Repacking lubricating oil was not manufacture before the Chapter 27 note, and the extended limitation demand could not stand.

Mere repacking of lubricating oil into smaller containers was not deemed manufacture for the relevant period before insertion of the Chapter 27 note with effect from 1 March 2000. The allied valuation objection under Section 4(4)(b)(iii) could not sustain the demand on the facts recorded. The demand was also treated as barred by limitation because the extended period under Rule 9(2) and the proviso to Section 11A(1) was not supported on the record. On these grounds, the demand, penalty and related reliefs were unsustainable.

---

---

Issues: (i) Whether the demand for the relevant period was barred by limitation under Rule 9(2) of the Central Excise Rules, 1944 read with the proviso to Section 11A(1) of the Central Excise Act, 1944; (ii) Whether repacking of lubricating oil into smaller packs amounted to manufacture before the insertion of the Chapter 27 note with effect from 1-3-2000.

Issue (i): Whether the demand for the relevant period was barred by limitation under Rule 9(2) of the Central Excise Rules, 1944 read with the proviso to Section 11A(1) of the Central Excise Act, 1944.

Analysis: The demand was raised for an earlier period by invoking the extended period. The record showed that duty had been paid from time to time and the controversy centered on the correctness and timeliness of the demand. In the absence of sustainable grounds to sustain the invocation of the extended period on the facts found, the demand could not be upheld on limitation.

Conclusion: The demand was not sustainable as barred by limitation.

Issue (ii): Whether repacking of lubricating oil into smaller packs amounted to manufacture before the insertion of the Chapter 27 note with effect from 1-3-2000.

Analysis: The activity consisted of clearing lubricating oil in bulk to depots for filling into smaller packs. Before the statutory note was inserted, such repacking did not by itself create a deemed manufacture. The legal position supported the assessee's contention that the activity was not manufacture for the relevant period, and the allied valuation objection under Section 4(4)(b)(iii) of the Central Excise Act, 1944 also could not sustain the demand on the facts found.

Conclusion: Repacking did not amount to manufacture for the relevant period.

Final Conclusion: The demand, penalty, and related reliefs were unsustainable, and the assessee succeeded on both the limitation and manufacture issues.

Ratio Decidendi: Before the insertion of a specific deeming provision, mere repacking of lubricating oil into smaller containers did not amount to manufacture, and a demand founded on an unsupported invocation of the extended limitation period could not be sustained.

---