Custom, Excise & Service Tax Tribunal
M/S Abdos Trading Company Pvt. Ltd vs Commr. Of Central Excise, Kolkata Ii on 28 June, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
EAST REGIONAL BENCH : KOLKATA
Ex. Appeal No.351,352/06
Arising out of O/O No.81/Commissioner/CE/Kol.II/Adj./Denovo/2005-2006 dated 22.03.2006 passed by Commr. of Central Excise, Kolkata.
For approval and signature:
SHRI S. K. GAULE, HONBLE TECHNICAL MEMBER
DR. D. M. MISRA, HONBLE JUDICIAL MEMBER
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not? :
3. Whether His Lordship wishes to see the fair copy
of the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
M/s Abdos Trading Company Pvt. Ltd.
Shri Ram Gopal Agarwal
APPELLANT(S)
VERSUS
Commr. of Central Excise, Kolkata II
RESPONDENT (S)
APPEARANCE Shri B. N. Chattopadhyay, Consultant for the Appellant (s) Shri S. Misra, Addl. Commissioner (A.R.) for the Department CORAM:
SHRI S. K. GAULE, HONBLE TECHNICAL MEMBER DR. D. M. MISRA, HONBLE JUDICIAL MEMBER DATE OF HEARING & DECISION : 28.06.2012 ORDER NO..
Per Dr. D. M. Misra :
These appeals are filed against the Order-in-Original No. 81/Commissioner/CE/Kol.II/Adj./Denovo/2005-2006 dated 22.03.2006 passed by the Commissioner of Central Excise, Kolkata II Commissionerate.
2. Briefly stated the facts of the case are that M/s Abdos Trading Company Pvt. Ltd. ( hereinafter Appellant No.1) having their factory at 8/1 Hardutrai Chamaria Road, Howrah, were engaged in the activity of repacking of soda ash from bulk packs of 50 kgs/75 kgs bags to retail packs of 500gm/1 kg. The said bulk packs of soda ash were received from their own trading unit situated at 100 G.T. Road, Rishra, Hooghly, operating as a registered dealer, under the erstwhile Central Excise Rules, 1944. On the basis of intelligence that the Appellant No.1, had been carrying out the activity of repacking of soda ash, which amounts to manufacture of excisable goods falling under Chapter Heading 2836.10 of the First Schedule to the Central Excise Tariff Act, 1985 and clearing the same without payment of Central Excise duty, the officers from DGCEI carried out simultaneous searches at various premises and seized documents/records. Consequently, a show-cause cum demand notice bearing DGCEI No.289/EZU/KOL/2001/663 dated 9.4.2002, was issued to the appellant. In the said notice, it was alleged that from the registered trading unit of the Appellant No.1 located at G.T.Road, Rishra, they had been operating as first stage dealer of M/s Tata Chemical Ltd.. The said Unit of Appellant No.1 had procured soda ash and sodium bicarbonate in bulk packs of 50 kgs and 75 kgs bags from M/s Tata Chemical Ltd. and selling the same from the said registered premises under the cover of modvatable/cenvatable invoices and also under non-modvatable challans/bills raised to their customer. It is further alleged that the said Rishra Unit of the Appellant No.1 had been sending soda ash in bulk packs of 50/75 kgs under the cover of challans to their other premises at Hardutrai Chamaria Road, Howrah; in the said Hardutrai Chamaria Road unit, the Appellant No.I had carried out the activity of re-packing of soda ash in 500 gm (1/2 kg) and 1 kg retail packs from the bulk packs of 50/75 kgs. The retail packings bear the brand name printed on the poly packs as follows :
Diwali Brand (under which a logo of lighted lamp (Deepak) is there) TATA SODA ASH A TATA PRODUCT Manufactured by Tata Chemicals Limited, Bombay House, Bombay-400023,-Repacked by :- Abdos Trading Company Pvt. Ltd., 8/1 HARDUTRAI CHAMARI ROAD, Howrah-711101-MAX RETAIL PRICE (Incl of all Taxes)-pkd.
