Custom, Excise & Service Tax Tribunal
M/S Eveready Industries India vs Cce Kol I on 8 November, 2023
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Excise Appeal No. 130 of 2010
(Arising out of Order-in-Original No. CCE/COMMR/KOL-I/ADJN/NO.2/2009
dated 02.12.2009 passed by Commissioner of Central Excise, Kolkata-I.)
Eveready Industries India Ltd.,
2, Rainey Park, Kolkata-700019.
...Appellant (s)
VERSUS
Commissioner of Central Excise, Kolkata-I,
180, Shantipally, Rajdanga Main Road, Kolkata-700107.
. ..Respondent(s)
With Excise Appeal No. 396 of 2012 (Arising out of Order-in-Original No. 17/COMMR./CE/KOL-II/ADJN/2011-12 dated 27.03.2012 passed by Commissioner of Central Excise, Kolkata-II.) M/s The New Engineering Company, 2/4, Haldar Para Lane, Howrah-711101 (W.B.) ...Appellant (s) VERSUS Commissioner of Central Excise, Kolkata-II. 2nd Floor M.S. Building, Customs House, 15/1, Strand Road, Kolkata-700001.
. ..Respondent(s)
And
Excise Appeal No. 75002 of 2014
(Arising out of Order-in-Original No. 04/Commr./CE/Kol-II/Adjn./2013-2014 dated 16.09.2013 passed by Commissioner of Central Excise, Kolkata-II.) M/s The New Engineering Company, 2/4, Haldar Para Lane, Howrah-711101 (W.B.) ...Appellant (s) VERSUS Commissioner of Central Excise, Kolkata-II. 2nd Floor M.S. Building, Customs House, 15/1, Strand Road, Kolkata-700001.
. ..Respondent(s)
And
Excise Appeal No. 75049 of 2017
(Arising out of Order-in-Original No. 16-19/Commr./CE/Kol-II/Adjn./2016- 2017 dated 26.09.2016 passed by Commissioner of Central Excise, Kolkata- II.) M/s The New Engineering Company, 2/4, Haldar Para Lane, Howrah-711101 (W.B.) 2 Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 ...Appellant (s) VERSUS Commissioner of Central Excise, Kolkata-II. 2nd Floor M.S. Building, Customs House, 15/1, Strand Road, Kolkata-700001.
. ..Respondent(s) APPERANCE :
Shri B. L. Narasimhan, Deepro Sen & Shovit Betal, All Advocates for the Appellant Shri Mihir Ranjan, Spl. Counsel, & Shri S. S. Chattopadyay, Authorized Representative for the Respondent CORAM:
HON'BLE MR. R MURALIDHAR, MEMBER (JUDICIAL) HON'BLE MR. K. ANPAZHAKAN MEMBER (TECHNICAL) FINAL ORDER No...77474-77477/2023 DATE OF HEARING : 17.10.2023 DATE OF PRONOUNCEMENT: 08.11.2023 PER K. ANPAZHAKAN :
Excise Appeal No.130 0f 2010 has been filed by the Appellant M/s Eveready Industries against the Order-in-Original dated 02.12.2009 passed by Commissioner of Central Excise, Kolkata - I, wherein the Central Excise duty Rs. 4,12,67,046/- was confirmed along with interest. Penalty equal to the duty confirmed was also imposed against the Appellant. Aggrieved against this impugned order, the Appellant has filed the present appeal.
2. Excise Appeal No. 396 of 2012 was filed by the Appellant M/s The New Engineering Company against the Order-in-Original No. 17/COMMR./CE/KOL-II/ADJN/2011-12 dated 27.03.2012 passed by Commissioner of Central Excise, Kolkata-II, wherein duty of Rs.16,69,44,532/-was confirmed along with interest and imposed equal amount of tax as penalty. Excise Appeal No. 75002 of 2014 was also filed by the same Appellant against Order-in-Original No. 04/Commr./CE/Kol-II/Adjn./2013-2014 dated 16.09.2013 passed by Commissioner of Central Excise, Kolkata-II, wherein duty of Rs. 3,55,35,086/- was confirmed along with interest and imposed equal 3 Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 amount of tax as penalty. Excise Appeal No. 75049 of 2017 was also filed by the same Appellant against Order-in-Original No. 16- 19/Commr./CE/Kol-II/Adjn./2016-2017 dated 26.09.2016 passed by Commissioner of Central Excise, Kolkata-II, wherein duty of Rs.3,24,07,487/- was confirmed along with interest and imposed equal amount of tax as penalty. As the issues involved in all the above mentioned appeals are common, all these appeals are taken up together for decision by a common order.
