Customs, Excise and Gold Tribunal - Mumbai
Lakme Lever Limited vs Commissioner Of Central Excise on 5 October, 2000
Equivalent citations: 2001(127)ELT790(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The appellant is a manufacturer of cosmetics and toilet preparations. It manufactures and sells shampoos, cosmetics, skin creams, lipstick and other goods. Among its customers is the Canteen Stores Department of India (CSD for short). This organisation purchased the goods manufactured by the appellant for sale through its retail outlets for members of the armed forces and their families. The CSD, in view of the peculiar nature of its customers and the location, of which most are in remote border areas, asked the appellant to sort and pack the goods in the manner that would attract its customers. For example a carton of lipsticks would be ordinarily sold containing 12 lipsticks of one colour. In the case of CSD, however, a carton contained 12 assorted colours of lipsticks. Similarly a case of shampoo sold to the CSD consists of mixed varieties for dry, oily and regular hair, unlike shampoo sold to other customers, where each carton contains only one variety.
2. The goods marketed by the appellants include not only those manufactured by it, but also of goods which it purchased from other persons, who manufactured these goods on its order. Such goods, packed in the manner in which they would be sold generally in the market i.e., for customers other than CSD were received by it in its depots. It repacked the goods meant for consignment to the CSD. Continuing the example that we referred to above, it had to repack in its depots at Bhiwandi (with which we are concerned), twelve cartons each containing lipstick of particular shade would be redistributed to twelve cartons each containing different shades for supply to CSD. In the order impugned in the appeal, the Commissioner has confirmed the notice issued to the appellant in this regard that this process of repacking amounts to manufacture.
3. The goods manufactured by the appellant or obtained by it, all fall under chapter 33 of the tariff. Note 4 to this chapter at the relevant time (1996-97) reads as follows :
"In relation to products of heading nos. 33.03, 33.04 and 33.05, conversion of powder into tablets, labelling or relabelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer, shall be construed as 'manufacture'.
The notice issued to the appellant alleged, and the Commissioner agrees that the repacking done in the depot of the appellant falls within the scope of "adoption of any other treatment to render the product marketable to the consumers". Therefore the goods have been manufactured.
4. One of the meaning of the word 'rendering' the one that would obviously apply, to the phrase of the note under consideration is "cause to be or become; make of a certain nature, quality, condition etc." (New Shorter Oxford English Dictionary). From this meaning and indeed by common usage of this word, it is only the treatment which makes a product marketable to the consumer which was so rendered. That is to say, the process to fall within the scope of the "any other treatment" it must be one which confers upon a product the attributes of marketability which it did not possess earlier. We must note here the significance of the word 'consumer' in the note. Thus the product must be referred to must be rendered marketable to the consumer. Although this word is not defined it evidently refers to one who purchase the product for consumption by him, as distinct from a purchaser who trades in it. Therefore for any treatment to fall within the scope of the note to the chapter it must be one that confers upon a product a quality as a result of which the product, which was otherwise not marketable is now rendered marketable. If the product were already marketable any amount of treatment to enhance its marketability would not amount to manufacture within the meaning of this note. That treatment does not render it marketable when it earlier was not. That is the object of the note is also clear from the fact that the processes which is specified in it as manufacture conversion of powder into tablets, labelling or re-labelling of containers intended for consumers, re-packing bulk drugs to retail packs are all activities which result in the products being made marketable to the individual consumers.
5. Against this background it will be clear that the 'treatment' (that describes the activities undertaken by the appellant) in question did not render the product marketable and that they were in fact marketed to the vast majority of the customers prior to such treatment. Repacking therefore either did not confer on them or attribute any marketability except possibly to one particular customer. The process undertaken by the appellant therefore did not rende them marketable. Further, the activities undertaken by the appellant also did not involve any treatment of the goods, or of an individual retail pack. It merely consists of transferring them from one kind of retail pack to another.
6. The Commissioner, before whom these arguments were advanced has said that it is the value addition resulting from the repacking that it attempted to be taxed. A mere addition to value of goods does not by itself amount to manufacture. For that purpose it must fall within the legal definition of manufacture. Apart from that there was no value addition in fact. The appellant sell the goods to the CSD at a price lower than the price at which it sells the goods to the other customers, for two reasons, that CSD was a large and continuing customer, and that sales to it were exempted from sales tax. It is therefore not correct to say that there is any value addition as a result of this process, if at all, there is a value reduction, both on account of lower prices and on account of expenses incurred in the process. The demand on this ground is therefore clearly not sustainable.
7. The demand has also been raised on another ground. It is that during the period June to September 1997 the appellant affixed on the cartons of the goods sold by it to CSD, label appearing the words "Canteen Stores Department - in the service of defence services - Golden jubilee -1949-1998" The Commissioner has held this also to be treatment rendering the goods marketable. On the reasoning that we have explained earlier, this labelling also did not confer on the goods any attribute of marketability that they did not possess earlier. This was obviously a method by which inception to the raising of the CSD to advertise its virtue.
8. The appeal is accordingly allowed and the impugned order set aside. Consequential relief.