Judgment:
1. The application is for waiver of deposit of duty of Rs. 6.99 crores approximately and equal penalty, demanded and imposed on the ground that the activity undertaken by the applicant of packing in plastic cases (referred to as jewel boxes), containing labels on them indicating details of the product, the recorded audio and video compact disc that it imported in bulk, would amount to manufacture.
2. Counsel for the applicant says that it imports these recorded compact disc in pancakes, consisting of a cylindrical box in a spindle centre on which 50 compact discs rest. Each disc is taken out by the applicant, packed in jewel boxes which contain details relating to the contents of the compact disc. A hologram is also affixed on the box. He contents of the compact disc. A hologram is also affixed on the box. He contents the finding of the Commissioner that packing of these discs is a process incidental or ancillary to completion of manufacture of the product by pointing out that in its judgment in I.T.C. Ltd. v. CCE 2003 (151) ELT 246, the Supreme Court has categorically said that packing of cigarettes cannot be incidental or ancillary to the manufacturing process and may only be incidental or ancillary to sale. On the analogy of this judgment, the individual compact discs are fit for sale used by the buyer just as the Supreme Court found that individual cigarette is not for consumption.
3. We are not able to accept the contention that the departmental representative raises, that by application of Note 6 to Section XVI of the tariff, the process undertaken by the applicant amounts to manufacture. This note provides that conversion of an article which is incomplete or unfinished but having the essential character of the complete or finished article, into complete or finished article amounts to manufacture. The article for conversion in this case compact disc which is ready for use in the manner in which the applicant receives it. It can be put to use by the buyer to listen to the music or to view visual images that it contains. Packing does not change the character of the compact disc in any manner, but for the Supreme Court's judgment cited by the applicant, it could be that it is a process incidental to the manufacture of finished products because it provides marketability, as each compact disc is not marketed as such. However, the Supreme Court's judgment has taken a different view.
4. The applicant has also strong case on limitation. By its letter dated 11^th August 1997, the applicant intimated to the Superintendent of the fact that it had commenced the activity. The answer that the Commissioner gives to this contention, that there is no proof that the letter was acknowledged, ignoring the fact that it is signed by her office. She could easily have verified this fact.
5. On this perception, the applicant has strong prima facie case as well as on limitation, we waive deposit of the duty and, having regard to the repetitive nature of the issue of duty involved, we list the appeal for hearing on 9^th June, 2003.
6. The department is not to interfere with the use and nature of the land and building of the applicant which has been ordered by the Commissioner to be confiscated, subject to the applicant observing the condition which the counsel for the applicant undertakes on its behalf, that it shall not, pending the appeal, dispose of or otherwise deal with it.