"2024 INSC 354\nREPORTABLE \n \nIN THE SUPREME COURT OF INDIA \nCIVIL APPELLATE JURISDICTION \nCIVIL APPEAL NO. 1121 OF 2016 \n \nCOMMISSIONER OF CENTRAL EXCISE \nBELAPUR \n \n \n \n \n \n APPELLANT(S) \n \nVERSUS \n \nJINDAL DRUGS LTD. \n \n \n RESPONDENT(S) \n \nWITH \n \nCIVIL APPEAL NOS. 788-790 OF 2022 \n \nJ U D G M E N T \n \nUJJAL BHUYAN, J. \n \n \n \nHeard learned counsel for the parties. \n2. \n \nIssue raised in the present batch of appeals is identical. \nTherefore, the civil appeals were heard together and are being \ndisposed by this common judgment and order. \nDigitally signed by\nASHISH KONDLE\nDate: 2024.04.30\n16:11:41 IST\nReason:\nSignature Not Verified\n\n2 \n \n \n \n3. \n \nHowever, Civil Appeal No. 1121 of 2016 was argued as \nthe lead appeal. Therefore, for the sake of convenience, we would \nrefer to the facts of this appeal. \n4. \n \nThis is an appeal by the revenue under Section 35L \n(1)(b) of the Central Excise Act, 1944 (referred to hereinafter as \n‘the Central Excise Act’) against the order dated 16.04.2015 \npassed by the Customs, Excise and Service Tax Appellate \nTribunal, West Zonal Bench at Mumbai (briefly ‘CESTAT’ \nhereinafter) in Appeal No. E/86389/13-Mum. (Jindal Drugs \nLimited Vs. Commissioner of Central Excise, Belapur). \n4.1. \nBy the impugned order dated 16.04.2015, CESTAT has \nallowed the appeal filed by the respondent holding that as per Note \n3 to Chapter 18 of the Central Excise Tariff Act, 1985 (referred to \nhereinafter as ‘the Central Excise Tariff Act’), the activity of \nlabelling amounted to manufacture and hence the activity of the \nrespondent fell within the ambit of the definition of manufacture \nas per the said Note. Therefore, the respondent was eligible for \navailing the cenvat credit of the duty paid by its Jammu unit and \nwas also eligible for rebate on the duty paid by it while exporting \nits goods. CESTAT further held that there was no suppression by \n\n3 \n \n \n \nthe respondent and, therefore, the extended period of limitation \nwas not available to the department (revenue). \n5. \n \nThough facts lie within a narrow compass, nonetheless \nit is necessary to make a brief reference to the relevant facts for a \nproper perspective. \n5.1. \nRespondent is engaged in the business of exporting \ncocoa butter and cocoa powder. Its factory at Jammu \nmanufactures cocoa butter and cocoa powder. Respondent has \nanother unit located at Taloja in the State of Maharashtra. Cocoa \nbutter and cocoa powder manufactured at Jammu are received by \nthe respondent’s unit at Taloja. In the Taloja unit, respondent \naffixed two labels on two sides of the packages of the said goods \nreceived from its Jammu factory and cleared the same for export \non payment of duty and claimed rebate of the duty paid on the \nexported goods. Further, respondent availed cenvat credit of the \nduty paid on those two goods at the time of clearance from \nJammu. Respondent also imported cocoa butter and cocoa \npowder from China and Malaysia, receiving the same in its factory \nat Taloja. \n5.2. \nThe factory of the respondent at Taloja was visited by \nofficials of the appellant and it was found that the respondent was \n\n4 \n \n \n \nonly putting labels on the goods brought from Jammu as well as \non the imported goods. As the labels were already fixed on the \nboxes containing the two goods, additional labels affixed by the \nrespondent did not amount to manufacture since affixing of \nadditional label did not enhance the marketability of the goods \nwhich were already marketable. \n5.3. \nIn such circumstances, appellant issued show cause \ncum demand notice dated 09.10.2012 to the respondent to show \ncause as to why the activity of labelling undertaken by the \nrespondent on the product cocoa butter received from the Jammu \nunit and also on the imported goods should not be held as \nactivities not amounting to manufacture in terms of Note 3 to \nChapter 18 of the Central Excise Tariff Act. It was alleged that \nrespondent had wrongly availed cenvat credit amounting to Rs. \n23,02,53,752.00 for the period from June, 2008 to July, 2012 \nwhich should not be demanded and recovered under Rule 14 of \nthe Cenvat Credit Rules read with Section 11A(1) of the Central \nExcise Act (since renumbered as Section 11A (4) of the Central \nExcise