Holding

Repacking, relabelling and rendering the raw chemicals into distinct cleansing products constitutes manufacture under Chapter Note 6 of Chapter 34, making them liable to excise duty under sub‑heading 3402.90, and the department was justified in invoking the larger limitation period.

Summary

Mis. Mercantile Company received raw chemicals from Mis. T. Paul & Sons, supplied by Mis. Philips India Ltd., and carried out filtering, repacking into 50 ml containers, labeling and marketing them as distinct cleaning products. The Central Excise authorities classified these goods under sub‑heading 3402.90 of the Central Excise Tariff Act, 1985, treating the activities as "manufacture" and levied excise duty, interest and penalty, also invoking the larger period of limitation under the proviso to Section 11A of the Central Excise Act, 1944 on grounds of fraud and concealment. The appellant contended that the work was merely job‑working and that the products should remain classified under Chapters 27, 29 or 38, and that the limitation period had expired. The Supreme Court held that Chapter Note 6 of Chapter 34, effective from 1 March 1994, expressly deems packing, repacking and any treatment that renders a product marketable as manufacture, and the appellant's products, being cleansing preparations, fall within sub‑heading 3402.90. The Court also found that the appellant’s 1994 letter did not disclose the full facts and that the appellant deliberately attempted to evade duty by mislabeling, justifying the larger limitation period. Consequently, the appeals were dismissed.

Issues considered

The activities of filtering, repacking and labeling by the appellant amount to "manufacture" under the Central Excise Tariff Act, 1985.
Whether the products should be classified under sub‑heading 3402.90 (cleaning preparations) of Chapter 34 or under Chapters 27, 29 or 38.
Whether the Central Excise Department could invoke the larger period of limitation under the proviso to Section 11A of the Central Excise Act, 1944 on the basis of alleged fraud and concealment.

Legislation cited

Central Excise Act, 1944s. 11A, s. 2, s. 35L(b)
Central Excise Ruless. Rule 173Q
Central Excise Tariff Act, 1985s. Chapter 34, sub‑heading 3402.90, s. Chapter Note 6 of Chapter 34
Finance Act, 1994

Subjects

central excisemanufacturetariff classificationsub‑heading 3402.90cleaning preparationsChapter Note 6limitation periodfraud and concealmentrepacking

Judgment

MIS. MERCANTILE COMPANY A
v.
COMMNR. OF CENTRAL EXCISE, CALCUTTA

OCTOBER 11, 2007
B
[ASHOK BHAN AND V.S. SIRPURKAR, JJ.]

Central Excise Tariff Act, 1985-Chapter 34, Sub-Heading
34. 02-Chapter Note 6-Cleaning preparation-Classification-
Filtration, re-packing (into smaller packs) and labeling of raw C
materials falling under Chapter 27, 29 or 38-Held: Amounted to
manufacture as it resulted in emergence ofnew product-New product
known in market by different name and for a different use and would
notfall either under Chapter 27, 29 or 38-Product classifiable under
sub-heading 34. 02 as a cleansing product-Central Excise Act, 1944- D
s.2{/).
Central Excise Act, 1944-s.llA and its proviso-Extended
period of/imitation-Invocation of-Held: Invokable as assessee made
deliberate attempt to evade excise duty by not informing the revenue
about the actual activity undertaken. E

Orders were being received from Mis. Philips India Ltd., by
Mis. T. Paul & Sons and the same were executed by Appellant on
basis of an arrangement with Mis. T. Paul & Sons. In terms of the
said arrangement Appellant filtered, re-packed (into smaller packs) F
and labeled raw materials falling under Chapter Nos. 27, 29 & 38 of
the Central Excise Tariff Act, 1985 and thereafter marketed them
as different commercial commodities.
The questions which arose for consideration in the present
appeals are: (1) whether the activities carried on by Appellant G
amounted to manufacture and the products made by it were
classifiable under Tariff entry 3402.90 of the Act as held by the
Adjudicating Authority and (2) whether Appellant was guilty offraud,
concealment, etc. with a view to evade the payment of excise duty
1009 H
1070 SUPREME COURT REPORTS [2007] 10 S.C.R.