3. The Appellant, M/s Eveready Industries India Ltd. are engaged in the manufacture of primary cells and primary batteries falling under heading 8506 of the 1st Schedule to the Central ExciseTariff Act, 1985. In addition to manufacture and clearance of the aforesaid goods on payment of duty, the Appellant was also engaged in trading of "Eveready Recharge" which is packed by a job worker, M/s The New Engineering Company, on behalf of the Appellant. In order to produce "Eveready Recharge", the Appellant procures the following:
· unbranded battery chargers falling under tariff item 8504 4030 of the CETA, 1985 from small scale manufacturers, · branded rechargeable batteries falling under tariff item 8507 3000 of the Customs Tariff Act, 1975 imported from China. · various packing material such as blisters, blisters cards, 3-D holograms etc.
4. Thereafter, in terms of the contract with the job worker (M/s New Engineering Company, Howrah) the Appellant supplies all these items to them. The job worker in its own premises, using its own labourers undertakes the activity of packing the battery charger with 2 or 4 rechargeable batteries, brands them as "Eveready Recharge" and supplies the same to the Appellant. An employee of the Appellant company is posted on the premises of the job worker to ensure proper checks and to coordinate dispatches. The job worker did not discharge central excise duty on "Eveready Recharge" cleared by them to the Appellant since they considered that the activity of mere packing and labelling did not amount to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944. The Appellant after receiving the 4 Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 product used to clear the same to various depots all over the country for onward sale.
5. A SCN dated 29.05.2009 was issued to the Appellant proposing to demand central excise duty amounting to Rs. 4,79,20,264/- along with interest and penalty under Section 11AC for the period May 2004 to November 2008, on the ground that the Appellant had manufactured and cleared a product known as "Eveready Recharge" without payment of central excise duty. It was alleged that a whole new product i.e., "Eveready Recharge" came into existence on account of the conversion done by the job worker on behalf of the Appellant with the help of raw materials supplied by the Appellant. It was alleged that the job worker by affixing the labels and lending his premises to the Appellant for conducting quality check operations at different stages has rendered the product marketable. Therefore, the activity of packing of rechargeable batteries along with chargers and labelling the same is a process "incidental or ancillary to the completion of a manufactured product" and hence amounts to "manufacture" under Section 2(f)of the CEA, 1944. The Notice was adjudicated vide Order-in-Original dated 02.12.2009 passed by Commissioner of Central Excise, Kolkata - I, wherein the Central Excise duty Rs. 4,12,67,046/- was confirmed along with interest and imposed equal amount of tax as penalty.
6. The Appellant submits that the activity of packing and labelling undertaken by them does not amount to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944. Accordingly, they contended that the demand confirmed in the impugned order is not sustainable.
7. The Ld. A.R. reiterated the findings in the impugned orders and supported the case of the Appellants.
8. Heard both sides and perused the appeal records.
9. We find that the issue to be decided in these appeals is whether the activity undertaken by the Appellants would amount to 'manufacture' or not as defined under Section 2(f) of the CEA, 1944. The word 'manufacture' is defined in Section 2(f) of the CEA, 1944, the relevant 5 Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 portion of the definition is extracted hereunder for the purpose of reference:
"manufacture" includes any process, -
(i) incidental or ancillary to the completion of a manufactured product; and
(ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) amounting to manufacture; or as
(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re- labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, and the word "manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account.
9.1. The Appellant submits that in order to consider an activity as amounting to 'manufacture' there should be a new product with a distinct name, character and use must come into existence. We observe that the Hon'ble Supreme Court in Servo-Med Industries Pvt. Ltd. vs. CCE, Mumbai, 2015 (319) ELT 578 (SC) has laid down certain criteria as to when an activity can be regarded as manufacture or not under provisions of CEA 1944 . The same are summarized below:
(i) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved.
Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category.
(ii) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process.
(iii) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not 6 Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place.
(iv) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place.
9.2. In the present case we observe that after undertaking the activity of packing the chargers with the batteries and labelling them no different commercial commodity comes into existence. The goods viz. the charger and batteries remain exactly the same even after they are put together in a blister pack. In light of the decision of the Hon'ble supreme Court cited above, we hold that the activity of mere packing of rechargeable batteries along with battery chargers and labelling the same as "Eveready Rechargeable/Ultima" and "Uniross/Power Bank"
does not amounts to manufacture.
