2023 (12) TMI 374 - AT - Central Excise

Inserting toothpaste tubes and toothbrushes into promotional combo packs does not constitute manufacture

M/s Pearl Enterprises Versus The Commissioner of Central Excise, Chandigarh-I

M/s Pearl Enterprises Versus The Commissioner of Central Excise, Chandigarh-I - TMI Issues Involved:1. Whether the activity undertaken by the appellants amounts to manufacture.2. Whether the appellants are eligible for the exemption contained in Notification No.50/2003 despite the late filing of the declaration.3. Whether the activity undertaken by the appellants attracts service tax or central excise duty.4. Whether the extended period is invokable in the facts and circumstances of the case.Summary:Issue 1: Whether the activity undertaken by the appellants amounts to manufacture.The appellants, acting as job-workers for M/s Colgate Palmolive India Ltd (CPIL), were inserting 100gm toothpaste and a toothbrush into a promo pack containing a 200gm toothpaste tube. The Tribunal found that this activity does not amount to manufacture as per Note 6 to Chapter 34, which defines manufacture as labelling, re-labelling, or repacking from bulk to retail packs. The Tribunal concluded that the process undertaken by the appellants does not bring out a new product into existence and hence does not amount to manufacture.Issue 2: Whether the appellants are eligible for the exemption contained in Notification No.50/2003 despite the late filing of the declaration.The Tribunal held that the appellants are eligible for the exemption under Notification No.50/2003, even though the declaration was filed late. The Tribunal cited that M/s CPIL had already intimated the Department about the nature of the processing undertaken by the appellants, fulfilling the substantial conditions of the notification. The Tribunal referenced the case of Vasantham Enterprises, which held that procedural lapses should not deny substantial benefits if the conditions are otherwise met.Issue 3: Whether the activity undertaken by the appellants attracts service tax or central excise duty.The Tribunal found that the appellants were under the bona fide belief that their activity attracted service tax under the category of 'Business Auxiliary Service' and not central excise duty. The Tribunal noted that the appellants had been paying service tax and that the Department had been informed about the nature of their activities by M/s CPIL. Therefore, the Tribunal concluded that the appellants were correctly discharging service tax.Issue 4: Whether the extended period is invokable in the facts and circumstances of the case.The Tribunal found that the extended period could not be invoked as the Department was kept informed about the appellants' activities by M/s CPIL as early as 2007. The Tribunal observed that there was no positive act of suppression by the appellants to evade payment of duty. The appellants had a bona fide belief that their activity was subject to service tax, not central excise duty, and the Department had not raised any objections during audits.Conclusion:The Tribunal set aside the impugned order and allowed the appeal of the appellant with consequential relief, if any, as per law.