The Supreme Court addressed the issue of whether labelling goods amounts to "manufacture" under the Central Excise Tariff Act. The case revolved around labelling done at the Taloja unit of Jindal Drugs on cocoa butter received from their Jammu unit and imported goods. The Court upheld the decision of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) that labelling is considered manufacturing under the amended Note 3 of Chapter 18. It dismissed the Revenue's appeal, affirming that the respondent was entitled to cenvat credit and rebate.

1. Introduction and Procedural Background

• Parties Involved: Commissioner of Central Excise, Belapur (Appellant) vs. Jindal Drugs Ltd. (Respondent).
• Legal Provisions: The case involved the interpretation of Section 35L(1)(b) of the Central Excise Act, 1944, and Note 3 to Chapter 18 of the Central Excise Tariff Act, 1985.
• Appeals: The case came up from a decision of the CESTAT, which allowed the respondent's claim that labelling constituted manufacturing. This ruling was contested by the Revenue.

2. Factual Matrix

• Respondent’s Operations: Jindal Drugs operates two units—one in Jammu and another in Taloja, Maharashtra. The Jammu unit manufactures cocoa butter, which is transported to the Taloja unit, where additional labels are affixed on the packages. These goods are subsequently exported.
• Dispute: The Revenue challenged that the labelling of already marketable goods at Taloja does not amount to manufacturing and hence cenvat credit and rebate claimed by the respondent were wrongful.

3. Legal Arguments

• Revenue's Stand: The Revenue argued that labelling, without enhancing marketability, does not amount to manufacturing and challenged the respondent's cenvat credit and rebate claims under the Central Excise Tariff Act.
• Respondent's Stand: Jindal Drugs contended that under the amended Note 3 of Chapter 18, labelling alone qualifies as manufacturing post-2008, and therefore they were entitled to cenvat credit and rebate.

4. Tribunal’s Decision

• CESTAT's View: The Tribunal ruled in favor of Jindal Drugs, with the majority holding that labelling under Note 3 of Chapter 18 amounts to manufacturing. The Judicial Member interpreted the amendment to Note 3 (changing “and” to “or”) as widening the scope, such that labelling or re-labelling on its own qualifies as manufacturing.

Legal Analysis:

1. Interpretation of 'Manufacture' Under Section 2(f)

• Section 2(f) of the Central Excise Act defines manufacture as any process incidental or ancillary to the completion of a manufactured product, including processes specified in the Chapter Notes of the Central Excise Tariff Act. Labelling, as per Note 3 of Chapter 18, is explicitly deemed manufacturing.

2. Amendment to Note 3 of Chapter 18

• Pre-2008: Labelling or re-labelling and repacking from bulk to retail packs were treated as one unified process of manufacturing.
• Post-2008: The amendment substituted “and” with “or,” separating the processes. Now, labelling alone can constitute manufacturing without needing repacking.

Ratio Decidendi:

The Court concluded that labelling, as an independent activity under Note 3, constitutes "manufacture" under the Central Excise Tariff Act, and the respondent was justified in availing cenvat credit and rebate. The decision clarifies the scope of “manufacture” under the amended Central Excise provisions, broadening the activities that qualify for benefits under the law.

Acts and Sections Discussed:

1. Central Excise Act, 1944:
   • Section 35L(1)(b) – Appeals to the Supreme Court.
   • Section 2(f) – Definition of 'Manufacture'.
2. Central Excise Tariff Act, 1985:
   • Note 3 to Chapter 18 (amended post-2008) – Labelling and other processes considered as manufacture.
3. Cenvat Credit Rules, 2004:
   • Rule 14 – Recovery of cenvat credit wrongly availed.

Subjects:

Central Excise, Labelling as Manufacture, Cenvat Credit, Note 3 Chapter 18, Cocoa Butter, Jindal Drugs, Rebate Claims, Customs Excise Tribunal