By TIOL News Service

MUMBAI, NOV 13, 2015: THE appellants are manufacturing fatty acids, Oleic 26, Oleic 20 and LOF Aclassifiable under Chapter 38. They pay excise duty and clear such goods in lorry tankers from the manufacturing units located in Gujarat and bring to Mumbai.

In Mumbai, they have registration as a registered dealer. The duty-paid goods are unloaded into carboys of 90 litres and other varying capacities. On these carboys, name of the manufacturer, quantity, batch number, etc. are labeled and thereafter kept in warehouse and sold to the customers. Normally, these goods are sold at the same value at which goods are cleared from factory. In case, goods are sold at higher value, differential duty is deposited with the jurisdictional excise authority at the manufacturers' end.

It is the case of the Revenue that labelling and packing from bulk container to carboys amounts to manufacture as per Note 5 to Chapter Note 38 and, therefore, the appellants are required to pay duty in Mumbai on the repacked goods.

Having lost at the lower level, the appellants are before the CESTAT and submit that Board vide Circular No. 910/30/2009-CX dated 16/12/2009 has clarified that the tankers cannot be termed as bulk packs and, therefore, the activity of transferring the goods from tankers into small drums does not amount to manufacture. Following case laws are also cited in support viz. Sigma Scientific Co. Ltd. - 2008-TIOL-2135-CESTAT-MAD & Ammonia Supply Co. - 2011-TIOL-1400-CESTAT-MUM. They also argued on the ground of time bar inasmuch as they are registered as a dealer and their activity was known to the Revenue.

The AR drummed up support by adverting to Chapter Note 5 to Chapter 38 and submitted that consequent upon the processes undertaken the goods have become marketable and, therefore, are chargeable to CE duty. The apex court decision in Air Liquide North India Pvt. Ltd. - 2011-TIOL-86-SC-CX is relied upon.

The Bench after considering the submissions extracted in its entirety the Board Circular dated 16/12/2009, paragraphs 2 onwards of which reads -

"2. Whether an operation amounts to repacking from bulk packs to retail packs or not, is a question to be decided on facts. However before examining the implication of the substitution of word 'and' by 'or', it is necessary to examine whether the activity itself is covered by term repacking from bulk packs to retail packs. Hence the first issue which needs to be decided is whether the "container/ lorry tanker" can be considered as bulk pack.

3. Tribunal has in the case of Ammonia Supply Co. - 2002-TIOL-179-CESTAT-DEL, held that "As per Note quoted above, labelling or re-labelling of the container should take place at a time when the goods are packed from bulk packs to retail packs. The assessee was not getting Ammonia in bulk packs. They were getting it in tankers. Ammonia gas brought in tankers can never be termed as brought in bulk packs. So the assessee was not repacking the goods from bulk packs to retail packs. Accordingly the activity undertaken by the assessee in filling the smaller container from bulk container namely tankers can never fall within the fiction of manufacture as envisaged by Note 10 quoted above.

4. Therefore the tankers cannot be termed as bulk packs and therefore the activity of transferring the goods from tankers into smaller drums cannot be said to be covered by the said chapter note 10."

Holding that the said circular of the Board is in line with the decision taken by the Tribunal in various case laws cited by the counsel, the CESTAT allowed the appeals. The Bench also noted that the case law(s) cited by the AR were different and, therefore, distinguishable.

The Appeals were allowed.

(See 2015-TIOL-2415-CESTAT-MUM)