A and under the circumstances the Department was justified in
invoking the larger period oflimitation under proviso to Section 1lA.
Dismissing the appeals, the Court
HELD: 1.1. The goods covered under heading 34.02 are
B selected basically on the properties/characteristics of the products
than on the basis of constituents from which the goods are
manufactured. [Para24] (1080-F]
1.2. Chapter Note 6 of Chapter 34 provides that the packing
C or repacking of products of sub-heading No. 3402.90 into smaller
packs, including packing or repacking of bulk packs to retail packs
or adoption of any other treatment to render the product marketable
to the consumer shall amount to manufacture.
(Para 25] (1081-A, B]
D 1.3. The clause of 'manufacture' with reference to repacking
from bulk packs to retail packs introduced by the Finance Act from
1994 clearly points to the fact that even if the bulk material is
identifiable excisable goods, the fact ofrepacking from bulk to retail
pack would render the product separately classifiable. Admittedly,
E the product manufactured by the appellant is used as cleanser. It no
longer remained the product which was supplied to the appellant. It
was known in the market by a different name and for a different use.
The same would not fall either under Chapter 27, 29 or 38. The same
would fall under sub-heading No. 34.02 as a cleansing product. 1 ,
F [Para 28] [1081-D, E, F]
1.4. The contention of appellant that a note similar to Chapter
Note 6 of Chapter 34 was introduced in Chapter 29 and 38 with effect
from 1.3.1997 and till that date the repacking or re-labeling of the
goods supplied to it which were classifiable under Chapters 27, 29
G and 38 could not be covered under Chapter 34 cannot be accepted
as the goods after repacking were being supplied and marketed as
cleansing products, which is evident from the outer cover of the 3
products shown by the appellant during the course of hearing.
[Para 29] (1081-F, G]
H
t MIS. MERCANTILE COMPANY v. COMMNR. OF
CENTRAL EXCISE, CALCUTTA
1071

2.1. On the question oflimitation, the submission made by the A
Appellant that the letter dated 8th March, 1994 written by it to the
Assistant Collector of Central Excise, Calcutta disclosed the entire
facts to the authorities regarding the items manufactured by the
appellant cannot be accepted. The letter dated 8th March, 1994 did
not disclose the entire facts. The letter did not disclose the situation B
in its proper perspective. The authorities were not informed about
the actual activity undertaken by the appellant. The authorities were
also not informed that a new name has been given to the products.
The applicability and functions of the new products was also not
clearly stated. The new and distinct product which had come into C
existence was sold and known in the commercial world under a
separate name having different and distinct qualities. The appellant
had not produced sample of the subject goods along with the letter.
For the aforestated reasons, it cannot be held that the authorities
had full knowledge about the activities undertaken by the appellant. D
.~ [Para 30] [1082-A, B, C]
2.2. It appears that duty liability under the Central Excise Act
& Rules was well known to the appellant as is evident from the
correspondences made by Shri Arun Kanti Paul (who is the common
partner ofM/s. T. Paul & Sons and the appellant) on 23rd August, E
1995 with Mis. Philips India Ltd. Shri Arun Kanti Paul, in his letter
has stated that they could avoid Central Excise liability by printing
thinner instead of solvent on the packs of bottles. Mis. Philips India
. t Ltd., by its letter No. HD/CE/ACCY dated 6th September, 1995,
endorsed the same and permitted Mis. Paul & Sons to print thinner F
instead of solvent on the outer pack. The direction ofM/s. Philips
India Ltd. was actually executed by the appellant by printing thinner
instead of solvent on the cartons. Shri Arun Kanti Paul during
examination, when asked to throw some light on the correspondence
with Mis. Philips India Ltd., stated that he had some doubt about G
-··r the excise liability of these products and accordingly he obtained
legal opinion regarding the same and persuaded Mis. Philips India
Ltd., to allow them to print thinner against solvent on the cartons. It
clearly shows that the appellant although was conscious of the fact
that the products manufactured by them could attract the Excise H
1072 SUPREME COURT REPORTS [2007] 10 S.C.R.

