Repacking automotive spares from bulk to small packets with labeling not manufacture under Section 2(f)(iii) Central Excise Act

CESTAT Chennai held that repacking automotive spares from bulk to small packets with labeling does not constitute manufacture under Section 2(f)(iii) of Central Excise Act, 1944. The department failed to establish that concrete mixer/pump spares required excise duty payment. The activity merely enhanced marketability without creating new products with different attributes. Since the issue was interpretational and appellant filed proper ER-1 returns without suppression, extended limitation period was not applicable. The demand for excise duty, interest, and penalties was set aside, and the appeal was allowed in favor of the appellant.

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Issues Involved:

1. Whether the activity undertaken by the appellant of repacking of the spares from the bulk to small packets and labelling amounts to manufacture as under Section 2(f)(iii) of the Central Excise Act 1944Rs.
2. Whether the extended period is invokable or notRs.
3. Whether the confirmation of demand of duty, interest, and penalties are sustainable or notRs.

Summary:

Issue 1: Activity of Repacking and Labelling as Manufacture

The department argued that the appellant's activity of repacking spares into smaller packets and labelling them constitutes "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944. The appellant countered that they manufacture concrete pumps and mixers, which are cleared as such and only occasionally mounted on chassis supplied by customers. The Tribunal found that the appellant's products can be used without being mounted on chassis, thus they are not Special Purpose Vehicles (SPVs). The Tribunal also noted that the spares are not repacked in "unit containers" as defined by law and that the activity does not render the spares more marketable than they already are. Therefore, the activity does not amount to manufacture under Section 2(f)(iii).

Issue 2: Invocation of Extended Period

The Tribunal held that the issue is interpretational in nature, and the appellant had filed ER-1 returns clearly stating the description of goods manufactured. There was no positive act of suppression by the appellant indicating an intent to evade payment of excise duty. Thus, the invocation of the extended period was not justified.

Issue 3: Confirmation of Demand, Interest, and Penalties

Given the findings on the first two issues, the Tribunal concluded that the demand for duty, interest, and penalties imposed on the appellant could not be sustained. The impugned orders were set aside, and the appeals were allowed with consequential reliefs.

Conclusion:

The Tribunal ruled in favor of the appellant, holding that the repacking and labelling activities did not constitute manufacture, the extended period for demand was not invokable, and the confirmation of duty, interest, and penalties was unsustainable. The appeals were allowed with consequential reliefs.

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