Act with effect from 08.04.2011). It was further alleged that \nrebate claims amounting to Rs. 13,22,30,368.00 for the period \nfrom June, 2008 to July, 2011, were erroneously sanctioned and \n\n5 \n \n \n \nutilised by the respondent which should not be demanded and \nrecovered under Section 11A(1) of the Central Excise Act (since \nrenumbered as Section 11A(4) of the Central Excise Act with effect \nfrom 08.04.2011). Respondent was also called upon to show \ncause as to why interest at the appropriate rate on the cenvat \ncredit wrongly availed of and utilised as determined and \ndemanded should not be recovered from it under the provisions \nof Rule 14 of the Cenvat Credit Rules, 2004 read with Section \n11AB of the Central Excise Act (now Section 11AA of the said Act \nwith effect from 08.04.2011). \n5.4. \nRespondent submitted written reply dated 08.02.2013 \ndenying all the allegations made in the show cause notice. \n5.5. \n Following adjudication, the appellant vide the order in \noriginal dated 25.02.2013 held that cocoa butter received by the \nrespondent at its Taloja unit from its unit at Jammu as well as \nthe imported cocoa butter were already packed in corrugated \nboxes of 25Kg each. The exported cocoa butter was also in \ncorrugated boxes of 25Kg each. Hence no repackaging activity was \nundertaken either on the goods received from the Jammu unit or \non the imported cocoa butter. Appellant further held that the \ngoods received from the Jammu unit already contained a label. \n\n6 \n \n \n \nOn receipt of the goods at Taloja, two more labels on two sides of \nthe carton were affixed. Appellant concluded that it was a case of \nadditional labelling and not relabelling. Therefore, such labelling \nat Taloja did not amount to manufacture. After holding that Rule \n3 of the Cenvat Credit Rules, 2004 (hereinafter referred to as ‘the \nCenvat Credit Rules’) allows cenvat credit only in a case where the \nprocess undertaken amounts to manufacture, respondent held \nthat the process of labelling undertaken by the respondent in its \nunit at Taloja did not amount to manufacture. Therefore, the \ncenvat credit availed of by the respondent was contrary to Rule 3 \nof the Cenvat Credit Rules. Hence, the credit of Rs. \n23,02,53,752.00 availed of by it was irregular which was liable to \nbe recovered under Rule 14 of the Cenvat Credit Rules read with \nSection 11A(1) of the Central Excise Act. Further, appellant held \nthat the respondent had already utilised part of the irregular \ncredit availed of and claimed rebate of Rs. 13,22,30,368.00 during \nthe period from June, 2008 to July, 2012. As the credit availed of \nwas irregular, the rebate sanctioned was erroneous since the \nrespondent was not entitled to take the credit and to utilize the \nsame. Therefore, it was held that the erroneous refund of Rs. \n13,22,60,368.00 was liable to be recovered on which the \n\n7 \n \n \n \nrespondent was also liable to pay interest under Section \n11AB/Section 11AA of the Central Excise Act. Proceeding further, \nappellant held that respondent had suppressed the information \nfrom the department that it was only undertaking labelling \nactivity at its Taloja unit which did not amount to manufacture. \nThus, with the intention to avail irregular credit, respondent had \nsuppressed the information and claimed that the process \nundertaken by its unit at Taloja amounted to manufacture. \nTherefore, there was suppression of material fact with the intent \nto avail irregular credit. Hence, the respondent was held liable to \npay penalty equivalent to the irregular credit availed of under Rule \n15(2) of the Cenvat Credit Rules read with Section 11AC of the \nCentral Excise Act. Thereafter, appellant passed the following \norder: \n1. credit of Rs. 23,02,53,752.00 (Rupees twenty \nthree crores two lakhs fifty three thousand seven \nhundred fifty two only) was wrongly availed and \ntherefore demanded under provisions of Rule 14 \nof Cenvat Credit Rules read with Section 11A(4) \n(erstwhile Section 11A(1) of the Central Excise \nAct. \n2. rebate of Rs. 13,22,30,368.00 (Rupees thirteen \ncrores twenty two lakhs thirty thousand three \n\n8 \n \n \n \nhundred sixty eight only) sanctioned during the \nperiod from June 2008 to July 2012 was \nerroneous as the duty on the exported goods were \npaid by