3. The charge against the Appellant No.1 was that in view of the Chapter Note 10 of Chapter 28 of CETA,1985, repacking from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumer, results into deemed manufacture as per Section 2(f) of Central Excise Act, 1944. Consequently, Central Excise duty of Rs.68,28,654/- alleged to be not paid on such retail packs of soda ash cleared by the appellant no.1 from their Hardutrai Chamaria Road premises during the period 2.4.1997 to 31.3.2001, was demanded under the first proviso to Section 11A (1) of the Central Excise Act,1944. The ld. Commissioner confirmed the demand of Rs.68,21,654/- vide its order dated 15.6.2004 and appropriated the amount of Rs.5.00 lakhs already paid by the appellant; he had also imposed penalty of Rs.68,21,654/- on the Appellant No.1 and Rs.5 lakhs on the Managing Director of the Company, i.e. Appellant No. 2. Aggrieved by the said order, the appellants preferred appeals before this Tribunal. This Tribunal remanded the matter to the Commissioner for denovo adjudication observing as :
After hearing both sides, we find that the issue being a law point first raised before this Tribunal in the Miscellaneous Application (AD) No.356/05 and not raised before the lower authority, on the question as to whether packing of soda ash from regular marketable packages of 50/75 kgs into smaller packs, is a manufacture or not, was already admitted by the Tribunal on 9.8.05. Accordingly, we remand the matter to the original adjudicating authority to consider the above point. We also direct the Commissioner that he will hear the applicant/appellant company on the limitation point as well as on the question of entitlement of modvat credit and cum-duty price, and after observing the principles of natural justice, he will decide the matter afresh. The appeals are thus allowed by way of remand. Stay petitions also get disposed of.
4. Pursuant to the said remand order, the ld. Commissioner initiated the denovo proceeding and after re-determination of the duty as per the direction of this Tribunal, confirmed the duty of Rs. Rs.58,22,618/- and imposed an equivalent penalty on the Appellant No.(1) and Rs.5.00 lakhs on the Managing Director of the Company, i.e. Appellant No. 2. Aggrieved by the said order, they have filed the present appeals.
5. The ld. Consultant, Shri B. N. Chattopadhyay, appearing for the appellants, has submitted that the Appellant No. 1 were selling soda ash in bags of 50/75 kgs received from M/s Tata Chemicals Ltd. since 1983. He has submitted that around 95% of the said soda ash were sold in the same bags of 50/75Kgs , whereas 5% of the products, were re-packed into smaller packings of 500 gm/1 kg at their Packet Department located in their Head Office at Hardutrai Chamaria Road, Howrah. After introduction of Modvat Credit Scheme in 1986, the appellants were passing on the modvat credit to the Industrial consumers by making endorsement on the excise invoices of M/s Tata Chemicals Ltd., as was permissible at the relevant time. Their premises at at G.T.Road, Rishra, had obtained Central Excise Registration as a dealer from April, 1994 and accordingly, issuing modvatable invoices to the customers and maintaining necessary records as required, namely, RG-23D Register, copies of Central Excise dealers invoices and challans and filing necessary Returns with the Department .
6. The Ld. Consultant further submitted that though they were carrying out the activity of re-packing into smaller packs at their Head Office at Hardutrai Chamaria Road, Howrah, but as they were not aware of the provisions of Central Excise law, that is, re-packing of soda ash from bulk pack of 50/75 kgs into smaller packs of 500 gm/1 kg would result into manufacture under the Central Excise Act, 1944 and the retail packs attract central excise duty, they had not discharged duty on the small packs of 500 gm/1 kg. The ld. Consultant alternatively submitted that in terms of Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985, the process/activity of labeling or re-labeling of container and repacking from bulk pack to retail pack or adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture. He has argued that in terms of the definition of deemed manufacture under Section 2 (f) of Central Excise Act, 1944 read with the said Chapter Note, it is only when re-packing is done from bulk packs, the condition laid down in the said Chapter Note is satisfied. It is his submission that when the re-packing is done from the standard packages, it would not attract the said definition of manufacture.
