Supreme Court Holds Relabelling of Cocoa Products Amounts to Manufacture Under Central Excise Law

In Commissioner of Central Excise Belapur v. Jindal Drugs Ltd. (2024 Latest Caselaw 282 SC), the Supreme Court clarified the scope of "manufacture" under the Central Excise Act and held that relabelling of cocoa products independently amounts to manufacture under Note 3 of Chapter 18 of the Central Excise Tariff Act. Consequently, the assessee was held entitled to avail CENVAT credit and rebate on exported goods. 

Jindal Drugs Ltd. manufactured cocoa butter and cocoa powder at its Jammu unit and transported the goods to its Taloja unit in Maharashtra. At the Taloja unit, the company affixed additional labels to the packages before exporting the goods and claimed CENVAT credit as well as rebate of the excise duty paid. The Revenue contended that merely affixing additional labels did not amount to manufacture and alleged that the company had wrongly availed CENVAT credit and rebate. It also alleged suppression of material facts and sought recovery of the credit, rebate, interest and penalty. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), by majority, held in favour of the assessee. The Revenue challenged that decision before the Supreme Court. 

Whether the activity of relabelling or affixing labels on cocoa products constituted "manufacture" under Note 3 of Chapter 18 of the Central Excise Tariff Act, thereby entitling the assessee to CENVAT credit and rebate. 

The Supreme Court upheld the decision of the CESTAT and held that the activity undertaken by the assessee amounted to manufacture. The Court observed that:

•Prior to 1 March 2008, Note 3 required labelling or relabelling along with repacking from bulk packs to retail packs for the activity to amount to manufacture.

•After the amendment replacing the word "and" with "or", each activity became an independent process. 

•Consequently, labelling or relabelling of containers by itself constitutes manufacture under Note 3. 

•Since the assessee relabelled the cocoa products at its Taloja unit, the activity fell squarely within the statutory definition of manufacture under Section 2(f)(ii) of the Central Excise Act. 

•As the process amounted to manufacture, the assessee was rightly entitled to avail CENVAT credit and claim rebate on exported goods. 

•The Court also found no suppression or misrepresentation by the assessee and held that the extended period of limitation and penalty provisions were not attracted. 

The Supreme Court:

•Dismissed the Revenue's appeals. 

•Affirmed the majority decision of the CESTAT. 

•Held that relabelling of cocoa products amounted to manufacture under Note 3 of Chapter 18 of the Central Excise Tariff Act.

•Upheld the assessee's entitlement to CENVAT credit and rebate. 

The judgment provides important clarity on the interpretation of "manufacture" under the Central Excise regime. It confirms that, after the 2008 amendment to Note 3 of Chapter 18, relabelling of specified goods is by itself sufficient to constitute manufacture, without requiring repacking or enhancement of marketability. The decision also reinforces that statutory interpretation disputes, in the absence of suppression or fraud, do not justify invocation of the extended limitation period or imposition of penalties.