Holding

The benefit of MODVAT/CENVAT credit on inputs used for manufacturing third‑party branded goods does not preclude an SSI unit from availing the exemption under the applicable SS/ Notifications for its own goods.

Summary

The appellants, both small‑scale industrial units, manufactured their own branded medicines and also performed job‑work for third parties, producing goods bearing the third parties' brand names. While they paid excise duty on the third‑party branded goods, they also claimed MODVAT/CENVAT credit on the inputs used. The Department issued show‑cause notices alleging that claiming such credit disqualified them from the exemption under the series of SS/ Notifications (Nos. 8/1999, 8/2000, 8/2001, 8/2002, 8/2003) for their own products. The Supreme Court examined the wording of the Notifications, which expressly exclude clearances of goods bearing another person's brand name from the aggregate clearance calculation and from the exemption itself. Consequently, the Court held that availing MODVAT/CENVAT credit on inputs for third‑party branded goods does not strip an SSI unit of the right to claim exemption for its own goods. The Tribunal’s decisions were affirmed and both appeals were dismissed.

Issues considered

Whether availing MODVAT/CENVAT credit on inputs used for manufacturing third‑party branded goods on a job‑work basis disqualifies an SSI unit from claiming exemption under the relevant SS/ Notifications for its own products.

Legislation cited

Subjects

central exciseSSI unitMODVATCENVAT creditexemption notificationjob workbrand nameaggregate clearanceexcise dutysmall scale industry

Judgment

[2015] 12 S.C.R. 395

COMMISSIONER OF CENTRAL EXCISE, CHENNAI A
v.
M/S. NEBULAE HEALTH CARE LTD.
(Civil Appeal No. 2789 OF 2007)
B
OCTOBER 27, 2015

[A.K. SIKRI AND ROHINTON FALi NARIMAN, JJ.]
Central Excise Act, 1944: SS/ Notifications -
Notification no.811999, 812000, 812001, 812002, 812003 - C
Held: Benefit of MODVATICENVAT credit in respect of
branded goods of third parties manufactured by assessee
on job work basis would not disentitle him from availing
benefit of SS/ Notifications for goods manufactured by them
0
on their own account.

Dismissing the appeals, the Court

HELD: 1. For availing the benefit of Notification by
an SSI Unit, the clearances for home consumption only E
are to be taken into consideration, except in those cases
where it is clearly provided otherwise. For this purpose,
clearances bearing the brand narne or trade name of third
parties are concerned, they are kept outside the scheme
inasmuch as: (a) they are not to be included for F
determining the aggregate value of the clearances for
home consumption; and (b) such products bearing
brand names or trade names of third parties, even if
manufactured by the SSI Unit, are not eligible for any
exemption and excise duty thereupon has to be paid. It G
becomes apparent that so far as manufacture of branded
goods of third party on job work basis by the SSI Unit is
concerned, they are to be dealt with differently in the
sense that they do not come within the ambit of H
395
396 SUPREME COURT REPORTS [2015] 12 S.C.R.

A exemption on which normally excise duty, as per the
provisions of the Central Excise Act, is payable. As a
sequitur, it also follows that once excise duty is paid by
the manufacturer on such branded goods manufactured,
the brand name whereof belongs to another person, on
B job work basis, the 551 Unit would be entitled to CENVAT/
MODVAT credit on the inputs which were used for
manufacture of such goods as on those inputs also
excise duty was paid.These branded goods
manufactured by the 551 Units meant for third parties
C are regulated by the normal provisions of excise law and
will have no bearing or relevance insofar as availing the
benefit of those exemption notifications in respect of its
own products manufactured by the 551 Units is
concerned. The Tribunal in the impugned decisions in
0
both these appeals has decided the issue correctly.
[Paras 17, 18] [419-B-H; 420-A]

Commissioner of Central Excise, Ahmedabad v.
Ramesh Food Products 2004 (174) E.L.T. 310
E (5.C.); Faridabad Tools Pvt. Ltd. v. Collectorof
Central Excise 1993 (63) E.L.T. 759; Kamani
Food v. Collector of Central Excise 1995 (75)
E.L.T. 202; Kharia Cement Works v. Collector of
Central Excise 1989 (42) ELT 696 (Tribunal) -
F
referred to.

Case Law Reference

2004 (174) E.L.T. 310 (5.C.) referred to. Para 13
G
1993 (63) E.L.T. 759 referred to. Para 13

1995 (75) E.L.T. 202 referred to. . Para 13

1989 (42) ELT 696 9Tribunal referred to. Para 15
H
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 397
HEALTH CARE LTD.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. A
2789 of2007

From the Judgment and Order No. 829/06 dated
22.08.2006 of the Customs Excise & Service Tax Appellate
Tribunal, South Zonal Bench, Chennai in Appeal No. E/1034/ B
05

WITH

C.A. No. 1142 of2009
c . ~- _,.
A.K, Sanghi, P. K. Mullick, Binu Tamta, Rajiv Singh,
B. Krishna Prasad, Soma Mullick for the Appellant.

