Labelling of medicaments for revised M.R.P. is manufacture when goods are reworked for marketability under excise rules

Affixing labels or stickers showing the revised M.R.P. on medicaments returned to the factory for re-labelling is treated as manufacture under Chapter Note 5 to Chapter 30. The note and the Board's circular both treat labelling or re-labelling of medicaments to make them marketable as manufacture. On that basis, such activity supports duty treatment under Rule 16(4) of the Central Excise Rules, 2002, and a contrary view denying manufacture is unsustainable.

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Issues: Whether affixing labels or stickers showing the M.R.P. on medicaments brought back to the factory for re-labelling amounts to manufacture, so as to permit duty treatment under Rule 16(4) of the Central Excise Rules, 2002.

Analysis: The goods were returned to the factory only for changing labels or stickers to reflect the revised M.R.P. under the Drugs Price Control Order. Chapter Note 5 to Chapter 30 treats labelling or re-labelling of goods as manufacture. The Board's Circular No. 576/13/2001-CX dated 16-5-2001 also states that putting stickers on the outer packing of medicaments to make them marketable amounts to manufacture. On that basis, the activity of affixing labels on the medicaments could not be denied the character of manufacture.

Conclusion: The activity amounted to manufacture and the demand based on the contrary view was unsustainable; the appeal was allowed in favour of the assessee.

Ratio Decidendi: Where a tariff entry and binding circular treat labelling or re-labelling of goods as manufacture, affixing M.R.P. labels or stickers on medicaments for marketability constitutes manufacture.

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