A) Abstract / Headnote
This case deals with the interpretation of Note 3 to Chapter 18 of the Central Excise Tariff Act, 1985, particularly after its amendment in 2008, and whether the activity of affixing additional labels on cocoa butter and cocoa powder packages constitutes “manufacture” under Section 2(f) of the Central Excise Act, 1944. The Supreme Court upheld the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), confirming that affixing additional labels amounts to “manufacture” as per the statutory provision. It emphasized the post-2008 amendment that split composite activities into distinct processes, where any one of the specified activities qualifies as manufacture. Consequently, the respondent’s eligibility for CENVAT credit and rebate on duty paid during exports was affirmed.
Keywords: Manufacturing Activity, Re-labelling, CENVAT Credit, Rebate, Indirect Tax.
B) Case Details
- Judgment Cause Title: Commissioner of Central Excise, Belapur v. Jindal Drugs Ltd.
- Case Number: Civil Appeal No. 1121 of 2016
- Judgment Date: April 30, 2024
- Court: Supreme Court of India
- Quorum: Abhay S. Oka, J., and Ujjal Bhuyan, J.
- Author: Ujjal Bhuyan, J.
- Citation: [2024] 5 S.C.R. 271; 2024 INSC 354
- Legal Provisions Involved:
- Central Excise Act, 1944: Section 2(f), Section 11A, Rule 14 of the CENVAT Credit Rules.
- Central Excise Tariff Act, 1985: Note 3 to Chapter 18.
- Judgments Overruled by the Case: None specified.
- Law Subject: Indirect Taxation, Central Excise Law.
C) Introduction and Background of Judgment
The dispute arose regarding the classification of re-labelling activities under the scope of “manufacture” as defined by Section 2(f) of the Central Excise Act, 1944. Prior to 2008, the composite activity of re-labelling and repackaging constituted manufacture. However, the 2008 amendment introduced an independent interpretation, enabling labelling or re-labelling alone to qualify as “manufacture.”
The appellant (Revenue) contended that the respondent’s activity at its Taloja unit, involving additional labelling on cocoa butter and cocoa powder packages manufactured in Jammu, did not constitute manufacture. The respondent argued the contrary, relying on the amended Note 3 to Chapter 18 of the Central Excise Tariff Act, 1985.
D) Facts of the Case
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Respondent’s Business Operations:
- The respondent exported cocoa butter and cocoa powder manufactured at its Jammu unit.
- These goods were transported to the respondent’s Taloja unit, where additional labels were affixed to the packages.
- The goods were exported with CENVAT credit claimed and duty rebate availed.
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Revenue’s Observations:
- Officials observed that the respondent’s activity at Taloja involved mere labelling of goods already labelled at the Jammu unit.
- It was alleged that additional labelling did not render the goods more marketable, thus not amounting to manufacture under the pre-amended provisions.
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Proceedings and Show Cause Notice:
- Revenue issued a notice demanding recovery of CENVAT credit and rebates, arguing the respondent falsely claimed these benefits.
- The respondent was accused of suppressing facts, warranting the invocation of the extended limitation period under Section 11A.
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Initial Orders:
- The adjudicating authority ruled against the respondent, declaring the activity as non-manufacturing and imposing penalties.
- On appeal, a split decision at the CESTAT resulted in the matter being referred to a third member, who ruled in favor of the respondent.
E) Legal Issues Raised
- Does additional labelling of goods already labelled at the manufacturing stage constitute “manufacture” under Note 3 to Chapter 18 of the Central Excise Tariff Act?
- Is the respondent entitled to CENVAT credit and duty rebates for goods exported after such labelling activities?
F) Petitioner/Appellant’s Arguments
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Definition of Manufacture:
- The petitioner argued that the additional labelling did not enhance marketability, a critical factor under pre-amended Note 3.
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Fraudulent Claims:
- The respondent allegedly suppressed facts, misrepresenting the nature of activities at the Taloja unit to avail benefits.
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Non-Manufacturing Activity:
- The petitioner emphasized that mere affixing of labels was insufficient to categorize the process as manufacture.
G) Respondent’s Arguments
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Reliance on Amended Note 3:
- The respondent contended that post-2008, any one of the listed activities under Note 3 independently qualified as manufacture.
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Entitlement to CENVAT Credit:
- The respondent was eligible for credits and rebates as the activities aligned with the amended provisions.
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No Suppression of Facts:
- All relevant details were disclosed to the authorities, negating allegations of suppression or fraud.
H) Judgment
Ratio Decidendi
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Interpretation of Note 3:
- Post-2008, the word “or” replaced “and,” making labelling, repackaging, and other treatments separate and independent criteria for manufacture.
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Labelling as Manufacture:
- Additional labelling at the Taloja unit constituted manufacture as per the amended Note 3, regardless of enhanced marketability.
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No Fraud or Suppression:
- The Court found no evidence of suppression or misrepresentation by the respondent, dismissing the Revenue’s claims.
Obiter Dicta
- The legislative intent behind the 2008 amendment was to expand the scope of manufacture by segregating distinct processes into standalone qualifying activities.
Guidelines
- Any one activity listed under Note 3 suffices to establish manufacture.
- Post-amendment provisions must be applied to disputes arising thereafter.
I) Conclusion and Comments
The Supreme Court emphasized a purposive interpretation of statutory amendments to reflect legislative intent. By recognizing labelling as a standalone manufacturing activity, the judgment clarified ambiguities in excise law and reinforced the rights of manufacturers under the amended provisions.
J) References
- Cases Referred:
- None explicitly cited beyond CESTAT rulings.
- Statutes Referred:
- Central Excise Act, 1944
- Central Excise Tariff Act, 1985