S. Jai Kumar, t-likhil Nayyar, N. Sai Vinod, Aparna
Hirandagi, Sandeep Narain,Ashok Bannidinni, M. H. Patil, M/ D
s. S. Narain & Co. for the Respondent.

The Judgment of the Court was delivered by

A.K. SIKRI, J. 1. Delay condoned.
E
2.These appeals raise an issue of eligibility of
concession/exemption from excise duty that is provided under
Notification nos. 8/1999, 8/2000, 8/2001, 8/2002 and 8/2003
to the Small Scale Industrial Units (for short, 'SSI Units'). It is
not in dispute that the respondents - assessees in these F
appeals fulfill eligibility conditions for availing the benefit of
SSI exemption under the aforesaid Notifications. However, in
addition to manufacturing goods on their own account, they
are also doing job work of manufacturing goods of certain other
parties on job work basis. The goods manufactured for third G
parties bear the brand name of those third parties and in
respect of such goods manufactured for third parties, the
assessees paid the normal duty of excise but atthe same time
availed the benefit of MODVAT/CENVAT credit as well. Thus,
H
398 SUPREME COURT REPORTS [2015] 12 S.C.R.

A to put it succinctly, the real issue is as to whether availing the
benefit of MODVAT/CENVAT credit in respect of branded
goods of third parties manufactured by the assessees on job
work basis, disentitles them from availing the benefit of the
aforesaid Notifications?
B
3. The assessee in Civil Appeal No. 2789 of2007 is the
manufacturer of medicaments which fall under Chapter
Heading 30 of the First Schedule of the Central Excise Tariff
Act, 1985 (hereinafter referred to as the "CETA, 1985"). In
C addition, it is manufacturing medicines under the brand name
belonging to third parties, viz., M/s. Roots Pharma House (P)
Ltd., Chennai, M/s. Satven & Mer, Chennai, Mis. Tickle Pharma,
Chennai, M/s. Shyulu India, Krishnagiri and M/s. ARK Medicare,
Chennai. The goods manufactured by the assessee on its
D own account bear ~sown brand name and goods manufactured
by the third parties bear the brand names belonging to those
parties. During the period in question, i.e., 1999 to 2003 -
2004, the assessee had availed the benefit of SSI exemption
notifications that were in force, i.e., Notification nos. 8/1999
E etc., as mentioned above. Availing the benefit of these
Notifications in respect of goods manufactured by the
assessee on its own account, i.e., the goods bearing its own
brand name, the assessee had cleared the said goods without
F payment of any excise duty. On the other hand, during this
very period, in respect of goods bearing the brand name of
third parties manufactured by the assessee, it paid excise duty
thereupon. At the same time, it also availed CENVAT credit in
respect of inputs used for the manufacture of these branded
G goods. It resulted in issuance of five show cause notices
stating therein that since the assessee had availed CENVAT
credit in respect of inputs used for the manufacture of branded
goods, it had lost the right to claim the benefit of SSI
exemptions under the aforesaid Notifications and, thus, had
H claimed the exemption from payment of duties improperly. The
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 399
HEALTH CARE LTD. [A.K. SIKRI, J.]

details of these show cause notices are as under: A

S.No. SCN No. & Date Period Duty involved
1 1471/30.09.99 1999-2000 13,50,000/-
2 579/26.04.2001 2000-2001 13,50,000/-
B
3 1979/26.12.2001 2001-2002 16,00,000/-
4 588/08.04.2003 2002-2003 15,99,904/-
V/Ch.30/1517/04
5 2003-2004 . 15,99,875/-
· dated 16.03.2004

4. The aforesaid demand was confirmed by the Joint C
Commissioner vide his Order-in-Original dated January 17,
2005. Penalty under Rule 25 of the Central Excise Rules as
well as interest under Section 11AB of the Central Excise Act
was also imposed. The appeal of the assessee to the
0
Commissioner (A) proved futile as it was dismissed by the
Commissioner (A) vide orders dated July 19, 2005. However,·
a partial relief was given by setting aside the penalty. Not
satisfied with this outcome, the assessee approached the
Central Excise and Service TaxAppellate Tribunal (hereinafter E
referred to as "CESTAT") by way of another statutory appeal
in which it has succeeded as the CESTAT, Chennai Bench,
has allowed the appeal of the assessee.

