2024-VIL-305-CESTAT-BLR-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Section 2(f)(iii) of Central Excise Act, 1944 – Manufacture - Import of Modems – appellant subjected to certain activities on imported modems before sale of the same to customers – whether the activities undertaken on the imported modems such as, opening of the boxes, testing of modems and on completion of such testing, labelling with appellant’s logo on the cover of the modem and sticker, amounts to manufacture in terms of Section 2(f)(iii) of the CEA, 1944 – HELD - After import of the modems on payment of applicable CVD and SAD, etc. the same are received at appellant’s registered trading premises and subjected to certain activities/processes before sale of the same to customers – the imported modems were not simply cleared ‘as such’ but it has been opened, tested by qualified engineers which necessarily includes, if damaged or any manufacturing deficiency, to repair/remove the same, to put in saleable condition; the tested modems then repacked in the boxes and placed in bigger cartons along with other modems, accessories which would make the modems marketable, procured and supplied along with the modems after affixing the logo and labelling the modems with appellant’s name and address - Modem is notified under the Third schedule to the CEA,1944, accordingly, these activities have been considered by the Revenue as deemed ‘manufacture specified under Section 2(f)(iii) of the Central Excise Act, 1944 - from plain reading of the extended meaning of ‘manufacture’, it is clear that for the goods specified in Third Schedule, the activities of packing or repacking of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of the retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer have been considered as amounting to ‘manufacture’ even if the said activities do not fall under main part of Section 2(f) of CEA, 1944 – undertaking various processes like opening the boxes, testing the modems, making it functional and thereafter repacking, affixing their logos are definitely relevant and necessary for marketing the product to the end consumer - the activities carried by the appellant in the trading premises on imported modems would result into ‘manufacture’ within the meaning of Section 2(f)(iii) of CEA, 1944. Consequently, the appellant are required to discharge duty on the imported modems for the aforesaid activities in their trading premises, which amounts to manufacture - the issue involved is interpretation of law, and consequent actions of debiting the duty from Cenvat credit account maintained in the manufacturing premises was after due intimation to the Department, therefore imposition of penalty on the appellants is unwarranted and set aside – the appeal is partly allowed - Validity of discharge of duty liability by the Trading unit on the imported modems, debiting through the CENVAT credit account maintained in Manufacturing Unit – HELD - the appellant had sold the imported modems after certain processes carried out on the said modems which they considered as not resulting into ‘manufacture’ and accordingly issued dealer’s invoices passing on the amount of cenvat credit to the customers, as a ‘first stage registered dealer’. When the Department examined the processes/activities carried out by the appellant opined that the activities would result into deemed ‘manufacture’; hence duty is payable, therefore in all fairness, the dealer’s Registration for the said premises belonging to the appellant ceases and the trading premises became manufacturing premises as there is no other items other than ‘modems’ which was traded from the said premises - Since the same products are manufactured and cleared by appellant on payment of duty from their registered premises as manufacturing unit, therefore, merging both dealer’s registration with manufacturing registration of the adjacent premises is only a procedural issue which cannot come on the way of allowing credit to discharge duty on the imported modems, once it is considered that the activities undertaken on the said modems amounts to manufacture. Therefore, no irregularity in availing the cenvat credit even though the input-modems had already sold/cleared by the appellant - Whether the Appellant contravened Rule 8(3A) of the Central Excise Rules, 2002 in discharging the duty by utilising the credit from their manufacturing unit – HELD - since Rule 8(3A) of the Central Excise Rules, 2002 has been held to be ultra vires of the rule making power by the Hon’ble Gujrat High Court in the case of Indsur Global Ltd., the findings of the Ld. Commissioner on this count cannot be sustained.
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