Repacking and relabelling not 'manufacture' until Feb 2010; deemed 'manufacture' after amendment. Penalties removed.

The Tribunal ruled that the activities of repacking and relabelling spare parts did not constitute 'manufacture' for the period January 2008 to February 2010, thus not attracting excise duty. However, for March 2010 to March 2011, these activities were considered 'deemed manufacture' under amended provisions. The extended period of limitation for duty demand was deemed inapplicable, restricting the demand to the normal limitation period. All penalties imposed on the appellants were set aside. The appeal was partly allowed, adjusting the duty demand and removing penalties.

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Issues Involved:
1. Whether the activity of packing, repacking, and relabelling of spare parts constitutes 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944.
2. Applicability of the extended period of limitation for demanding duty.
3. Imposition of penalties on the appellants.

Summary:

Issue 1: Definition of 'Manufacture'
The appellant, a Public Sector Undertaking, engaged in the manufacture of Dump Trucks, Water Sprinklers, and Motor Graders, was also involved in repacking and relabelling spare parts. The dispute was whether these activities constituted 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944. The Tribunal divided the period into two phases: January 2008 to February 2010, and March 2010 to March 2011. For the first period, it was determined that the parts involved were not 'automobiles' as per the Larger Bench decision in M/s. Action Construction Equipment Ltd., thus falling outside the scope of Sl. No.100 of the Third Schedule. Therefore, these activities did not amount to 'manufacture' and were not leviable to excise duty. However, for the second period, the amended entry at Sl. No.100 of the Third Schedule covered these activities under 'deemed manufacture'.

Issue 2: Extended Period of Limitation
The appellant argued that the extended period of limitation could not be invoked based on the Tribunal's decision in their own case, M/s. BEML & Ors. vs. CCE, where it was held that extended period could not apply for recovery of duty on the basis of retrospective legislation. The Tribunal agreed, noting that the appellant's activities commenced in 2006, and the retrospective amendment was only applicable from March 2010. Thus, invoking the extended period of limitation was deemed unsustainable, confining the demand to the normal period of limitation.

Issue 3: Imposition of Penalties
Given the findings on the non-applicability of the extended period of limitation and the nature of the activities not amounting to 'manufacture' for the first period, the Tribunal found the imposition of penalties on the appellants unwarranted. Consequently, all penalties imposed were set aside.

Conclusion:
The appeal was partly allowed, limiting the demand to the normal period of limitation and setting aside all penalties imposed on the appellants.

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