A Duty, made a deliberate attempt to evade the same by printing
thinner instead of solvent on the cartons. The Tribunal has rightly
come to the conclusion that the department could under the
circumstances invoke larger period of limitation.
[Paras 31and32] [1082-D, E, F, G; 1083-A]
B
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1854-
1855of2001.
From the Final Order No. A. 1419-1420-Cal/2000 dated
31.8.2000 of the Customs Excise and Gold (Control) Appellate Tribunal,
C Eastern Bench, Calcutta in Appeals No. E/R-156-157/99.
S.K. Bagaria, Rashmi and Avinish Pandey (for Ruby Singh Ahuja)
for the Appellant.
M.M. Paikadey, Binu Tamta and Shishir Pinaki (for B.K. Prasad)
D for the Respondent. -
)._
The Judgment of the Court was delivered by
BHAN, J. 1. Assessee has filed these appeals under section 35L(b)
of the Central Excise Act, 1944 (hereinafter called the 'Act') against the
E final order no.1419-1420/Cal/2000 dated 31st August 2000 in appeal
no. E/R-156-157/99 passed by the Customs, Excise & Gold (Control)
Appellate Tribunal, Eastern Bench, Calcutta (hereinafter called the
Tribunal) whereby the Tribunal has dismissed the appeal filed by the
appellant herein. "{ ,
F FACTS:
2. Acting on the basis of intelligence, a team of officers from CPO
of Calcutta I Central Excise Commissionerate, Headquarters visited the
factory-cum-office of the appellant on 5th September, 1.997 and conducted
G a search operation. Search resulted in seizure of 3 files, 9700 pieces of
y-
Philips Ultra cleaner, 500 pieces of degreasing & cleansing fluid, 700
pieces of Switch cleaning oil all bearing brand name of Philips. These were
detained and later seized on 9th February, 1998. Also, some 13 files
belonging to Mis. T. Paul & Sons were tendered by the partner of the
H appellant firm. Certain other documents were also handed over to/seized
MIS. MERCANTILE COMPANY v. COMMNR. OF 1073
CENTRAL EXCISE, CALCUTTA [BHAN, J.]
by the raiding party. A
3. On the basis of the statements made by Shri Arnn Kanti Paul
partner of the appellant and other records recovered from the said
premises on the day of search, it was found that the orders were being
received from Mis. Philips India Ltd., by Mis. T. Paul & Sons and the
same were executed by the appellant on the basis of arrangement with B
Mis. T. Paul & Sons to the effect that the appellant gets a job charge of
paise 0.20 per 50 ml. bottle of the said product. The price at which
Mis. T. Paul & Sons raised bills to Mis. Philips India Ltd. is controlled
by Mis. Philips India Ltd. and it appears from the cost sheet given in the
statement of Shri Arun Kanti Paul that Mis. Philips India Ltd., had allowed C
a profit of 10%. The raw materials and packing materials supplied by
Mis. T. Paul & Sons was being received directly at the factory premises
of the appellant and the dispatch of the said products was directly from
298, Rabindra Sarani, Calcutta 700 073 to the consignment agent of
Mis. Philips India Ltd. The goods received were filtered and put into 50 D
ml. plastic container by the appellant both manually and mechanically at
its factory premises. After sealing, bottles were pasted with Philips Labels
& holograms. Multi-colour holograms were received directly from Mis.
Philips India Ltd.
E
4. Samples of seized goods were got tested from Departmental
Chemical Laboratory at Customs House, Calcutta. The report of the
Chemical Examiner was that Audio Tape Head Cleaner is in the form of
colour less liquid and has the characteristics of methanol. Similarly, for
Degreasing Cleansing Fluid, the report was that it is in the form of colour F
less transparent liquid and has characteristics of iso-prophyle alcohol. The
sample of Switch Cleaning is in the form of colour less transparent liquid
containing mixture ofliquid hydrocarbon.
5. On 18th February, 1998, a show cause notice was issued to the
appellant alleging therein that the activities carried on by the appellant G
amounted to manufacture and the products being filtered and repacked
were classifiable under entry 3402.90. The larger period oflimitation was
also invoked under the proviso to Section I IA on the ground that the
appellant was guilty of fraud, concealment, etc. with a view to evade the
payment of excise duty. H
\
- ,;\
1074 SUPREME COURT REPORTS [2007] 10 S.C.R. ,

