Process Of Re-Labelling Amounts To ‘Manufacture:’ SC Affirms CENVAT Credit Availed By Jindal Drugs Ltd.
The Supreme Court affirmed the the CENVAT Credit availed by Jindal Drugs Ltd. (Jindal) holding that the process of labelling amounted to ‘manufacture.’
The Bench explained that the word ‘manufacture’ included any process which was incidental or ancillary to the completion of a manufactured product. Any process outlined in the First and Third Schedules of the Central Excise Tariff Act (the Act), such as packing or repacking goods into unit containers, labelling or re-labelling containers, including the declaration or alteration of the retail sale price, or adoption of treatments to render the product marketable to consumers, constituted manufacturing under the Act.
Justice Abhay S. Oka and Justice Ujjal Bhuyan observed, “The process to constitute manufacture should either be labelling or re-labelling of containers and repacking from bulk packs to retail packs. This process was construed to be one whole. In other words, the activity should not only include labelling or relabelling of containers but the same should relate to repacking from bulk packs to retail packs. This was one activity.”
Sr. Advocate Rupesh Kumar represented the appellant, while Sr. Advocate V.Sridharan appeared for the respondent.
Jindal was exporting cocoa butter and cocoa powder with a manufacturing factory in Jammu and another unit in Taloja, Maharashtra for labelling the goods.
The CBEC issued a show cause cum demand notice to Jindal, prompting them to explain why the labelling activity should not be classified as activities not amounting to manufacture under Note 3 to Chapter 18 of the Act. Allegations were made that Jindal had wrongly utilised CENVAT credit, which should be recovered under Rule 14 of the CENVAT Credit Rules in conjunction with Section 11A(1) of the Central Excise Act (now renumbered as Section 11A(4) with effect from 2011).
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal filed by Jindal holding that as per Note 3 to Chapter 18 of the Central Excise Tariff Act, 1985 (the Act), the activity of labelling amounted to manufacture. Therefore, Jindal was eligible for the CENVAT credit and rebate on the duty paid by it while exporting its goods.
The core issue to be considered before the Supreme Court was whether the activity of labelling carried out by Jindal amounted to manufacture or not.
Hence, the Court clarified that under Note 3 of the amended act, three distinct processes were outlined, the satisfaction of any one of them constituted manufacturing. The processes include: labeling or re-labeling of containers, repacking from bulk packs to retail packs, or adoption of any other treatment to render the product marketable to the consumer.
Consequently, the Court held that “Any one of the processes indicated in Note 3 to Chapter 18 of the Central Excise Tariff Act would come within the ambit of the definition of ‘manufacture’ under Section 2(f)(ii) of the Central Excise Act…In terms of Note 3 to Chapter 18, this process of re-labelling amounts to manufacture.”
Accordingly, the Supreme Court dismissed the appeal.
Cause Title: Commissioner of Central Excise Belapur v. Jindal Drugs Ltd. (Neutral Citation: 2024 INSC 354)
Appearance:
Appellant: Sr. Advocate Rupesh Kumar; AOR Mukesh Kumar Maroria and B. Krishna Prasad; Advocates Keval Babubhai Rathod, Shamik Sanjanwala, Shyam Gopal, Sughosh Subramanyam, and Rohit Verma
Respondent: Sr. Advocate V.Sridharan; AOR Rahul Gupta; Advocates Prakash Shah, Jas Sanghavi, Jasdeep Singh Dhillon, Prabhat Kumar Chaurasia, Yuganthar Singh Chauhan and Anirudh Jamwal