utilizing the regularly availed credit \nwhich was not eligible to the assessee. Hence, the \nsame \nwas \ndemanded \nunder \nSection \n11A(1)/Section 11A(4) of Central Excise Act. \n3. interest at the appropriate rate under Rule 14 of \nthe Cenvat Credit Rules read with Section 11AA \n(erstwhile Section 11AB) of the Central Excise \nAct, was demanded on the irregular credit \navailed/erroneous rebate sanctioned. \n4. penalty of Rs. 23,02,53,752.00 (Rupees twenty \nthree crores two lakhs fifty three thousand seven \nhundred fifty two only) under the provisions of \nRule 15(2) of Cenvat Credit Rules read with \nSection 11AC(1)(a) of the Central Excise Act was \nimposed. However, the penalty would be reduced \nto 25% of the above amount if the assessee paid \nthe duty determined along with interest within 30 \ndays of receipt of the order. The reduced penalty \nof 25% of the amount of duty so determined \nwould be available to the assessee only if the 25% \nof the penalty was also paid within the period of \nthirty days of receipt of the order. Otherwise, the \npenalty imposed under Section 11AC(1)(a) equal \nto the duty amount would remain. \n\n9 \n \n \n \n5.6. \nAggrieved by the aforesaid order in original passed by \nthe appellant, respondent preferred appeal before the CESTAT. \nAfter hearing the matter, both Judicial Member and Technical \nMember passed separate orders on 05.01.2015. \n5.7. \nIn his order, the Judicial Member recorded that the \nrespondent after clearing the goods in its Jammu unit, received \nthe same in its factory at Taloja and claimed the benefit of \nnotification No. 56/2002-CE(NT) dated 14.11.2002. As per the \nsaid notification, the Jammu unit was entitled to refund of the \nduty paid whereas the Taloja unit was also entitled to avail cenvat \ncredit of the duty paid by the Jammu unit. Judicial Member noted \nthat after receiving the goods at Taloja, respondent affixed two \nlabels on the packages on two different sides and thereafter \nexported the goods. After referring to the show cause cum demand \nnotice, the Judicial Member opined that the only issue for \nconsideration was whether the labelling/re-labelling or putting \nadditional labels on the containers in the Taloja unit amounted to \nmanufacture in terms of Note 3 to Chapter 18 of the Central \nExcise Tariff Act. As per Note 3, in relation to products of Chapter \n18, labelling or re-labelling of containers or repacking from bulk \npacks to retail packs or the adoption of any other treatment to \n\n10 \n \n \n \nrender a product marketable to the consumer shall amount to \nmanufacture. Judicial Member opined that all the three activities \nare independent and separate. Note 3 to Chapter 18 is a deeming \nprovision whereby the processes mentioned therein, if carried out, \nwould amount to manufacture though there may not be any \nactual manufacture. In the above context, the Judicial Member \nheld that activities of labelling or re-labelling of containers without \nenhancing marketability amounted to manufacture. A reading of \nNote 3 would clearly indicate that the activity of labelling or re-\nlabelling of the containers amounted to manufacture. Thereafter, \nit was held that both the Jammu unit and the Taloja unit of the \nrespondent are separate units. Therefore, it could not be said that \nrespondent was availing double benefit. The Taloja unit had \nrightly availed the cenvat credit of the duty paid at Jammu as well \nas the countervailing duty paid for the imported goods. \nConsequently, the rebate claim was correctly sanctioned to the \nrespondent. Therefore, the respondent had rightly availed of the \ncenvat credit. Since the issue, whether the activity of labelling or \nre-labelling amounted to manufacture as per Note 3 to Chapter \n18 of the Central Excise Tariff Act was related to interpretation of \na \nstatutory \nprovision, \nquestion \nof \nany \nsuppression \nor \n\n11 \n \n \n \nmisrepresentation of fact by the respondent did not arise. Hence, \nquestion of getting the benefit of any extended period of limitation \nby the appellant for issuing show cause cum demand notice and \nthereafter passing adjudication order did not arise. In the above \nbackground, the Judicial Member set aside the order in original \ndated 25.02.2013. \n5.8. \nHowever, the Technical Member did not agree