A 6. Assessee filed detailed reply to the show cause notice explaining
that the activities carried on by the appellant did not amount to
manufacture and that the classification proposed by the department was
incorrect Various other contentions on limitations as well as on merits were
raised. According to the appellant, during the said period, the appellant
B worked as a job worker undertaking filtering, repacking and labeling the
materials supplied to it and the same would not amount to manufacture.
7. Commissioner of Central Excise Calcutta 1 in its order in original
dated 27th January, 1999, confirmed the demand of duty. It was held
that sub-heading 3402.90 covers surface-active preparations, washing
C preparations and cleansing preparations, whether or not containing soap.
Explanatory notes of HSN were referred to and relied upon wherein it
has been provided that washing preparation act on the surfaces by bringing
the soil on the surface into a state of solution or dispersion. With reference
to the degreasing preparation, it was stated that these preparations are
D used with a basis inter alia of solvents and emulsifiers. That the goods
covered under the heading 34.02 are selected basically on the properties/
characteristics of the products than on the basis of the constituents from
which the goods were manufactured.
E 8. Chapter note 6 of Chapter 34 which reads as follows:
"6. In relation to products of sub-heading No. 3402.90,
packing or repacking into smaller packs, including packing or
repacking of bulk packs to retail packs or adoption of any other 1'
treatment to render the product marketable to the consumer shall
F amount to "manufacture"."
was relied upon to hold that the activity of repacking, re-labeling amounted
to manufacture. Chapter note 6 was introduced to Chapter 34 with effect
from 1st March, 1994.
G 9. On the question oflimitation, it was held that the letter dated 8th y-
March, 1994 relied upon by the appellant did not disclose the entire facts
and did not reflect the situation in its proper perspective. The Depattment
was not informed about the actual activity undertaken by the appellant. It
was not disclosed as to whether a new name has been given and the
H
(
,I MIS. MERCANTILE COMPANY v. COMMNR. OF 1075
CENTRAL EXCISE, CALCUTTA [BHAN, J.]
applicability and functions of the products were not clearly stated. That A
new and distinctive product came into existence which was sold and
known in the commercial world under a separate name having different
and distinct qualities. Commissioner of Central Excise, Calcutta 1,
confirmed the demand of duty Rs. 42,62,862/- proposed in the show
cause notice and also levied a penalty of Rs. I 0 lakhs on the appellant B
unde~ Section 1IAC and the interest under Section 1lAB. A redemption
fine of Rs. 20,000/- was also imposed.
10. Aggrieved against the order passed by the Commissioner of
Central Excise Calcutta 1, appellant filed the appeals before the Tribunal.
c
Tribunal upheld the order of the Commissioner. It was held that the
adjudicating authority had rightly held that the various products are
classifiable under heading 3402.90. The findings recorded on the question
of limitation were also confirmed. Demand of duty, interest and penalty
were also upheld. As regards personal penalty imposed under the D
provisions of Section 1lAC, it was noted that these provisions came into
existence on 28th September, 1996. Since the provisions of Section 1lAC
were not retrospective in nature, the penalty under the said provision could
not be imposed for the period prior to 28th September, 1996. For the
period prior to the said date, penalty could be imposed under Rule 173Q E
only. As no segregation of quantum of duty confmned for the period prior
to the said date and for the period after the said date was there, the case
was remanded to the adjudicating authority for imposing penalty for the
, ~ period prior to 28th September, 1996 in tem1s of the provisions of Rule
173Q and for period subsequent to 28th September, 1996 in terms of F
the provisions of Section l lAC, depending upon the quantum of duties
confirmed for both the periods.
11. Demand of duty has been confim1ed on the following products
by treating the same as classifiable under sub-heading no. 03402.90: -
G
(i) Ultraclean Audiotape Headcleaner.
(ii) DCF-847-Degreasing and Cleansing Fluid.
(iii) SC0-846-Switch Cleaning Oil-cleans and lubricates switch
controls.
H
\

