Disposed

Jindal Drugs Limited v. the Union of India, through Secretary, Ministry of Finance Dept of Revenue North Block and Ors.

Bombay HC5 Aug 2013WP/4926/2013

Case brief

AI extract

What is this about?

Court allowed requisition for interim supervision of cocoa butter stuffing at petitioner's premises by Central Excise Authority. Court directed revenue to issue show cause notice to determine if new process constitutes manufacturing under Tariff Act while registering petitioner as merchant exporter.

What did the court decide?

Directed Revenue to supervise stuffing of cocoa butter as interim measure and issue show cause notice to determine if process amounts to manufacture while petitioner registers as merchant exporter.

Jindal Drugs Limited Vs the Union of India, through… — Customs and Excise | Bombay HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION

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WRIT PETITION NO.4926 OF 2013

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Jindal Drugs Limited .. Petitioner. V/s. The Union of India & Others .. Respondents.

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Mr. V. Sreedharan, Sr. Counsel i/b. PDS Legal, for the Petitioner. Mr. Y. R. Mishra along with Mr. M. A. Adenwala, for Respondent No.2.

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CORAM: MOHIT S. SHAH, C.J. & M.S.SANKLECHA,J. DATE : 5 AUGUST 2013.

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P.C:-

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By this Petition under Article 226 of the Constitution of India, the Petitioner seeks an order in a nature of mandamus, directing the Commissioner of Central Excise and Customs, Belapur through its Officers to supervise the stuffing of cocoa butter in the containers and sealing the same for the purposes of exports. This would enable the petitioner to claim rebate on duty on exports of cocoa butter from its premises at Taloja.

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2 In 2008, the petitioner set up a factory at Taloja for manufacturing cocoa butter and cocoa powder, falling under Chapter 18 of the first schedule of the Central Excise Tariff Act, (in short “the Tariff Act), 1985. In its factory at Taloja, the petitioner received duty paid cocoa butter falling under chapter 18 of the Tariff Act from its Jammu factory in

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corrugated boxes having the quantity of 25 kg each, in respect of which Cenvant credit was taken by the petitioner at Taloja. At its factory in Taloja, the petitioner only affixed labels on the corrugated boxes received from its Jammu factory and claimed it amounts to manufacture for claiming rebate of duty paid under Rule 18 of the Central Excise Rules 2004.

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3 Consequent to investigation/verification a show cause notice dated 9 October 2012 was issued to the petitioner that affixing of the more label at Taloja on the corrugated boxes of cocoa butter would not amount to manufacture even in terms of Note 3 to Chapter 18 of the Tariff Act. Therefore, the notice was issued seeking to recover wrongly availed Cenvat credit amounting to Rs.23.02 Crores and erroneously sanctioned rebate of Rs.13.22 Crores for the period June 2008 to July 2012. By order dated 25 February 2013, the Commissioner of Central Excise confirmed the show cause notice dated 9 October 2012.

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4 Being aggrieved, the petitioner has filed the appeal and an application for stay of the order dated 25 February 2013 to Customs Excise and Service Tax Appellate Tribunal (in short “the Tribunal”). We are informed that the said application of the appellant has been heard by the Tribunal and the order thereon is awaited.

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5 Consequent to the order dated 25 February 2013 of the Commissioner of Central Excise, the appellant claims to have changed its so called manufacturing process at Taloja. By letter dated 10 April 2013, to the Superintendent of Central Excise, the Appellant pointed out that

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they now receive cocoa butter in polyethylene bags without any labels from their Jammu unit and the same are packed in 25 kgs cardboard carton and thereafter labeled at its Taloja unit. In these circumstances, it was the appellant's contention that the activities carried out by them would now amount to manufacturing activity in terms of Note 3 to Chapter 18 of the First Schedule to the Tariff Act, which reads as under:-

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Note 3 to Chapter 18:-

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“In relation to products of this Chapter, labelling or relabelling of containers or 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.”

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This was of course without prejudice to the petitioner's contention that even the process carried out by them earlier would amount to manufacturing process in terms of Note 3 to Chapter 18 of the Tariff Act. In the circumstances, the petitioner submitted that they continue to be Manufacturer-Exporter and are entitled to all the privileges available to it as a Manufacturer-Exporter.

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6 However, the revenue by its letter dated 15 April 2013, did not accept the submission of the petitioner and reiterated that in view of the order dated 25 February 2013 of the Commissioner of Central Excise, the petitioner's activity cannot be considered to be a manufacturing activity. Thus, the revenue pointed out that request to carry out the supervision of stuffing of cocoa butter into containers for the purposes of claiming rebate under Rule 18 of Central Excise Rules 2002 could not be done.