7. The ld. Consultant has further submitted that since they were engaged in packing of the goods from standard packs of 50/75 kgs, the criterion of repacking from bulk packs was not satisfied in the present case. He further submitted that the definition of Bulk as per Blacks Law Dictionary, means, it is neither counted, weighed nor measured, it is the aggregate quantity that form a body or unit, when used in relation to sale of goods by sample ; bulk means the whole quantity of goods sold, which is supposed to be fairly represented by the sample. It is his submission that the meaning of bulk as explained in Blacks Law Dictionary, clearly indicates the quantity which are not measured or packed in a standard pack, would only be considered as in bulk. The contention is that the goods which they have received, were not bulk, but it is measured, weighed i.e. 50/75 kgs. contained in each package, hence it cannot be considered as in bulk. Therefore, the condition of Chapter Note 10 of Chapter 28 of CETA,1985 cannot be made applicable to the activity carried out by them i.e transferring or repacking soda ash received in standard packs of 50/75 kgs. into smaller packs of 500 gms/1 kg.
8. It is his submission that it has been made clear by various Judicial pronoucements that if the packages are of standard packages and in marketable condition than the activity/process of re-packing from such standard packages cannot be termed as deemed manufacture as per Chapter Note 10 of Chapter 28 of CETA,1985. In support, he has referred to the following decisions viz. (i) Jhonson & Jhonson Ltd. Vs. Commr. of Central Excise, Mumbai IV : 2003 (156) ELT 134 (Tri.-Mumbai), (ii) Jhonson & Jhonson Ltd. Vs. Commr. of Central Excise, Mumbai : 2005 (188) ELT 467 (SC), (iii) Lupin Laboratories Ltd. Vs. Commissioner of Central Excise & Customs, Aurangbad : 2002 (139) ELT 366 (Tri.-Mumbai), (iv) Lakme Lever Ltd. Vs. Commissioner of Central Excise, Mumbai III : 2001 (127) ELT 790 (Tri.). (v) Burns & Cones Vs. Commr. of Central Excise, Delhi II : 2005 (124) ECR 371 (Tri), (vi) Amrit Lal Chemaux Ltd. Vs. CCEx., Mumbai, IV : 2004 (172) ELT 474 (Tri.) He has further submitted that due to the use of word And in the said Chapter Note 10 of Chapter 28, labeling & relabeling along with the activity of repacking from bulk packs to retail, though being an essential condition, but no fulfilled in the present case.
9. The Ld. Consultant further submitted that the demand issued on 9.4.2002 for the period from 01.4.1997 to 31.3.2001, is barred by limitation prescribed under Section 11A(1) of Central Excise Act,1944. He has contended that the trading unit at 100, G.T. Road, Rishra, Hooghly, had been sending standard packs of soda ash of 50/75kgs to their Chamaria Road premises for re-packing into retail packs. The said soda ash were transferred under delivery challans mentioning therein self packet department. Besides in their RG-23D Register, they had entered transfer of the said quantity of soda ash to Chamaria Road Unit, and the documents/returns were filed with the department periodically. Besides, all their records maintained at Rishra Road premises were periodically audited by the department. Therefore, there was no suppression of facts from the knowledge of the Department that they were carrying out the activity of re-packing of soda ash from the standard pack to smaller packs. The ld. Consultant further submitted that all the activities were carried out by them in a bonafide manner, hence, in absence of any suppression of facts, mis-declaration, intention to evade payment of duty, penalties imposed on the appellants are un-called for and un-warranted.