1076 SUPREME COURT REPORTS [2007] 10 S.C.R. ·· A\
A 12. Shri S.K. Bagaria, learned Counsel appearing for the appellant
contended that the activities undertaken by the appellant of filtering,
packing and labeling resulting in emergence of the said product cannot
be a manufacturing activity. That filtering and re-packing thinner, liquid
paraffin and Isoprophile Alcohol, which fell under tariff heading 3814.00,
B 2710.90 and 2905.90, respectively of the Central Excise Tariff Act, from
bulk to small containers would not amount to manufacture. He submits
that raw materials are not classifiable under Chapter 34 and theii nature
and identity do not get changed after filtration and re~packing into smaller
packs. The said note was applicable to the products of Chapter 34 only.
c It is further submitted that with effect from 1st March, 1997, a note similar
to Chapter note 6 of Chapter 34 was inserted in Chapters 29 and 38,
and, if at all the activity undertaken by the appellant amounts to
manufacture, then the same shall be with effect from 1st March, 1997
only. That re-packing, re-labeling and re-naming of a product would not
D amount to manufacture and the resultant goods shall not be liable to duty.
Marketing of the product in smaller containers under a different name shall
also not amount to manufacture unless the nature and identity of the product
is changed. Since in the present case, the identity of the product did not
change, the activity undertaken by the appellant cannot be held to be
E manufacture of a new product.
13. On the point oflimitation, it was submitted by him that the demand
has been confirmed from 1st March, 1994 to 5th September, 1997
whereas the show cause notice was issued on 18th February, 1998, well
beyond the period of limitation. It was admitted by him that no classification
F list was filed by the appellant. He has drawn our attention to a letter dated
8th March, 1994 written by the appellant to the Assistant Collector of
Central Excise, Calcutta disclosing the activity undertaken by the appellant
and requesting the Revenue to let the appellant know about the Central
Excise formalities required to be observed. That the writing of the letter
G well in advance shows the bona fides of the appellant and that there was
no suppression, misstatement, etc., on the part of the appellant with an
intent to evade payment of duty and the authorities below erred in holding
to the contrary.
14. As against this, learned Counsel for the Revenue, Shri M.M.
H
(
;
MIS. MERCANTILE COMPANY v. COMMNR. OF 1077
CENTRAL EXCISE, CALCUTTA [BHAN, J.]
-f Paikadey, supported the Commissioner's findings recorded in the order- A
in-original. It was submitted by him that the process undertaken by the
appellant was not as simple as has been projected by him. That the items
in question have been given specific names and the same were used for
specific purpose for which the raw material cannot be used. The impugned
goods were specially packed in the cardboard packages and are known B
differently in the commercial as well as common circles. That the
appellant's products are cleansing products and deserved to be classified
under Chapter 34 and the adjudicating authority has rightly classified them
under heading 3402.90.
15. As regards limitation, it was submitted on behalf of the Revenue c
that the letter dated 8th March, 1994 written by the appellant did not
state the entire facts. The same was vague and lacking in particulars. In
the letter, it was not disclosed by the appellant that the products were
being marketed as "cleanser" and gave the impression as if they are only
re-packing the raw material into smaller packs. It was not disclosed that D
a new name has been given to the products. That the appellant did not
disclose the applicability and functions of the products. The
correspondence between T. Paul & Sons and Mis. Philips India Ltd.
clearly indicates that there was a doubt as to whether the products wouid
invite the Central Excise duty. To overcome this, they obtained the opinion E
of an Advocate and the Advocate advised them that instead of solvent,
the word 'thim1er' should be printed on the carton to avoid the Central
Excise Rules.
16. Counsels for the parties have been heard at length ...
F
17. It would be necessary to refer to the relevant entries to Chapters
· 34, 27, 29 and 38 to appreciate the controversy involved in the case.
18. Chapter 34 deals with soap and organic surface-active agents,
r etc. Heading No. 34.02 reads as under: -
G
i

~
1078 SUPREME COURT REPORTS (2007] 10 S.C.R.