with the \nview taken by the Judicial Member. He held that no manufacture \nhad taken place in the Taloja unit of the respondent both in \nrespect of the goods manufactured at Jammu as well as the \nimported goods. He further held that the activity of the respondent \nin bringing the goods from Jammu to Taloja and thereafter to affix \nlabels so as to avail the benefit of Note 3 to Chapter 18 was not \nknown to the department. Therefore, it was a case of \nmisrepresentation of facts with the intent to avail rebate \nfraudulently. Consequently, the extended period of limitation was \navailable to the department. That being the position, the Technical \nMember was of the view that the order in original was justified on \nall counts and dismissed the appeal. \n5.9. \nIn view of the difference of opinion between the Judicial \nMember and the Technical Member, the matter was placed before \n\n12 \n \n \n \nthe President of CESTAT to nominate a third member to resolve \nthe same. \n5.10. \n \nThereafter, pursuant to the order passed by the \nPresident, the matter was placed before the third member to \nresolve the difference of opinion between the Judicial Member and \nthe Technical Member. \n5.11. \n \nAfter hearing the matter, the third member passed the \norder dated 16.04.2015. Referring to Note 3 to Chapter 18, both \nprior to 01.03.2008 and post 01.03.2008, the third member noted \nthat Parliament has consciously substituted the word ‘or’ in place \nof ‘and’ appearing between the words ‘labelling or re-labelling of \ncontainers’ and ‘repacking from bulk packs to retail packs’ to \nwiden the scope of Note 3. According to the third member, any one \nof the three activities referred to in Note 3 i.e. (i) labelling or re-\nlabelling, (ii) packing or repacking from bulk and retail packing \nand (iii) adoption of any other treatment to render a product \nmarketable would be deemed to be manufacture. He held that the \nactivity undertaken by the respondent at its Taloja unit i.e. \nlabelling amounted to manufacture. He negated the stand of the \nrevenue \nthat \nlabelling \nor \nre-labelling \nshould \nenhance \nmarketability of the goods as contrary to the plain reading of Note \n\n13 \n \n \n \n3. He, therefore, agreed with the Judicial Member that the activity \nof labelling undertaken by the respondent is covered by Note 3 to \nChapter 18 of the Central Excise Tariff Act which amounts to \nmanufacture. Further, he also recorded a finding of fact based on \nthe evidence on record that respondent had repacked the \nimported cocoa butter in new cartons and exported them after \nlabelling. He thus fully concurred with the view expressed by the \nJudicial Member that the activity of labelling undertaken by the \nrespondent amounted to manufacture in terms of Note 3 to \nChapter 18 of the Central Excise Tariff Act. He also concurred with \nthe view expressed by the Judicial Member that there was no \nsuppression or misrepresentation of material fact by the \nrespondent. Therefore, the extended period was not available to \nthe revenue. He further held that the respondent is entitled to the \ncredit of the duty paid on the goods received from the Jammu unit \nas well as credit of the countervailing duty paid on the imported \ngoods. That being the position, he held that the credit and the \nrebate were rightly availed of by the respondent. Question of \nrefund of the same did not arise. Further, no penalty can be \nimposed on the respondent. \n\n14 \n \n \n \n5.12. \n \nFollowing the opinion rendered by the third member, \nthe matter was placed before the two-member Bench of CESTAT. \nIn view of the majority decision, the appeal filed by the respondent \nwas allowed vide the order dated 16.04.2015. \n6. \n \nThis Court by the order dated 08.02.2016 had issued \nnotice. Thereafter, the appeal was admitted on 18.11.2019. \n7. \n \nRespondent has filed counter affidavit supporting the \norder of CESTAT and has sought for dismissal of the appeal. In \nresponse thereto, appellant has filed rejoinder affidavit reiterating \nthe grounds urged in the appeal. \n8. \n \nLearned counsel for the appellant has laid great \nemphasis on the fact that the activity undertaken by the \nrespondent at its Taloja unit i.e. putting labels on the two sides of \nthe cartons which were already labelled at Jammu, cannot