Customs, Excise and Gold Tribunal - Tamil Nadu
Ruchi Health Foods Ltd. And Ktv Oil Mills vs Commissioner Of Central Excise, ... on 25 October, 2006
Equivalent citations: 2007(114)ECC374, 2007ECR374(TRI.-CHENNAI), 2007(209)ELT68(TRI-CHENNAI)
ORDER P. Karthikeyan, Member (T)
1. These are three appeals filed against the following orders, details of which are tabulated below.
Order in Original No. & Date Appellant &Appeal No. Period of dispute Duty demanded (Rs) Penalty imposed.
(Rs) 47/05 dated 30.12.05 Ruchi Health Foods Ltd.
E/252/04 September 04 to February 2005 1,77,01,910/ 88,50,000/-
18/06 dated 24.3.06 KTV Oil Mills E/388/06 June 2004 to August 2004 17,99,894/-
5,00,000/-
46/2005 dated 30.5.05 KTV Oil Mills E/692/05 August 2003 to October 2003 7,66,172/-
10,000/-
2. The Common issues arising for decision are,
(i) Whether packing and labelling of refined edible oil in bulk into retail packs amount to manufacture in terms of Note 4 to Chapter 15 of First Schedule to the CETA 1985.
(ii) If the answer to the above question is yes, whether such repacked and labelled goods are eligible for exemption in terms of Notification No. 6/02-CE dated 1.3.2002 if the input oil was cleared under DEPB scheme availing exemption?
3. As the second question does not survive if the answer to the first question is in the negative, we take up the first question for examination.
4. The facts of the case are that M/s Ruchi Health Foods (P)Ltd and M/s KTV Oil Mills had imported RBD palm oil/palmolein in bulk and resold in bulk to traders or packed the same in pouches preprinted with the description of the contents, quantity (1/2 litre, 1 litre and, in the case of KTV Oil Mills, also 15 Kg tins which bore the firm's sticker), name of manufacturer etc and sold to consumers. The orders relate to demand for removals of RBD palm oil/ palmolein imported in bulk under DEPB scheme availing exemption and sold after packing. This item falls under Chapter Heading 15.02 of CETA Schedule.
5. As the issue involved in the three orders are same we take up appeal against one of the orders, Order-in-Original No. 47/2005 dated 30.12.2005 in the case of M/s. Ruchi Health Foods Ltd.(RHFL) for detailed examination.
6. M/s. Ruchi Health Foods Ltd.(RHFL) received imported palm oil/palmolein in bulk and stored in their storage tanks. The imported oil was packed in pouches on their own account and also on job work basis for traders. Most of the imported oil had been cleared under Notification No. 45/02-Cus. Dated 22.4.2002 and 96/2004-Cus. Dated 17.9.2004 which exempted refined edible oils, among others, from duties of customs including additional duty of customs. The oil was then filled in pouches of 1/2 litre and 1 litre capacity and sold. The pouches bore on them details such as description of the contents, quantity and name of the manufacturer.
7. RHFL cleared the impugned goods during September 2004 to February 2005. After issuing Show Cause Notice and hearing the party, the Commissioner decided that the impugned goods had been manufactured in terms of Clause (ii) of Section 2(f) of the Central Excise Act, 1944 read with Note 4 to Chapter 15. As per the said Clause (ii), "manufacture" meant any process specified in relation to any goods in the Section or Chapter notes to the First Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture. In the instant case, the relevant Note 4 to Chapter 15 reads as under:
4. In relation to the products of sub-heading Nos. 1502.00, 1503.00, 1504.00 and 1504.90, labelling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to "manufacture.
The Commissioner found that the process undertaken by appellants was repacking and labelling of edible oil received in bulk packs.
8. The appellants had argued before the Commissioner that the goods received in bulk were a marketable item and what was cleared was the same goods after packing. Therefore there was no manufacture of any new product to attract Central Excise levy. They also cited the following case law in support of their argument that the Chapter Note also was not attracted in their case.
i) Lakme Lever Ltd. v. CCE, Mumbai III
ii) Lupin Laboratories Ltd. v. CC & CEX, Aurangabad
iii) Aamritial Chmeaux Ltd. v. CCE The Commissioner found that the case law covered cases different from the subject case on facts Lakme Lever Ltd. v. CCE, Mumbai III dealt with a case where shampoo and lipstick of different varieties/shades already packed in small packs were repacked in same size retail packs of assorted varieties. In the Lupin Laboratories Ltd. v. CC & CEX, Aurangabad, the facts were that different medicines ready for marketing were put in sets, each set consisting a day's dose. All the three cases did not involve repacking from bulk packs to render them ready for sale and were not therefore relevant to the case under adjudication. He observed that in the instant case, Palmolein consignments not ready for marketing had been repacked and labelled to render them marketable. Therefore, it was concluded that as per Chapter Note 4 to Chapter 15, the impugned goods had been manufactured and duty was demanded as the input oil had been imported under DEPB scheme and cleared without payment of additional customs duty.
9. Before us the following legal arguments were made by the learned Counsel appearing for the appellants. As per Chapter Note 4 to Chapter 15, only labelling or relabelling of goods repacked from bulk packs to smaller packs amounted to manufacture. The appellants had only packed and labelled goods received in bulk/tanker trucks and not goods received in 'bulk packs'. He cited the following case law in support of his argument.