10. Per contra, the ld. A.R. (Addl. Commissioner) for the Department reiterated the findings of the ld. Commissioner. He has submitted that the activities carried out by the Appellant No.1 in their Chamaria Unit , clearly fall within the scope of Chapter Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985 and accordingly satisfy the definition of manufacture as under Section 2(f) of the Central Excise Act, 1944. The ld. A. R. submitted that the activities carried out by the appellant involve breaking of the bulk pack of Soda ash contained in bags of 50/75 Kgs and transfer of the same into smaller packs of 500 gms/1 kg. The contention is that the smaller packs also bear the brand name Diwali belonging to M/s Tata Chemicals Ltd.. He has further submitted that the meaning of bulk sought to be read by the appellant, in interpreting the expression bulk pack of Chapter Note 10, is incorrect, in as much as it cannot be read in isolation, but should be read as a whole i.e. bulk pack. The meaning that can be assigned to bulk pack while interpreting the said Chapter Note, would be clear, when the same is read in the context and in contrast to the meaning of the expression retail pack. The ld. A.R. further submitted that the argument advanced by the appellants that the Chapter Note 10 refers to bulk pack and not standard pack, hence, the said Chapter Note is not applicable to their case, is devoid of merit as in a given circumstances, like the present one, all standard packs are invariably bulk packs. He has submitted that there is no difference between the terminology bulk pack and standard pack as far as chapter Note 10 of Chapter 28 is concerned.
11. The ld. A.R. further submitted that the judgements referred to by the appellants are also not applicable to the facts of the present case as in those cases, the issue was whether goods already in retail pack are further packed in a wholesale pack and marketed be considered to involve the process of repacking from bulk pack to retail pack.
12. Further, he has submitted that merely the bulk packs of Soda ash in bags of 50/75kgs., were itself marketable, would not make any difference because repacking into smaller pack were meant for retail customers. The activities by which soda ash are transferred from the bulk packs to retail packs, would definitely attract Chapter Note 10 of Chapter 28 of CETA, 1985 as by such activity, the soda ash became marketable to the retail consumers. In this connection, the ld. A.R. placed reliance on the decision of the Honble Supreme Court in the case of Air Liquide North India Pvt. Ltd. Vs. Commissioner of Central Excise, Jaipur I reported in 2011 (271) ELT 321 (SC).
13. The Ld. A.R. further submitted that the appellant had not disclosed the said process of re-packing of soda ash into 500gms/1 Kg. from bulk pack of 50/75 kgs to the Department nor disclosed clearly in their statutory/private documents maintained at their premises at Rishra. Even though in the challans of their Rishra premises, it is mentioned as self packet department, but in the said challans, they had not disclosed the said activities. He has further submitted that their premises at Rishra was registered as a dealer and not as a manufacturer and hence the Audit of the records were mostly confined to the accounting of the inputs received and credit passed by raising delaers invoices. Hence, the department has no scope of knowing from those records that in their other premises at Chamaria,Howrah, process of repacking from bulk packs to retail packs was carried out. Further, he has submitted that since there was suppression of facts and mis-declaration, hence, imposition of penalty by the ld. Adjudicating Authority on the Appellants are justified.
14. Heard rival submissions and perused the records. The issues for determination are: (i) whether re-packing of soda ash from bulk or standard packages of 75/50 kgs. into smaller packing of 500 gm/1 kg fall within the scope of Chapter Note 10 of Chapter 28 of CETA, 1985 and result into manufacture as defined under Section 2(f) of the Central Excise Act, 1944; and (ii) whether the demand is barred by limitation. The relevant Chapter Note 10 of Chapter 28 reads as follows :
In relation to products of this chapter, labeling or re-labeling 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.
15. Before analyzing the scope and applicability of Chapter Note 10 of Chapter 28, it is essential to visit the undisputed facts. The Appellant No.1 are having two premises: one at 100 G.T.Road, Rishra, Hooghly and the second one at 8/1 Hardutrai Chamaria Road, Howrah. They have been dealing with Soda Ash as authorized dealer of M/s Tata Chemicals Ltd. since 1983. The premises at 100 G. T. Road, Rishra, Hooghly, was registered with the Central Excise Department as a Dealer whereas the other premises at Hardutrai Chamaria Road, Howrah, was not registered. The registered premises at Rishra had received soda ash manufactured by M/s Tata Chemicals Ltd. contained in bags of 75/50 kgs and around 95% of the received quantity were sold to Industrial consumers against dealers invoices, on which the said industrial consumers were eligible to avail modvat/Cenvat Credit. The balance quantity of 5% were sent to their premises at Hardutrai Chamaria Road, Howrah for re-packing into smaller packs of 500 gm./1 kg and from there the same were sold to retail consumers.