9.3. We observe that the Appellant has placed their on the following rulings where the activity of packing has been held as not amounting to "manufacture" under the provisions of CEA, 1944:
· In Commissioner of Central Excise vs. M/s Sony Music Entertainment India Pvt Ltd, 2010-TIOL-46-HC-MUM- CX, the Hon'ble Bombay High Court was considering a situation where the Appellant imported recorded audio and video discs packed in boxes of 50 and after receipt of the said material in its factory, it packed each individual disc in transparent plastic cases known as jewel boxes, an inlay card containing the details of the content of the compact disc was also placed in the jewel box. The whole was then shrink wrapped and sold. In such circumstances the question arose whether the activity of packing imported compact discs in a jewel box along with inlay card would amount to manufacture under section 2(f) of the CEA, 1944. The Hon'ble High Court by upholding the ruling of the 7 Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 Hon'ble CESTAT held that the activity of packing does not amount to manufacture. [Ref to pg. no. 25 of the Compilation of Cases] · Again, in Commissioner of Central Excise, Faridabad - II vs. Kapoor Lamp Shade Company (Factory Shop), 2016-TIOL-962-HC-P&H-CX, the Hon'ble Punjab and Haryana High Court was dealing with a situation where the respondent used to procure various components of lamp shades and chandeliers from different sources and thereafter would pack the same in cartons and put its logo. The revenue raised the duty demand on the premise that the assembly of various components of lamp shades and chandeliers amounts to manufacture of the lamps and light fittings covered by the CEA, 1944. The Hon'ble High Court upheld that ruling of the Hon'ble CESTAT by holding that procuring of manufacturing items and packing them with its own brand name by the respondent does not amounts to creation of a new product which may invite the duty. · In M/s Electropneumatics& Hydraulics (I) P Ltd vs. Commissioner of Central Excise, Mumbai - IV, 2016 (11) TMI 1091 - CESTAT Mumbai, the Tribunal was considering whether packeting of pre-determined quantity of various O Ring & U Cap seals in plastic bags would amount to manufacture.
The Tribunal held the question of considering packeting as manufacture does not arise as the O Ring & U Cap seals were already marketable when the supplier/manufacturer had manufactured the same and cleared to Appellant. It was held that:
"Subsequent packeting of pre-determined quantity of these in a plastic bag has not made the products further marketable. In the absence of any note to the chapter that packeting of pre-determined quantity would amount to manufacture, this activity in our view cannot be considered as a manufacturing activity."8
Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 · In Sony Enterprises vs. Commissioner of C. Ex., Mumbai - IV, 2018 (364) ELT 411 (Tri-Mumbai),the Appellant used to purchase various goods from several manufacturers and was thereafter checking, testing, branding and packing the same with "CONA" brand name. The department contended the said activity amounts to manufacture in terms of Note 6 to Section XVI of Central Excise Tariff Act, 1985. In such factual circumstances, the Tribunal made the following findings:
"From the reading of the above provisions, we observed that in respect of Chapters 84 and 85 of Central Excise Tariff, any activity which converted unfinished or incomplete product into finished or complete article shall amount to manufacture. In the facts of the present case, which is not under dispute that the appellant are purchasing manufactured goods and they are only carrying out quality tests, branding and packing of the goods for marketing purpose. These processes cannot be said that it contributes for converting incomplete or unfinished goods to the complete and finished article for the reason that neither any further assembly is carried out norany mechanical process which make a unfinished goods or incomplete product into complete and finished product. Theproduct purchased by the appellant is already complete and finished. Merely a quality test, which is nothing but by connecting with the power plug for checking whether it is working or not but by this quality test there is no transformation of the product, which is already in the fully manufactured form, therefore all the electrical goods purchased by the appellant are completely in manufactured form, therefore in our considered view this so called activity of quality testing, branding and packing of the already manufactured goods will not be covered by Note 6 of Section XVI of the Central Excise Tariff, therefore we hold that the appellant is not engaged in the manufacturing of the goods, they are only doing trading activity of bought out goods".
· TI Diamond Chain Limited vs. Commissioner of C. Ex., Chennai - II, 2000 (126) ELT 790 (Tribunal) maintained by the Hon'ble Supreme Court in 2001 (130) ELT A259 (Supreme Court).
9Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 · Dalmia Industries Ltd vs. Commissioner of C. Ex., Jaipur, 1999 (112) ELT 305 (Tribunal) maintained by the Hon'ble Supreme Court in 2005 (184) ELT A37(Supreme Court). · Narang Latex & Dispersions Pvt Ltd vs. Commr. of C. Ex., Mumbai - VI, 2001 (134) ELT 482 (Tri-Mumbai) maintained by the Hon'ble Supreme Court in 2002 (139) ELT A302(Supreme Court).