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7 The grievance of the petitioner before us was that as there was a change in the process carried out by them at Taloja after the order dated 25 February 2013 of the Commissioner of Central Excise and, therefore, the above order dated 25 February 2013 would have no application now. Thus they would now be entitled to rebate of duty as manufacture-exporter under Notification No.19/2004 CE dated 6 September 2004 issued under Rule 18 of the Central Excise Rules. However, the revenue is insistent on its stand that the petitioner's activities does not amount to manufacture and consequently, must register themselves as a merchant exporters and the permission for stuffing should be obtained from Custom Authorities.

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8 When this petition reached hearing on 2 July 2013, the Respondent-Commissioner was directed to inspect the process now carried out by the petitioner and determine whether the same amounts to manufacturing process or not. We are informed that on 9 July 2013, the process was examined and a panchanama was also drawn as annexed to the affidavit dated 16 July 2013 filed by the Deputy Commissioner of Central Excise. The affidavit dated 16 July 2013, further contends that the petitioner does not carry out any manufacturing activities. Therefore, they are not entitled to the benefit to rebate of excise duty as provided under Rule 18 of Central Excise Rules read with Notification No.19/2004 CE dated 6 September 2004. In the circumstances, it is contended on behalf of the revenue that the petitioner must obtain registration as Merchant-Exporter and apply to Customs for purposes of supervising the stuffing of cocoa butter into containers.

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9 We find that the benefit of Notification No.19/2004 CE dated 6 September 2004 under Rule 18 of the Central Excise Rules for grant of rebate would not be available in case of export of goods which were manufactured and cleared by availing the benefit of Notification Nos.56/2002 and 57/2002 (C.E) dated 14 November 2002. The petitioner's unit at Jammu has admittedly obtained the benefit of the above Notifications. The benefit of rebate would only be available if the activities carried out at Taloja in respect of the good received from the petitioner's unit at Jammu amounts to a manufacturing process. Whether or not the activity carried out by the petitioner under the new process adopted post the order dated 25 February 2013 amounts to a manufacturing activity is for the authorities to determine under the Central Excise Act 1944. For the above purposes, the office of the Commissioner of Central Excise will issue a show cause notice to the petitioner on the basis of petitioner's letter dated 10 April 2013, panchanama dated 9 July 2013 and any other material which they seek to rely upon to the petitioner, calling upon the petitioner to show cause why the activity carried out by the petitioner even after change of process would not amounts to manufacturing process. The petitioner would respond to the notice and the authority under the Act would decide whether or not the process now carried out at Taloja amounts to a manufacturing process entitled to the benefit of rebate under Notification No.19/2004 dated 6 September 2004.

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10 However, till the aforesaid issue of determining whether the process now adopted by the petitioner amounts to a manufacturing process, the petitioner would have themselves registered as Merchant-

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Exporter as desired by the revenue. However, the revenue would in terms of the procedure set out in Notification No.19/2004 dated 6 September 2004 supervise the stuffing of cocoa butter into the container and sealing them for purposes of export at the petitioner's premises at Taloja. It prima facie appears that the facility of supervision by the Central Excise Authority of stuffing of goods for export is also available to MerchantExporter in terms of procedure set out in Notification No.19/2004 (C.E.) dated 6 September 2004. In any case, it is fairly stated by Mr. Sreedharan, learned Counsel appearing for the petitioner that the extension of the facility of supervising the stuffing of cocoa butter at their factory/premises at Taloja would not give petitioner any rights to claim entitlement of rebate of duty from the respondents. Their entitlement to rebate would be decided by the authorities under the Central Excise Act, 1944. However, this facility is being extended only as and by way of an interim measure, till the authorities under the Central Excise Act 1944 take a decision with regard to whether or not, the process carried out by the petitioner is a manufacturing process or not. The claim for availing Cenvat credit and also rebate of duty under Notification No.19/2004 dated 6 September 2004 would be consequential to the determination of the basic issue of whether the process carried out at Taloja would amount to a manufacturing process or not.

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11 It is made clear that petitioner would not claim by virtue of this order that they are entitled to avail of and claim rebate of duty in respect of the process carried out by them at Taloja. Their entitlement or not would depend upon the order passed by the adjudicating authority, subject to further appeals under the Central Excise Act, 1944.

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12 Writ Petition is disposed of with the aforesaid directions,

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with no order as to costs.

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(CHIEF JUSTICE)