16. In the Order impugned before us, the Ld. Adjudicating authority has held that the activity of re-packing of soda ash into small/retail packs of 500 gms/1 kg from bulk packs of 75/50 kgs, results into manufacture, in view of Chapter Note 10 of Chapter 28 of CETA,1985 read with Section 2(f) of the Central Excise Act,1944. The Ld. Adjudicating authority in arriving at the said conclusion had observed that the Soda Ash contained in bags of 75/50 kgs are bulk packs and the packs of 500gms/1 kg are retail packs. Assailing the said observation, the ld. Consultant submitted that the Chapter Note 10 prescribe that the activity of re-packing from bulk packs to retail packs only would amount to manufacture, whereas the appellant did not carry out re-packing from bulk pack but transfer soda ash from Standard Packs of 75/50 Kgs. into small packs of 500gms/1 Kg. In nutshell, his contention is that the activity of re-packing would result into manufacture and are confined to those cases only where the bulk pack are converted and/or transferred into retail packs; but when the contents are transferred from Standard packs and repacked into retail packs, the Chapter Note 10 of Chapter 28 is not attracted.
17. We find that in substantiating his aforesaid argument, the Ld. Consultant has argued that the meaning of bulk has to be understood as an un-measured quantity or quantity which cannot be determined. Extending his argument further, he has submitted that contrary to the said meaning of bulk, in the present case, since specific quantity of soda ash are packed in standard packs of 75 kg/50 kg bags., hence, the same could not be treated as bulk packs, but are only standard packs, and the said Chapter Note 10 refers to bulk pack and not standard pack. Countering the said interpretation of bulk pack, the ld. A.R. had argued that the meaning of bulk is associated with the word pack in the said Chapter Note 10 and hence, both the words should be read together and cannot not be read in isolation to determine the meaning of bulk pack. Besides, the true scope of bulk pack, could be clear when it is read in the context and in contrast to the meaning of retail pack.
18. We agree with the contention of the ld. A.R. that the expression bulk pack cannot be read by dissecting the expression into bulk and pack. It is to be read as a whole and in contrast to the meaning of retail pack, as the activity of converting/transferring the contents of a bulk pack into retail packs, is the decisive factor, in determining whether the activity falls within the scope of Chapter Note 10 of Chapter 28 of CETA,1985. Once, it is a bulk pack, then the quantity ought to be definite and measured according to the packing in which it is placed. In case of solid, it is packed in standard size of packings and in case of liquid and gas, it takes shape of the containers. No specified quantity could be assigned or earmarked to understand the meaning of bulk pack and retail pack. The said connotation are to be ascertained by delving into the facts and circumstances of each case. For example, in case of soda ash quantity of 75/50 kgs in bags, may be considered as bulk packs in contrast to the quantity of 500 gms/1 kg. But, in case of spices, for example, cardamom powder, 1 kg could be considered as bulk pack and 1 gm/2 gm packs could be treated as retail packs. Therefore, in each case, it has to be determined as to what constitute a bulk pack and a retail pack. Needless to mention, the activity of transferring from bulk pack to retail pack is undertaken to enhance the marketability. Therefore, the argument that the said Chapter Note is attracted only to bulk packs and not to standard pack, is unacceptable.
