CX - Process of labeling imported retail biscuit packets does not amount to manufacture: High Court
By TIOL News Service
CHENNAI, AUG 25, 2017: THE o-in-o dated 30.01.2003 confirming the CE duty of Rs.1.10 lakhs and equivalent penalty, interest etc. was challenged by the petitioner before the Madras High Court.
Incidentally, the ground taken by the petitioner of total lack of jurisdiction as well as the claim being barred by limitation appeared to have been the reasons for the Court to entertain the petition and grant an interim order.
Therefore, the High Court, while deciding the case recently, felt that at this juncture it would be unfair to relegate the petitioner to avail the alternate remedy.
The petitioner imported biscuits from Malaysia and at the time of marketing had affixed their labels denoting imported and marketed by the petitioner, the Maximum Retail Price (MRP) and Month of Import. According to the petitioner, they were required to do so to comply with the statutory obligation under the Standards of Weights and Measures Act, 1976, and under the Prevention of Food Adulteration Act.
The respondent issued a SCN dated 01.05.2002 by referring to Note 3, Chapter 19 of the Central Excise Tariff Act, 1985, and alleging that labeling or relabeling 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, of products of the said chapter, shall amount to manufacture. According to the respondent, the activity of affixing the label mentioning the Maximum Retail Price (MRP) as per the Standards of Weights and Measures Act, 1976, at the time of sale by affixing it in the premises of the petitioner amounts to manufacture;that the petitioner had not intimated the activity of labeling their products to the department nor had taken out the registration nor followed the procedures prescribed under the Act and Rules and, therefore, it appeared to be an act of suppression of facts with an intention to evade the payment of Central Excise Duty and hence, the extended period of limitation under provision of Section 11A(1) of the Act is applicable.
The original authority upheld the allegations and confirmed the CE duty as well as penalty etc.
The High Court observed that the two issues for consideration were - (i) Whether the process of labeling of the imported retail biscuit packets done by the petitioner would amount to manufacture; and (ii) Whether the respondent is justified in invoking the extended period of limitation.
On the first issue, the High Court inter alia held thatin the light of the decision of the Apex Court in Johnson and Johnson Limited - 2005-TIOL-132-SC-CX and Servo-Med Industries Private Limited - 2015-TIOL-103-SC-CX, affixing the sticker indicating the name of the importer and MRP as per the requirement under the Standard of Weights and Measures Act does not amount to labeling/re-labeling and does not amount manufacture. Therefore, the first issue was answered in favour of the petitioner and against the revenue.
As for the second issue, although the same had become academic, the High Court extracted the provisions of section 11A of the CEA, 1944 and after relying on the decisions in Punjab Laminates (P) Ltd. - 2006-TIOL-109-SC-CX, Larsen & Toubro Ltd. - 2017-TIOL-996-HC-KERALA-CT, Supreme Industries Limited - 2014-TIOL-2742-HC-MAD-CX, observed –
"16. …, the law having been well settled on the above terms, it has to be seen as to whether the impugned demand makes out a case for invoking extended period of limitation under Section 11-A of the Act. As noticed earlier, there is no specific allegation of fraud made out by the second respondent at the time of issuance of the show cause notice. The allegation is that non-intimation of activities to the department, which according to the respondent, amounts to suppression. However, to invoke the extended period of limitation, something more is required to be on record and the statute mandates the same which has been explained in the aforementioned decisions. Thus, it is a clear case where the extended period of limitation could not have been invoked under the facts and circumstances of the case. Thus, the issue No.2 is also answered in favour of the petitioner and against the Revenue."
The Writ petition was allowed and the impugned order was quashed.
(See 2017-TIOL-1659-HC-MAD-CX)