A Heading Sub-Heading Description of goods ·Rate of ~
No. No. duty
(1) (2) (3) (4)
34.02 Organic surface-active agents
(other than soap); surface-active
B
preparations, washing prepara-
tions (including auxiliary washing
preparations) and cleaning prepar- -(
ations, whether or not containing
soap.
c 3402.10 ... Sulphonated caster oil, fish oil or
sperm oil NIL
3402.90 Other 30%

D 19. Chapter 27 deals with Minerals Fuels, Mineral Oils & Products
)..
of Their Distillation: Bituminous Substances; Mineral Waxes. Sub-heading
27.10 reads as under:

Heading Sub-Heading Description of goods Rate of
No. No. duty
E
(1) (2) (3) (4)
27.10 Petroleum oils and oils obtained
from bituminous minerals, other
than crude; preparations not 1
F elsewhere specified or included,
containing by weight 70% or
more of petroleum oils or of oils
obtained from bituminous
minerals, these oils being the
basic constituents of the
G preparations.
2710.11 xxx
2710.12 - xxx
2710.13 - xxx
2710.14 - xxx
H 2710.90 - Other 10%
f
! M/S. MERCANTILE COMP ANY v. COMMNR. OF 1079
CENTRAL EXCISE, CALCUTTA [BHAN, J.]
20. Chapter 29 deals with Organic Chemicals. Sub-heading 29.05 A
reads as under:
Heading Sub-Heading Description of goods Rate of
No. No. duty
(1) (2) (3) (4)
B
II. ALCOHOLS AND THEIR
HALOGENATED,
SULPHONATED, NITRATED OR
NITRO-SATED DERIVATNES.
29.05 Acyclic alcohols and their c
halogenated, sulphonated, .nitrated
or nitrosated derivatives.
2905.10 Methanol 20%
2905.90 Other 20%
D
21. Chapter 38 deals with Miscellaneous Chemicals Products. Sub-
heading 38.14 reads as under:
Heading Sub-Heading Description of goods Rate of
No. No. duty
(1) (2) (3) (4) E

38.14 3814.00 Organic composite solvents
and thinners, not elsewhere
specified or included; prepa-
red paint or varnish removers. 20% F
22. Chart (as per appellant) showing the material supplied and the
relevant headings under which the said material would fall, activity
undertaken and the description on the labels put on the bottles reads as
under: -
G
"
~
1080 SUPREME COURT REPORTS (2007] 10 S.C.R.

A s. Materials supphed ActIVIties Descnpt1on on
No. to the Appellant undertaken by the labels
the Appellant
(a) Thinners falling Filtering, packing Ultraclean Audio Tape
under SH 3814.00 in small plastic Head cleaner (Special
B containers or thinner for cleaning all
bottles and pasting klnds of recording head,
of labels and pinch rollers and
holograms of capstans of audio tape-
Phillips India Ltd. recorders).
c
(b) Liquid Paraffin SCO- 845 - Switch
falling under SH cleaning oil - cleans and
2710.90 -do- lubricates switch
controls
D (c) lsopropyl Alcohol DCF 847 - de-
falling under SH greasing and cleaning
2905.90 -do- fluid (specially packed
for servicing audio/
video industry).
E
23. It is not in dispute that the raw materials out of which the
impugned goods have been manufactured by way of filtering, repacking,
etc. were classifiable under a separate heading prior to the activities
undertaken by the appellant. 1 '
F 24. The goods covered under heading 34.02 are selected basically
on the properties/characteristics of the products than on the basis of
constituents from which the goods are manufactured.
25. The outer coverage of3 products shown to us during the course
G of hearing shows that the ULTRA CLEAN-AUDIO TAPE HEAD
CLEANER is a special thinner for cleaning all kinds of recording heads
pinch rollers and capstans of audio tape recorders. SWITCH
CLEANING OIL cleans and lubricates switch controls. DEGREASING
AND CLEANING FLUID is used for servicing in the AudioNideo
H recorders industry. The above shows that the products in question are
{
:
M/S.MERCANTILECOMPANYv. COMMNR.OF 1081
CENTRAL EXCISE, CALCUTTA [BHAN, J.J
different commercial commodities than the raw materials out of which the A ,
same were manufactured. The impugned goods became fit for commercial
use by the target consumers only after the process undertaken by the
appellants. Chapter Note 6 of Chapter 34 provides that the packing or
repacking of products of sub-heading No.3402.90 into smaller packs,
including packing or repacking of bulk packs to retail packs or adoption B
of any other treatment to render the product marketable to the consumer
shall amount to 'manufacture'.
26. The basic property of mixture is cleansing as is evident from the
statement of the partner of Mis. Thinner & Company.
c
27. Extracts of H.S.N. under Chapter 34 sub heading No. 3402.90
provides: -
"Cleaning preparation whether or not containing soap, other
than those heading 34.01 and cleaning preparation serve for
cleaning floors, windows, or other surface." D
28. The clause of 'manufacture' with reference to repacking from
bulk packs to retail packs introduced by the Finance Act from 1994
clearly points to the fact that even if the bulk material is identifiable
excisable goods, the fact of repacking from bulk to retail pack would render E
the product separately classifiable. Admittedly, the product manufactured
by the appellant is used as cleanser. It no longer remained the product
which was supplied to the appellant. It was known in the market by a
different name and for a different use. The same would not fall either under
Chapter 27, 29 or 38. The same would fall under sub-heading No. 34.02 F
as a cleansing product.
29. Contention of the counsel for the appellant that a note similar to
Chapter Note 6 of Chapter 34 was introduced in Chapter 29 and 38
with effect from 1.3 .1997 and till that date the repacking or re-labeling
~ of the goods supplied to it which were classifiable under Chapters 27, G
29 and 38 could not be covered under Chapter 34 cannot be accepted
as the goods after repacking were being supplied and marketed as
cleansing products, which is evident from the outer cover of the 3 products
shown to us by the appellant during the course. of hearing.
H
1082 SUPREME COURT REPORTS (2007] 10 S.C.R.