19. Now analyzing the facts of the present case in the above back drop, it could easily be discerned that the Soda ash in bags of 50/75 kgs were mainly meant for industrial consumers to whom the appellants had sold from their Registered premises at Rishra by raising dealers excise invoices and passed on the element of excise duty paid by the manufacturer M/s Tata Chemicals Ltd.; the said customers, accordingly, were eligible to avail modvat credit/cenvat credit on the duty paid on soda ash. It is admitted by the Appellants that the soda ash were repacked into smaller packs of 500gm/1 Kg. to cater the needs of the small household customer i.e. retail consumers at the behest of M/s Tata Chemicals. Obviously, these customers were not interested in availing modvat/ cenvat credit on the amount of duty paid on the Soda ash. Therefore, the activity of re-packing from bags of 75/50 kgs, even if these were termed as standard packs, cannot loose the characteristic of bulk packs, since these were meant for Industrial consumers, whereas smaller packs of 500 gm/1 kg made out of such bulk packs, were to meet the requirement retail customers and hence safely be concluded as retail pack.
20. The ld. Consultant has placed heavy reliance on the judgment of this Tribunal in the case of Johnson & Johnson Ltd. (cited supra), wherein, the Appellant were importing, inter alia, two life saving medicaments, namely, Topomac and Eprex, which were already packed in retail packs by the overseas suppler being intended for sale in retail and shipped by placing several such packs in bulk packings for transportation. After import of the said goods, as per the requirement of provisions of relevant law, the importer removed these goods to their warehouse at Vakola, after repacking the goods in cardboard boxes containing 20 packets of 10 tablets each affixed a sticker on the card board boxes containing details of MRP, name and address of manufacturer, manufacturing date etc.. The issue involved for determination was whether placing of these retail packs of 20 packets of 10 Tablets each in the cardboard boxes, would fall under the scope of Chapter Note 5 of Chapter 30 of CETA, 1985. This Tribunal while distinguishing between wholesale pack & retail pack observed at para 16 as:
16.?It is significant to note that the notes do not refer to repacking from wholesale pack to retail pack, but refer to repacking from bulk pack to retail pack. There is, clearly, a distinction between a bulk pack and the wholesale pack. To our minds, the expressions wholesale pack and retail pack denote the kind of packing to which goods are subjected to render them suitable for sale at a particular commercial level. Wholesale packing would consist of a number of retail packs put together for ease of transportation and distribution. The wholesale packing generally denotes the quantities in which goods are sent for a particular industry are sold to wholesalers, being made up of a number of packs and the quantity in which goods are generally sold in retail. Thus, a wholesale pack of cigarettes may consist of a pack containing say 10 packs of 20 cigarettes each, the retail pack means a pack of cigarettes containing 20. A bulk pack, on the other hand, would denote goods kept in bulk, not for purposes of sale at a particular commercial level, but to be utilized either for repacking into retail packs or for sale directly. Conversion from wholesale pack to retail pack would not involve repacking. All that is required to be done is to take the retail pack out of the wholesale pack in which it has been put. Conversion from bulk pack to retail pack would however require such repacking. The quantities of the commodity which are in the bulk pack would not be in any kind of packing suitable for sale at any commercial level and thus would have to be either repacked before sale or sold without any packing."
21. This judgment has been upheld by the Honble Supreme Court by dismissing the Appeal filed by the Department. We find that the facts of the said case are different from the present one in as much as, around twenty number of retail packs are placed in cardboard boxes to be sold in wholesale, where as in the present case the bags of Soda ash f 50/75kgs were torn/dismantled and the contents were transferred and repacked into smaller packs of 500gms/1kg in order to sale to the retail customer. Accordingly, the said ratio is not applicable to the present case.
