour, the appellate court will not interfere with the Tribunal's factual and legal conclusions.

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