Programming imported pagers can amount to manufacture; cum-duty valuation applies and personal penalties need evidence of intent to evade duty.

Programming imported pagers in the factory, together with labelling and packing, was treated as manufacture because the goods were not usable as pagers without that process under the relevant chapter note. The duty demand was sustained on that basis. On valuation, the clearance value was held to fall within the settled cum-duty pricing principle, so the Revenue's challenge failed. On penalties, the main penalty was reduced, and the personal penalties on the Director and General Manager were set aside because there was no evidence of deliberate omission or intent to evade duty.

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Issues: (i) Whether programming imported pagers in the factory amounted to manufacture under Note 6 of Section XVI of the Central Excise Tariff Act, 1985; (ii) Whether the clearance value was liable to be treated as cum-duty price and whether the penalties imposed required interference.

Issue (i): Whether programming imported pagers in the factory amounted to manufacture under Note 6 of Section XVI of the Central Excise Tariff Act, 1985

Analysis: The imported pagers were found to be brought into the factory for programming, labelling and packing. The statement of the General Manager specifically recorded that the goods were imported from Hong Kong and subjected to programming before use. The later retraction was made after a long delay and was not accepted as sufficient to displace the earlier detailed admission. Since the pagers were not usable as pagers without such programming, the process brought them within the statutory concept of manufacture under the chapter note.

Conclusion: The process amounted to manufacture and the duty demand was sustained.

Issue (ii): Whether the clearance value was liable to be treated as cum-duty price and whether the penalties imposed required interference

Analysis: The valuation issue was held to be covered by the settled legal position on cum-duty pricing. On penalty, the Tribunal found that the circumstances justified reduction of the main penalty, while there was no evidence of deliberate omission or commission with intent to evade duty on the part of the Director and the General Manager. The personal penalties were therefore not supportable.

Conclusion: The Revenue's challenge on cum-duty valuation failed, the main penalty was reduced, and the personal penalties were set aside.

Final Conclusion: The assessee succeeded only to the extent of reduction and deletion of penalties, while the core demand was upheld and the Revenue's appeal was rejected.

Ratio Decidendi: Where imported goods are subjected to a process that renders them usable only after programming, the process may amount to manufacture under the relevant chapter note; penalty cannot be sustained without evidence of intent to evade duty.

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