22. Similarly, In Lupin Laboratories Ltd.s case, in order to maintain the continuity and regularity of intake of four drugs viz. rifampcin, ethambutol, isoniazid and pyrazinamide, all of which were anti tuberculosis drugs, the Appellant placed these drugs in a single packs containing a days requirement, and sold in the market. The question arose was whether putting these different drugs, which are already in packed condition, in a single pack, would amount to manufacture in view of chapter note 5 of chapter 30 of CETA,1985. Rejecting the said contention, at para 6 it is observed:
6.?It is also relevant to note that these four or three tablets were initially packed, after their manufacture into this combination packing. It is not as if they were first packed into separate packing and thereafter drawn from this packing and put into the packing presently under consideration. If the Commissioner (Appeals)s logic is to be adopted, it would mean that every manufacturer of pharmaceutical products or cosmetic products has to pay duty twice on any one product first when it comes off the production line and the second when it is packed. This, surely, is not the intention of the law makers. The intention which appears to us is to ensure that the value addition, which is sometimes substantiated, which results as a consequence of packing the product into a retail pack is levied to duty. Each of the processes referred to in these notes, conversion of powder into tablets; labelling or relabelling of containers intended for a consumer; repacking from bulk pack to retail pack obviously results in or facilitates sale of the product to the retail consumer. The adoption of any other treatment referred to in each of these notes would be such treatment that would render the product marketable to a consumer. It is therefore not possible for us to uphold the finding of the Commissioner (Appeals) that a new product has emerged which was not entitled to benefit of either of the notification.
23. We find that the facts are similar to that of Johnson & Johnsons case and hence its ratio is also not relevant to the facts of the present case.
24. In Lakeme Lever Ltd.s case (cited supra), the appellants were manufacturer of cosmetics and were supplying the goods to Canteen Stores Department(CSD) of Indian Armed forces. The appellants were repacking various cosmetics items, including Lipsticks, by distributing the contents from twelve cartons each containing lipstick of particular shade, to twelve cartons containing different shade of lipstick. The question thus raised was whether such activity of repacking(redistribution of retail packs in different cartons) would result into manufacture in view of Chapter Note 4 of Chapter 33 of CETA,1985. The Tribunal rejected the argument of the department, inter alia, observing that the activity consist of transferring one retail pack to another retail pack. We find that in the present case the issue involved is transferring the contents soda ash from bulk pack to retail pack and hence the said judgment is also not relevant.
24. In BOC India Ltd.s case, the respondent was engaged in the manufacture of various gases and they used to purchase Helium Gas from other manufacturers and sold the same under their Brand name and claimed the same as a part of their Trading activity. The issue raised before the Honble Supreme Court was whether mere labeling & relabeling in absence the activity of repacking from bulk packs to retail packs would result into manufacture as prescribed under Chapter Note 10 of Chapter 28 of CETA,1985. In the present case there is no dispute on the aspect labeling and relabeling of the soda ash bags, but the issue is repacking from bulk pack(which the Appellant claimed as Standard Pack) to retail pack and hence the said ratio of the Honble apex court is also not applicable to the facts of the present case.
25. The ld. A.R. for the Department has placed reliance on the decision of the Honble Apex Court in the case of Air Liquide North India Pvt. Ltd. (cited supra) in support of his submission that even if the soda ash in 50/75 kgs were marketable and marketed to Industrial consumers, when the same are transformed into retail pack, and sold to retail consumers, it would not in any manner affect the conclusion that the activity of repacking from bulk pack to retail pack attract the mischief of Chapter Note 10 of Chapter 28 of CETA,1985 . In that case, the appellants have purchased helium gas from the market in bulk and repacked the same into smaller cylinder after giving different grade and sold the same in the open market. Thus the question arose was whether the activity carried out by the appellants would attract Chapter Note 10 of Chapter 28 of the CETA,1985. Their Lordship was observed as under :
13. In the instant? case, Helium gas was having different marketability, which it did not possess earlier and hence the gas sold by the appellant was a distinct commercial commodity in the trade, rendering it liable to duty under Chapter Note 10 of Chapter 28 of the Act. If the product/commodity, after some process is undertaken or treatment is given, assumes a distinct marketability, different than its original marketability, then it can be said that such process undertaken or treatment given to confer such distinct marketability would amount to manufacture in terms of Chapter note 10 to Chapter 28 of the Act.
..