A 30. On the question oflimitation, the submission made by the counsel
for the appellant that the letter dated 8th March, 1994 disclosed the entire
facts to the authorities regarding the items manufactured by the appellant
cannot be accepted. The letter dated 8th March, 1994 did not disclose
the entire facts. The letter did not disclose the situation in its proper
B perspective. The authorities were not informed about the actual activity
undertaken by the appellant. The authorities were also not informed that
a new nan1e has been given to the products. The applicability and functions
of the new products was also not clearly stated. The new and distinct
product which had come into existence was sold and known in the
c commercial world under a separate name having different and distinct
qualities. The appellant had not produced sample of the subject goods
along with the letter. For the aforestated reasons, it cannot be held that
the authorities had full knowledge about the activities undertaken by the
appellant.
D 31. It appears that duty liability under the Central Excise Act & Rules
was well known to the appellant as is evident from the correspondences
made by Shri Arun Kanti Paul (who is the common partner of Mis. T.
Paul & Sons and the appellant) on 23rd August, 1995 with Mis. Philips
India Ltd. Shri Arun Kanti Paul, in his letter has stated that they could
E avoid Central Excise liability by printing 'thinner' instead of 'solvent' on
the packs of bottles. M/s. Philips India Ltd., by its letter No. HD/CE/
ACCY dated 6th September, 1995, endorsed the same and permitted
Mis. Paul & Sons to print 'thinner' instead of'solvent' on the outer pack.
The direction of Mis. Philips India Ltd. was actually executed by the
F appellant by printing 'thinner' instead of 'solvent' on the cm.tons. Shri Arun
Kanti Paul during examination, when asked to throw some light on the
correspondence with Mis. Philips India Ltd., stated that he had some doubt
about the excise liability of these products and accordingly he obtaineJ.
legal opinion regarding the same and persuaded Mis. Philips India Ltd.,
G to allow them to print 'thinner' against 'solvent' on the cartons. It clearly
shows that the appellant although was conscious of the fact that the
products manufactured by the~ could attract the Excise Duty, made a
deliberate attempt to evade the same by printing 'thinner' instead of
'solvent' on the cartons.
H
M/S.MERCANTILECOMPANYv. COMMNR.OF 1083
CENTRAL EXCISE, CALCUTTA [BHAN, J.]
"" 32. The Tribunal has rightly come to the conclusion that the A.
department could under the circumstances invoke larger period of ·
limitation.
33. For the reasons stated above, we do not find any merit in these
appeals and dismiss the same with no order as to costs.
B
B.B.B. Appeals dismissed.