Manufacture by programming imported pagers before clearance sustains duty, while personal penalties fail for lack of intent to evade.

Programming imported pagers before clearance, together with labelling and sticker-packing, was treated as manufacture under Note 6 of Section XVI because the goods were not usable as pagers without that processing; the duty demand was therefore sustained. Cum-duty valuation was also accepted on the basis of the governing Supreme Court principle applied by the Tribunal, and the revenue's challenge on valuation failed. Personal penalties on the director and general manager were set aside because the record did not establish omission or commission with intent to evade duty.

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Issues: (i) whether programming of imported pagers before clearance rendered the process manufacture under Note 6 of Section XVI of the Central Excise Tariff Act, 1985; (ii) whether the clearances were to be valued as cum-duty price; (iii) whether the personal penalties on the director and general manager were sustainable.

Issue (i): whether programming of imported pagers before clearance rendered the process 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 sticker-packing. The statement of the general manager recorded that the imported pagers underwent such processing, and the later retraction was not accepted as sufficient to displace the earlier detailed admission. Since the pagers were not usable as pagers without programming, the process brought the goods within the statutory concept of manufacture under the chapter note.

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

Issue (ii): whether the clearances were to be valued as cum-duty price

Analysis: The question of cum-duty valuation was treated as already settled by the governing Supreme Court principle relied upon by the Tribunal, and no separate infirmity in the valuation method was accepted in the revenue challenge.

Conclusion: The cum-duty valuation was accepted and the revenue's challenge failed.

Issue (iii): whether the personal penalties on the director and general manager were sustainable

Analysis: The record did not show omission or commission with intent to evade duty on the part of the director or the general manager. In the absence of such evidence, personal penal liability was not justified.

Conclusion: The personal penalties on the director and the general manager were set aside.

Final Conclusion: The demand of duty was sustained, the revenue appeal failed, and the assessee obtained relief only to the extent of reduction and setting aside of the personal penalties.

Ratio Decidendi: Where imported goods are subjected to programming before they can be used for their intended function, the process may amount to manufacture if the statutory chapter note so treats conversion into a complete or finished article.

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