18. It is also? pertinent to elucidate on the phrase marketable to the consumer. The word consumer in this clause refers to the person who purchases the product for his consumption, as distinct from a purchaser who trades in it. The marketability of the product to the purchaser trading in it is distinguishable from the marketability of the product to the purchaser purchasing the same for final consumption as in the latter case, the person purchases the product for his own consumption and in that case, he expects the product to be suitable for his own purpose and the consumer might purchase a product having marketability, which it did not possess earlier.
19. Therefore, the? phrase marketable to the consumer would naturally mean the marketability of the product to the person who purchases the product for his own consumption. Hence, the argument of the appellant that as the product was already marketable, the provisions of Chapter Note 10 of Chapter 28 of the Act would not be attracted, will have to be rejected.
20. For the? aforetasted reasons, we agree with the Tribunal in holding that the appellant is liable to pay excise duty for the reason that it has manufactured Helium within the meaning of the term manufacture as explained in terms of Chapter Note 10 of Chapter 28 of the Act.
26. We find that the facts of the present case are anlogus to the one decided in the above case by the Honble Supreme Court. In the present case also, the soda ash had been brought in bulk packs of 75/50 kgs and were then transferred into smaller packs of 500 gms/1 kg i.e. retail pack. The retail pack of soda ash as admitted, were meant for a different market segment i.e. for small consumer/retail consumer, whereas, the bulk packs were meant for industrial consumers. Therefore, the process/activity of transferring from bulk packs into retail packs resulted in enhancement of the marketability of the soda ash among the retail customer. Therefore, undoubtedly, in our opinion, the process of transferring/converting the bulk packs of soda ash in bags of 75/50 Kg into smaller/retail packs of 500gms/1 kg and affixing with the brand name of M/s Tata Chemicals would result into manufacture within the meaning of Section 2(f) of Central Excise Act, 1944 and leviable to duty.
27. Further, we find that the appellants were operating from two different premises, one at Rishra, registered with the Central Excise Department and other one at Chamaria, not registered, where the activity of re-packing was being carried out by the appellants during the relevant time. The departments case is that from the Chamria premises, the retail packed soda ash in 500gms/1kg were cleared without payment of duty. The appellants claim is that in the registered premises, they have maintained prescribed statutory Registers/documents, namely, RG 23D Register, wherein the quantity transferred to their other unit at Chamaria were duly mentioned and accounted. The transfer of the said bags of 50/75kgs of Soda ash were carried out against delivery challan mentioning as: Self Packet Department. The records of Rishra unit had been periodically submitted to the department and the same were also audited by the department. Hence, all the facts were within the knowledge of the Department and nothing had been suppressed or misdeclared. We are unable to accept the said contention of the Appellant. We have perused the sample copies of delivery challans & the extracts of RG23D Register enclosed with the Appeal; in the delivery challans, no where it is mentioned that the quantity of soda ash were transferred to their premises at Chamaria were for carrying out the activity of converting/transferring the contents of bulk pack into smaller packs of soda ash of 500 gms/1 kg. Also, we find that the Director of the appellants had initially accepted their mistake and liability and agreed to discharge of duty. We agree with the contention of Ld. A.R. that the Appellant No.1s premises at Rishra had been registered as a dealer and not as a manufacturer and hence the stringency of audit norms applicable to a manufacturing Unit would not be applicable to a dealer as in the later case, it is the modvat/cenvat availed on the duty paid goods, are ultimately passed on to the purchaser on its sale. In these circumstances, we are of the view that the ld. Adjudicating Authority has rightly confirmed the demand invoking the extended period. Also since, there is an element of suppression and non-disclosure of the activity of re-packing from bulk pack to smaller packs and selling the same affixing brand name of M/s Tata Chemicals Ltd from their unregistered premises, without payment of duty and without disclosing their said activity to the department, the penalties imposed on both the appellants are also justified. Consequently, the order of the lower authority is upheld and both the appeals are accordingly dismissed.
(Operative portion of the Order pronounced in the open Court)
Sd/ Sd/
( S. K. GAULE ) ( DR. D. M. MISRA )
TECHNICAL MEMBER JUDICIAL MEMBER
mm
2
Ex. Appeal Nos.351,352/2006