be said \nto be a manufacturing activity. Note 3 to Chapter 18 of the Central \nExcise and Tariff Act cannot be read in a manner to hold that the \nactivity of labelling amounted to manufacture. Learned counsel, \ntherefore, contended that appellant was fully justified in passing \nthe order in original. CESTAT was divided in its opinion as to \nwhether such an activity could be termed as manufacture. The \nTechnical Member had given good reasons as to why such an \n\n15 \n \n \n \nactivity cannot be called manufacture while differing from the view \ntaken by the Judicial Member. The third member has erred in \nconcurring with the view taken by the Judicial Member. He, \ntherefore, submits that the order passed by the CESTAT by way \nof majority should be interfered with and order in original should \nbe restored. \n9. \n \nMr. V. Sridharan, learned senior counsel in his brief \nsubmission referred to Note 3 to Chapter 18 of the Central Excise \nTariff Act, both prior to its amendment with effect from \n01.03.2008 and post amendment. According to him, Parliament \nhas consciously replaced the word ‘and’ by the word ‘or’ and post \namendment, it is clear that the activity of labelling or re-labelling \namounted to manufacture. He, therefore, supports the decision of \nthe CESTAT and seeks dismissal of the appeal. \n10. \nSubmissions made by learned counsel for the parties \nhave received the due consideration of the Court. \n11. \nThe core issue to be considered is whether the activity \nof labelling carried out by the respondent amounts to \nmanufacture? While contention of the appellant is that the same \ndoes not amount to manufacture, on the other hand according to \n\n16 \n \n \n \nthe respondent, as per Note 3 to Chapter 18 of the Central Excise \nTariff Act, the above activity amounts to manufacture. \n12. \nThe Central Excise Act which has since got subsumed \nin the Central Goods and Services Tax Act, 2017 was enacted to \nprovide for levy of central duties of excise on goods manufactured \nor produced in India and for matters connected therewith or \nincidental thereto. \n12.1. \n \nSection 2 is the definition clause. ‘Manufacture’ is \ndefined in Section 2(f) which reads as follows: \n“manufacture” includes any process,- \n(i) \nincidental or ancillary to the completion of a \nmanufactured product; \n(ii) \nwhich is specified in relation to any goods in the \nSection or Chapter notes of the First Schedule to \nthe Central Excise Tariff Act (5 of 1986) as \namounting to manufacture; or \n(iii) which, in relation to the goods specified in the \nThird Schedule, involves packing or repacking of \nsuch goods in a unit container or labelling or re-\nlabelling of containers including the declaration \nor alteration of retail sale price on it or adoption \nof any other treatment on the goods to render the \nproduct marketable to the consumer, \n\n17 \n \n \n \nand the word “manufacturer” shall be construed \naccordingly and shall include not only a person who \nemploys hired labour in the production or manufacture \nof excisable goods, but also any person who engages in \ntheir production or manufacture on his own account; \n \n12.2. \n \nTherefore, the word ‘manufacture’ includes any process \nwhich is incidental or ancillary to the completion of a manufacture \nproduct; any process which is specified in relation to any goods in \nthe Section or Chapter notes of the First Schedule to the Central \nExcise Tariff Act as amounting to manufacture; or any process \nwhich in relation to the goods specified in the Third Schedule \ninvolves packing or repacking of such goods in a unit container or \nlabelling or re-labelling of containers including the declaration or \nalteration of retail sale price on it or adoption of any other \ntreatment on the goods to render the product marketable to the \nconsumer. \n13. \nChapter 18 of the Central Excise Tariff Act deals with \ncocoa and cocoa preparations. Note 3 to Chapter 18 has \nundergone amendment with effect from 01.03.2008. Prior to the \namendment, Note 3 to Chapter 18 read as under: \nIn relation to products of this Chapter, labelling \nor re-labelling of containers and repacking from \n\n18 \n \n \n \nbulk packs to retail packs or the adoption of \nany other treatment to render the product \nmarketable to the consumer, shall amount