· M/s 3M India Ltd vs. Commissioner of Central Excise, Bangalore - III, 2023-VIL-125-CESTAT-BLR-CE 9.4. We observe that the decisions cited above are squarely applicable in this case. In light of the discussions above, we hold that the activity of mere packing and labelling work which resulted into emergence of "Eveready Recharge" and "Uniross/Power Bank" cannot be termed as "manufacture" under Section 2(f) of the CEA, 1944. 9.5. We further observe that Section 2(f)(ii) of the CEA, 1944 deems certain processes as amounting to manufacture, if there is a Section Note or a Chapter Note deeming the processes as amounting to manufacture. In the present case, neither under Section XVI nor under Chapter 85 there are any notes deeming activity of packing or repacking as amounting to manufacture. Further, in terms of Section 2(f)(iii) of the CEA, 1944 goods specified in 3rd schedule to the CEA, various processes like packing or repacking, labelling or relabelling is deemed to be the manufacturing process. This sub-section would only apply to the goods specified in the 3rd schedule to the CEA, 1944. We observe that the goods falling under heading 8504 or 8507, in the present case are not specified in the 3rd schedule of the CEA, 1944. In light of the above, we hold that the activity of mere packing and labelling undertaken by the Appellant would not amount to "manufacture" in terms of Section 2(f) of the CEA, 1944. Accordingly, we hold that the demand confirmed in the impugned order dated 02.12.2009 is not sustainable. Since the demand is not sustainable, the question of demanding interest and imposing penalty does not arise. Accordingly, we set aside the impugned order dated 02.12.2009 and 10 Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 allow the appeal No.130 0f 2010, filed by the Appellant M/s Eveready Industries.
10. Regarding the three appeals filed by the Appellant M/s New Engineering Company, we observe that the Appellant has entered an agreement with M/s. Eveready Industries India Ltd for packing of 2 or 4 rechargeable batteries along with charger in a blister packs and labelling them as "Eveready Recharge/Ultima" and "Uniross/Power Bank". In terms of the agreement, M/s. Eveready Industries India Ltd. procure the following items:
· unbranded battery chargers falling under tariff item 8504 4030 of the CETA, 1985 from small scale manufacturers, · branded rechargeable batteries falling under tariff item 8507 3000 of the Customs Tariff Act, 1975 imported from China. · various packing material such as blisters, blisters cards, 3-D holograms etc. Thereafter, the aforesaid items were supplied to the Appellant. The Appellant in its own premises, using its own labourers undertook the activity of packing and labelling and supplied the same to the Appellant. An employee of M/s. Eveready Industries India Ltd. was posted on the premises of the Appellant to ensure proper checks and to coordinate dispatches. The department issued a SCN dated 29.05.2009 to M/s Eveready Industries Limited proposing to demand excise duty on that ground that the activity of packing of rechargeable battery along with charger and labelling the same amounts to "manufacture" under Section 2(f)of the Central Excise Act, 1944 and M/s Eveready Industries Limited being the real manufacturer is liable to pay the excise duty. The said SCN was adjudicated, and the demand proposed was confirmed vide OIO dated 02.12.2009. Being aggrieved by the said order M/s Eveready Industries India Ltd. preferred an appeal before this Tribunal being E/130/2010. Vide order dated 20.06.2011 this Tribunal has waived of the requirement of pre-deposit of duty, interest and penalty and stayed the recovery of the same during pendency of the appeal by prima facie observing that M/s Eveready Industries India Ltd is not the manufacturer. It is only after issuing the order waiving the pre deposit 11 Excise Appeal No. 130 of 2010, 396 of 2012, 75002 of 2014 & 75049 of 2017 by the Tribunal the department proceeded against the Appellant and demanded central excise duty from the job worker. Three Show cause Notices were issued and the demands raised in the Notices were confirmed as mentioned in para 2 supra.
11. In their appeals, the Appellant stated that that the activity of packing and labelling undertaken by them does not amount to manufacture as defined under Section 2(f) of the Central Excise Act, 1944. Accordingly, they contended that the demands confirmed in the impugned orders are not sustainable.
12. In paras 9 to 9.5 supra, the issue has been discussed and held that the activity undertaken by the Appellant would not amount to manufacture as defined under Section 2(f) of Central Excise Act, 1944.The same discussion holds good for the Appellant also, since they are the job workers who have undertaken the activity of packing and labelling. Thus, we hold that the demand of central excise duty from the Appellant M/s New Engineering Company is not sustainable, as the activity undertaken by them does not amount to 'manufacture' as defined under Section 2(f) of CEA, 1944. Since, the demand itself is not sustainable, the question of demanding interest and imposing penalty on the Appellant does not arise. Accordingly, we set aside all the three impugned orders and allow all the three appeals filed by the Appellant M/s New Engineering Company.
13. In view of the above discussion, we allow the appeals filed by both the Appellant (Pronounced in the open court on...08.11.2023.) Sd/-
(R. Muralidhar) Member (Judicial) Sd/-
(K. Anpazhakan)
Tushar Member (Technical)