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TMI Blog2024 (5) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture; or any process which in relation to the goods specified in the Third Schedule involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer. By way of the amendment, the word and has been replaced by the word or between the expressions labelling or re-labelling of containers and repacking from bulk packs to retail packs . Prior to 01.03.2008, the legislative intent was quite clear. 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. The other activity was adoption of any other treatment to render the product marketable to the consumer. Therefore, the legislature was quite clear that if either of the two processes were followed, the same would amount t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also eligible for rebate on the duty paid by it while exporting its goods. CESTAT further held that there was no suppression by the respondent and, therefore, the extended period of limitation was not available to the department (revenue). 5. Though facts lie within a narrow compass, nonetheless it is necessary to make a brief reference to the relevant facts for a proper perspective. 5.1. Respondent is engaged in the business of exporting cocoa butter and cocoa powder. Its factory at Jammu manufactures cocoa butter and cocoa powder. Respondent has another unit located at Taloja in the State of Maharashtra. Cocoa butter and cocoa powder manufactured at Jammu are received by the respondent s unit at Taloja. In the Taloja unit, respondent affixed two labels on two sides of the packages of the said goods received from its Jammu factory and cleared the same for export on payment of duty and claimed rebate of the duty paid on the exported goods. Further, respondent availed cenvat credit of the duty paid on those two goods at the time of clearance from Jammu. Respondent also imported cocoa butter and cocoa powder from China and Malaysia, receiving the same in its factory at Taloja. 5.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also in corrugated boxes of 25Kg each. Hence no repackaging activity was undertaken either on the goods received from the Jammu unit or on the imported cocoa butter. Appellant further held that the goods received from the Jammu unit already contained a label. On receipt of the goods at Taloja, two more labels on two sides of the carton were affixed. Appellant concluded that it was a case of additional labelling and not relabelling. Therefore, such labelling at Taloja did not amount to manufacture. After holding that Rule 3 of the Cenvat Credit Rules, 2004 (hereinafter referred to as the Cenvat Credit Rules ) allows cenvat credit only in a case where the process undertaken amounts to manufacture, respondent held that the process of labelling undertaken by the respondent in its unit at Taloja did not amount to manufacture. Therefore, the cenvat credit availed of by the respondent was contrary to Rule 3 of the Cenvat Credit Rules. Hence, the credit of Rs. 23,02,53,752.00 availed of by it was irregular which was liable to be recovered under Rule 14 of the Cenvat Credit Rules read with Section 11A(1) of the Central Excise Act. Further, appellant held that the respondent had already uti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed. However, the penalty would be reduced to 25% of the above amount if the assessee paid the duty determined along with interest within 30 days of receipt of the order. The reduced penalty of 25% of the amount of duty so determined would be available to the assessee only if the 25% of the penalty was also paid within the period of thirty days of receipt of the order. Otherwise, the penalty imposed under Section 11AC(1)(a) equal to the duty amount would remain. 5.6. Aggrieved by the aforesaid order in original passed by the appellant, respondent preferred appeal before the CESTAT. After hearing the matter, both Judicial Member and Technical Member passed separate orders on 05.01.2015. 5.7. In his order, the Judicial Member recorded that the respondent after clearing the goods in its Jammu unit, received the same in its factory at Taloja and claimed the benefit of notification No. 56/2002-CE(NT) dated 14.11.2002. As per the said notification, the Jammu unit was entitled to refund of the duty paid whereas the Taloja unit was also entitled to avail cenvat credit of the duty paid by the Jammu unit. Judicial Member noted that after receiving the goods at Taloja, respondent affixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Taloja unit of the respondent both in respect of the goods manufactured at Jammu as well as the imported goods. He further held that the activity of the respondent in bringing the goods from Jammu to Taloja and thereafter to affix labels so as to avail the benefit of Note 3 to Chapter 18 was not known to the department. Therefore, it was a case of misrepresentation of facts with the intent to avail rebate fraudulently. Consequently, the extended period of limitation was available to the department. That being the position, the Technical Member was of the view that the order in original was justified on all counts and dismissed the appeal. 5.9. In view of the difference of opinion between the Judicial Member and the Technical Member, the matter was placed before the President of CESTAT to nominate a third member to resolve the same. 5.10. Thereafter, pursuant to the order passed by the President, the matter was placed before the third member to resolve the difference of opinion between the Judicial Member and the Technical Member. 5.11. After hearing the matter, the third member passed the order dated 16.04.2015. Referring to Note 3 to Chapter 18, both prior to 01.03.2008 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led counter affidavit supporting the order of CESTAT and has sought for dismissal of the appeal. In response thereto, appellant has filed rejoinder affidavit reiterating the grounds urged in the appeal. 8. Learned counsel for the appellant has laid great emphasis on the fact that the activity undertaken by the respondent at its Taloja unit i.e. putting labels on the two sides of the cartons which were already labelled at Jammu, cannot be said to be a manufacturing activity. Note 3 to Chapter 18 of the Central Excise and Tariff Act cannot be read in a manner to hold that the activity of labelling amounted to manufacture. Learned counsel, therefore, contended that appellant was fully justified in passing the order in original. CESTAT was divided in its opinion as to whether such an activity could be termed as manufacture. The Technical Member had given good reasons as to why such an activity cannot be called manufacture while differing from the view taken by the Judicial Member. The third member has erred in concurring with the view taken by the Judicial Member. He, therefore, submits that the order passed by the CESTAT by way of majority should be interfered with and order in origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act as amounting to manufacture; or any process which in relation to the goods specified in the Third Schedule involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer. 13. Chapter 18 of the Central Excise Tariff Act deals with cocoa and cocoa preparations. Note 3 to Chapter 18 has undergone amendment with effect from 01.03.2008. Prior to the amendment, Note 3 to Chapter 18 read as under: In relation to products of this Chapter, labelling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture . 13.1. Post 01.03.2008, Note 3 now reads as follows: In relation to products of this Chapter, labelling or re-labelling of containers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the product m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As already observed above, if any one of the above three processes is satisfied then the same would amount to manufacture. 14. We have already noticed the definition of manufacture in the Central Excise Act. 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. 15. There is no factual dispute as to the activity carried out by the respondent at its Taloja unit. Whether the goods are brought from the Jammu unit or are imported, those are relabelled on both sides of the packs containing the goods at the Taloja unit of the respondent and thereafter, introduced in the market or sent for export. In terms of Note 3 to Chapter 18, this process of re-labelling amounts to manufacture . 16. That being the position, we are of the considered opinion that the view taken by CESTAT is the correct one and no case for interference is made out. This is because all the other aspects are related and hinges upon the core issue. Resultantly, the impugned order of CESTAT dated 16.04.2015 is affirmed and the appeal by the revenue is dismissed. 17. In view of ..... 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