COMMISSIONER CENTRAL EXCISE, BANGALORE versus M/S. UNITED SPIRITS LTD. & ANR.

Citation: [2017] 1 S.C.R. 54 · Decided: 05-01-2017 · Supreme Court of India · Bench: DIPAK MISRA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

[2017] I S.C.R. 54 
A 
COMMISSIONER CENTRAL EXCISE, BANGALORE 
B 
c 
D 
E 
F 
G 
H 
v. 
MIS. UNITED SPIRITS LTD. & ANR. 
(Civil Appeal No. 5003 of2006) 
JANUARY 05, 2017 
(DIPAK MISRA AND N. V. RAMANA, JJ.] 
Central Excise Act, 1944 - ss. 4 and JJA Proviso - Show 
cause notice by Revenue - To the assessee - On the ground that the 
assessee received additional consideration from its franchisees in 
the form of royalty.for supplying food flavours' which were essential 
ingredients of the IMFL manufactured by franchisees -
Re-assessment of food jluvours' by including the royalty received 
by the assessee - Demand of differential duty - Penalty as well as 
interest levied - Adjudicating authority confirmed the demand -
Appellate Tribunal held that there was no nexus between the royalty 
and the food flavour', that simple mixing of food flavours with 
IMFL is not manufacture and that two show cause notices were 
barred by /imitation - On appeal, held: Manufacture implies change, 
but every change is not manufacture - The Tribunal decided in 
favour of the assessee without the background check as to the actual 
process involved and undertaken - The Tribunal while holding the 
show cause notices as barred by limitation, has also not scrutinized 
the dates appropriately - Therefore. the mailer is remitted to the 
Tribunal. 
Allowing the appeal, the Court 
HELD: 1. 'Manufacture' implies change, but every change 
is not manufacture, such change is normally a result of treatment, 
labour and manipulation. [Para 23] (75-D-E] 
Union of India v. Delhi Cloth & General Mills Co. Ltd. 
AIR 1963 SC 791 : [1963] Suppl. SCR 586- followed. 
Deputy Commissioner of Sales Tax (Law), Board of 
Revenue (Taxes), Ernakulam v. Pio Food Packers 1980 
Supp. SCC 174: (1980] SCR 1271; Collector of 
Customs, Bombay 1( S.H Kelker & Co. Ltd. (2000) 10 
sec 478 - relied on. 
54 
COMMISSIONER CENTRAL EXCISE, BANGALORE v. M/S. 
UNITED SPIRITS LTD. & ANR. 
Anheuser-Busch Brewing Assn. v. United States 207 US 
556 (1908); Income Tax Ojjice1; Udaipur v. Arihant Tiles 
and Marbles Pvt. Ltd. (2010) 2 SCC 699 : [2009] 16 
SCR 21; CIT v. Mis NC. Budharaja and Company 1994 
Supp (1) SCC 280: [1993] 2 Suppl. SCR 185- referred 
to. 
2.1 In the present case in the order of the tribunal, the exact 
nature of the process undertaking and how mixing is undertaken 
and the process involved· is not discernible and has not been 
ascertained and commented. It remains ambiguous and 
inconclusive. The respondent claims that about 26% of the sales 
of odoriferous substances were brought from third party and sold 
without any modification or process. These are all questions of 
fact which must be first authenticated and the actual factual position 
validated. The tribunal has answered the question in favour of 
the respondent without the background check as to the actual 
process involved and undertaken. Different flavours may have 
different processes. [Para 32] [81-D-E] 
2.2 The respondent had pleaded a different factual matrix 
which has been accepted by the tribunal, albeit, without referring 
to specific details. General observation and broad brush approach 
need not reflect true consideration paid for all transactions. A far 
greater and deeper scrutiny of facts is required before forming 
any opinion, one way or the other. It would be wrong to be 
assumptuons without full factual matrix being lucent and 
absolutely clear. (Para 30] [80-E] 
Pepsi Foods Ltd. v. Collector of Central Excise, 
Chandigarh (2005) 9 SCC 28 : (2003] 6 Suppl. SCR 
232; Shyam Oil Cake Ltd. v. CCE-1, New Delhi, Jaipur 
(2005) 1 SCC 264 : (2004] 6 Suppl. SCR 346; The 
Additional Commissioner of Commercial Taxes, 
Bangalore v. Ayili Stone Industries Etc. Etc.2016 (10) 
SCALE 85 - referred to. 
3. The tribunal has held that certain show cause notices 
are barre.d by limitation. The tribunal on this score has also not 
scrutinized the dates appropriately, bnt has returned a cryptic 
finding. [Para 33] [81-F, G] 
55 
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56. 
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SUPREME COURT REPORTS 
[20 I 7] I S.C.R. 
4. In view or the aforesaid analysis, the matter is remitted 
to the tribunal for reconsideration of the aforesaid.aspects on the 
basis of observations made hereinabove and the law in the field. 
[Para 34] [81-G-H] 
Pepsi Foods Ltd. v. Collector of Central Excise, 
Chandigarh 
(2005) 9 SCC 28 : [2003] 6 Suppl. SCR 
232; Unio11 of India & Ors v. Delhi Cloth and General 
Mills Co. Limited and Ors. I
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