to \n‘manufacture’. \n \n13.1. \n \nPost 01.03.2008, Note 3 now reads as follows: \nIn relation to products of this Chapter, labelling \nor re-labelling of containers or repacking from \nbulk packs to retail packs or the adoption of \nany other treatment to render the product \nmarketable to the consumer, shall amount to \n‘manufacture’. \n \n13.2. \n \nThus by way of the amendment, the word ‘and’ has \nbeen replaced by the word ‘or’ between the expressions ‘labelling \nor re-labelling of containers’ and ‘repacking from bulk packs to \nretail packs’. Prior to 01.03.2008, the legislative intent was quite \nclear. The process to constitute manufacture should either be \nlabelling or re-labelling of containers and repacking from bulk \npacks to retail packs. This process was construed to be one whole. \nIn other words, the activity should not only include labelling or re-\nlabelling of containers but the same should relate to repacking \nfrom bulk packs to retail packs. This was one activity. The other \nactivity was adoption of any other treatment to render the product \nmarketable to the consumer. Therefore, the legislature was quite \n\n19 \n \n \n \nclear that if either of the two processes were followed, the same \nwould amount to manufacture. \n13.3. \n \nHowever, after the amendment i.e. post 01.03.2008, \nNote 3 has undergone a change as indicated above. Now because \nof substitution of the word ‘or’ in place of the word ‘and’ between \nthe two expressions ‘labelling or re-labelling of containers’ and \n‘repacking from bulk packs to retail packs’, the earlier composite \nprocess of labelling or re-labelling of containers and repacking \nfrom bulk packs to retail packs has been split up into two \nindependent processes. Labelling or re-labelling of containers is \none process and repacking from bulk packs to retail packs has \nnow become another process. Therefore, instead of two activities, \nNote 3 now contemplates three activities. As pointed out above, \nthe composite activity of labelling or re-labelling of containers and \nrepacking from bulk packs to retail packs has been split up into \ntwo activities i.e. labelling or re-labelling of containers is one and \nthe other is repacking from bulk packs to retail packs. The other \nactivity of adopting any other treatment to render the product \nmarketable to the consumers remains the same. Therefore, Note \n3, post amendment, as it exists today contemplates three different \n\n20 \n \n \n \nprocesses; if either of the three processes are satisfied, the same \nwould amount to manufacture. The three processes are: \n(i) labelling or re-labelling of containers; or \n(ii) repacking from bulk packs to retail packs; or \n(iii) the adoption of any other treatment to render the \nproduct marketable to the consumer. \n \n \n13.4. \n \nAs already observed above, if any one of the above three \nprocesses is satisfied then the same would amount to \nmanufacture. \n14. \nWe have already noticed the definition of ‘manufacture’ \nin the Central Excise Act. Any one of the processes indicated in \nNote 3 to Chapter 18 of the Central Excise Tariff Act would come \nwithin the ambit of the definition of ‘manufacture’ under Section \n2(f)(ii) of the Central Excise Act. \n15. \nThere is no factual dispute as to the activity carried out \nby the respondent at its Taloja unit. Whether the goods are \nbrought from the Jammu unit or are imported, those are \nrelabelled on both sides of the packs containing the goods at the \nTaloja unit of the respondent and thereafter, introduced in the \nmarket or sent for export. In terms of Note 3 to Chapter 18, this \nprocess of re-labelling amounts to ‘manufacture’. \n\n21 \n \n \n \n16. \nThat being the position, we are of the considered \nopinion that the view taken by CESTAT is the correct one and no \ncase for interference is made out. This is because all the other \naspects are related and hinges upon the core issue. Resultantly, \nthe impugned order of CESTAT dated 16.04.2015 is affirmed and \nthe appeal by the revenue is dismissed. \n17. \nIn view of the above decision, Civil Appeal Nos. 788-790 \nof 2022 would also stand dismissed. \n18. \nHowever, there shall be no order as to costs. \n \n………………………………J \n[ABHAY S. OKA] \n \n \n \n.……………………………J. \n [UJJAL BHUYAN] \n \nNEW DELHI; \nAPRIL 30, 2024. \n \n \n"