Affixing fresh MRP stickers on watches does not constitute manufacture under excise law

CESTAT Chennai held that affixing fresh MRP stickers on watches does not constitute manufacture under excise law. The appellant merely changed retail price stickers without adding new brand details or product information. Following precedents, the Tribunal distinguished between labels (containing product descriptions) and MRP stickers (showing price only). Since watches were already marketable and the activity did not enhance marketability or transform the product, no manufacturing occurred. The demand against showrooms and CFAs was unsustainable as duty liability rests with manufacturers. Additionally, the show cause notice was time-barred as no willful suppression was established, the issue being purely interpretational with price lists available in appellant's accounts.

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Issues Involved:
1. Whether the activity of affixing revised MRP tags and labels on the watches amounts to manufacture as per Section 2(f)(iii) of Central Excise Act, 1944.
2. Whether the extended period is invokable or not.

Summary:

Issue 1: Affixing Revised MRP Tags and Labels as Manufacture
The primary issue was whether affixing revised MRP tags and labels on watches constitutes "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944. The appellants argued that the activity of affixing MRP stickers and tags does not amount to labelling or relabelling and thus does not constitute manufacture. They cited several judgments, including C.C.E. vs Panchsheel Soap Factory and Lakme Lever Ltd. vs. CCE, which held that affixing MRP stickers does not enhance the marketability of the goods and thus does not qualify as manufacture. The Tribunal agreed with the appellants, stating that the watches were already marketable and the affixing of MRP stickers did not render them more marketable. Consequently, the activity did not amount to manufacture under Section 2(f)(iii).

Issue 2: Invocation of Extended Period
The second issue was whether the extended period for issuing show cause notices was applicable. The appellants contended that there was no suppression of facts as they had informed the department about their activities through a letter dated 20.05.2005. The Tribunal noted that the department had prior knowledge of the appellant's activities due to earlier proceedings and audits. The Tribunal found no evidence of wilful suppression with intent to evade duty and held that the show cause notices were time-barred. Therefore, the invocation of the extended period was not justified.

Conclusion:
The Tribunal concluded that the activity of affixing revised MRP stickers did not amount to manufacture and that the extended period for issuing show cause notices was not applicable. The impugned orders were set aside, and the appeals were allowed with consequential reliefs.

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