Manufacture by labeling and repacking of activated carbon requires proof of marketability; duty demand failed for lack of evidence.

Labeling, relabeling, or repacking of activated carbon constitutes manufacture under Chapter Note 9 to Chapter 38 only if the treatment renders the goods marketable. The evidence showed that some goods were shifted from 25 kg bags into 50 kg bags, which was not repacking from bulk to retail packs, and there was no positive material that the assessee sieved or otherwise processed the goods to make them marketable. On that record, manufacture was not established, and the demand of duty, interest, and penalty could not be sustained.

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Issues: Whether the activity of labeling or relabeling and repacking activated carbon by the assessee amounted to manufacture under Chapter Note 9 to Chapter 38, so as to attract central excise duty, interest, and penalty.

Analysis: Chapter Note 9 to Chapter 38 treats labeling or relabeling of containers, repacking from bulk to retail packs, or any other treatment to render the product marketable as manufacture. The evidence showed that in some instances the goods were packed from 25 kg bags into 50 kg bags, which was repacking from smaller packs to larger packs and not repacking from bulk to retail. Apart from discrepancies between purchase invoices and sale invoices regarding grade, there was no positive evidence that the assessee had sieved the goods or otherwise processed them to make them marketable. The available material was insufficient to sustain an inference of manufacture.

Conclusion: The activity did not fall within Chapter Note 9 to Chapter 38, and the demand of duty, interest, and penalty could not be sustained.

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