(a) Ammonial Supply Co. v. CCE, New Delhi
(b) Ammonia Marketing Co. v. CCE&C, Bangalore
(c) Ram Kishore Chemicals Co. Pvt. Ltd. v. CCE In the Ammonia Supply Company case, the Tribunal had decided that filling bulk compressed ammonia gas in tankers into cylinders did not amount to manufacture in view of the Chapter Note 10 to Chapter 28 of the First Schedule to CETA, 1985. The said note to Chapter 28 was identical to the Note 4 of Chapter 15. In the other cases, the Tribunal had followed the ratio of the Ammonia Supply Company case. The activity they undertook was also not 'any other treatment undertaken to render the product marketable to the consumer'. In this connection the ld Counsel cited the, following observations of the Tribunal in Johnson & Johnson Ltd. v. CCE to buttress the point:
18. The Departmental Representative's contention that the processes that these appellants undertook would be covered by the term, "any other treatment to render the product marketable" is an unsuccessful attempt to salvage the situation. The notice issued to both the importers alleged only labelling. In the orders, the Commissioner has found the activity undertaken by Nestle to be any other treatment. The word "other" in each of the notes clearly refers to a process other than those earlier specified in them....
The appellants had not undertaken any activity other than packing which would be covered by 'any other treatment' referred to in the Chapter Note. The learned Counsel cited the following observation of the Tribunal in the Ammonia Supply Company case in support of his argument.
In relation to products of this Chapter, labelling or re-labelling of containers and repacking from bulk packs to retail packs, or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture.
From the above Chapter Note one can spell out the manufacturing process only if the activities mentioned therein are carried out. The activity mentioned therein when carried out are treated as manufacturing process. In such circumstances a legal fiction as to manufacture is to be presumed. The fiction incorporated in the note should have a restricted meaning only. In other words, for a manufacturing process to come into existence, by invoking this fiction, ingredients contained therein must be strictly complied with. What are the ingredients that are to be satisfied to bring in a fiction of "manufacture" as per this Note? The first ingredient that is to be satisfied is labelling of container while repacking from bulk packs to retail packs. The second may be re-labelling of the container while repacking from bulk packs to retail packs. The third will be adoption of any other treatment to render the product marketable to the consumer. In the instant case, we can safely exclude the third option because the department has no case that the assessee adopted any treatment to render the product, Ammonia, marketable in the course of filling it into smaller container.
6. The department has nowhere alleged that the assessee in this case resorted to labelling or re-labelling the container while filling the Ammonia gas into smaller container.
10. Similar arguments were made in the appeals filed by M/s. KTV Oil Mills and by their Counsel before us.
11. The learned SDR argues that in the Ammonia Supply Company case, the facts were different from that of the subject case. In that case Ammonia gas in bulk was packed in returnable cylinders and the labelling of cylinders was disputed. In the instant case the appellants had registered as assessee as per the Central Excise Rules for the impugned activity and the present controversy was raised only when they were called upon to pay duty on repacking of imported goods cleared under DEPB.
12. We have carefully considered the facts and arguments. There is no dispute as regards the facts of the case. The Note 10 of Chapter 28 reads as follows:
In relation to products of this Chapter, labelling or re-labelling of containers and repacking from bulk packs to retail packs, or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture.
Note 4 of Chapter 15 reads as:
4. In relation to the products of sub-heading Nos. 1502.00, 1503.00, 1504.00 and 1504.90, labelling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to "manufacture.
These Chapter notes are identical in their contents. While interpreting the scope of the Chapter Note 10 supra, the Tribunal made the following observation:
"The fiction" incorporated in the Note should have a restricted meaning only. In other words, for a manufacturing process to come into existence, by invoking this fiction, ingredients contained therein must be strictly complied with. What are the ingredients that are to be satisfied to bring in a fiction of "manufacture" as per this Note? The first ingredient that is to be satisfied is labelling of container while repacking from bulk packs to retail packs. The second may be relabelling of the container while repacking from bulk packs to retail packs. The third will be adoption of any other treatment to render the product marketable to the consumer.
This reading of the Chapter Note 10 to Chapter 28 applies also to Chapter Note 4 of Chapter 15. As per the reasoning followed by the Tribunal, packing of bulk RBD palm oil/palmolein in preprinted pouches of capacity 1/2 litre, 1 litre (and also 15 Kgs tins in the case of KTV Oil Mills ) does not amount to manufacture. The appellants did not repack RBD palmolein from bulk packs into smaller packs. We also agree with the argument of the appellants that their activity did not involve 'any other treatment' referred to in the said Note 4. Thus we find that the answer to the first question we formulated at the outset is in the negative. As we have found that the appellants did not undertake any activity deemed to be manufacture in the Chapter Notes in CETA Schedule, the enquiry whether the input oil had suffered duty of excise or additional duty of customs is irrelevant. In the circumstances we find the Order in Original No. 47/05 dated 30.12.05 passed by the Commissioner in the case of Ruchi Health Foods (P) Ltd is not sustainable in law. We find that similar orders on the issue passed by the Commissioner in the case of M/s. KTV Oil Mills are also not sustainable. Accordingly we set aside the impugned orders and allow all the three appeals.
(Operative portion of this order pronounced in open Court on 25.10.06)