5. The assessee in Civil Appeal No. 1142 of 2009 is F
engaged in the manufacture of motor vehicle rubber parts falling
under Chapter Heading 8708.00 of the Act. It filed declaration
with effect from May 01, 1995 claiming 15% central excise
duty on branded goods and full exemption for its own products
on the ground that it was eligible for exemption as per G
Notification No. 1/9-C.E., dated February 28, 1993, being an
SSI Unit. The excise duty was pa[d on branded goods which
were manufactured for third parties. However, in respect of
inputs used in the manufacture of these goods, the assessee
availed MODVAT credit. Three show cause notices were H
400 SUPREME COURT REPORTS [2015] 12 S.C.R.

A issued to the assessee stating that since it had filed MODVAT
facility for branded goods under Notification No. 1/93-C.E.,
the assessee was not entitled to the benefit of exemption
notification even in respect of its own products. Order-in-
Original dated July 10, 1998 was passed confirming the
B demand. In the appeal filed by the assessee to the
Commissioner (Appeals), the assessee succeeded as the
·said appeal was allowed by orders dated March 25, 2003
setting aside the Order-in-Original and holding that the
assessee could avail both the facilities, i.e., MODVAT credit
C of inputs used for manufacturing of goods with brand name of
· others of exemption for own branded goods, simultaneously.
This order was challenged by the Department before the
CESTAT. However, vide impugned order dated June 12, 2008,
D the Tribunal has dismissed the appeal, thereby maintaining
the order of the Commissioner (Appeals).

This is how the Department has filed the two instant
appeals challenging the orders of the Tribunal.

E 6. From 1986, the SSI Units have been given the benefit
of excise duty by allowing them to clear the goods either
without payment of any excise duty or allowing them to clear
the goods at concessional duty, depending upon the nature of
product manufactured by these SSI Units. General Exemption
F No. 1 in this behalf was issued vide Notification No. 175/86-
CE dated March 01, 1986 which has been amended from time
to time. Vide these amendments, the value of the goods
produced to avail the benefits has been increasing. It is not in
dispute that the two assessees before us qualify the definition
G of SSI Units. By amendments, certain other eligibility
conditions have also been provided from time to time. One
such condition/provision with which we are concerned in these
appeals pertain to manufacturing of branded goods of third
H parties.
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 401
HEALTH CARE LTD. [A.K. SIKRI, J.]

7. Insofar as Notification No. 1/93-C.E., dated February A
28, 1993 is concerned, exemption to first clearances of
specified goods upto the value of 1 30,00,000/- and
concessional duty on subsequent clearances in case of
manufacturer having clearances not exceeding 1 3,00,00,000/
- in the preceding financial year was provided. In paragraph 4 B
of this Notification, it was stated that the exemption contained
in the said Notification would not apply to the specified goods
bearing a brand name or trade name, whether registered or
not, of another person. The said para 4 reads as under:
c
"4. The exemption contained in this notification shall not
apply to the specified goods, bearing a brand name or
trade name (registered or not) of another person:

Provided that nothing contained in this paragraph shall o
be applicable to the specified goods which are
component parts of any machinery or equipment or
appliances and cleared from a factory for use a original
equipment in the manufacture of the said machinery or
equipment or appliances, and - E

(i) in a case where the clearances of such specified
goods are within the first clearances upto an aggregate
value not exceeding rupees thirty lakhs in a financial year,
the manufacturer of the specified goods gives a .F
declaration that the specified goods shall be used as
mentioned above;

(ii) in any other case, the procedure set out in Chapter X
of the Said Rules is followed: G
Provided further that nothing contained in this paragraph
shall be applicable to the specified goods bearing a
brand name or trade name (registered or not) of the
Khadi and Village Industries Commission or of the State H
402 SUPREME COURT REPORTS [2015] 12 S.C.R.

A Khadi and Village Industries Board, National Small
Industries Corporation or the State Small Industries
Development Corporation.

* * * *
B
Notwithstanding the exemption contained in paragraph
1 of this notification, a manufacturer shall have an option
for not availing of the benefit of the exemption contained
in the said paragraph and to pay duty of excise at the
c rate applicable to the specified goods but for the
exemption contained in the said paragraph 1, subject to
the condition that such manufacturer shall pay duty at the
rate applicable but for the aforesaid exemption on all
subsequent clearances of specified goods made after
D availing such option, in a financial year in which such date
of option falls."

8. This Notification contained as many as 11
explanations. For our purposes, Explanation Nos. Ill, IX and X
E are relevant and, therefore, we reproduce here below these
explanations as well:

"Explanation Ill. - For the purpose of computing the
aggregate value of clearances under paragraph 1,2 and
3, the clearances of any specified goods, bearing a
F
brand name or trade name (registered or not) of another
person, which are not eligible for grant of exemption in
terms of provisions of paragraph 4 of this notification,
shall not be taken into account.
G Explanation IX. - "Brand name" or "trade name" shall
mean a brand name or trade name, whether registered
or not, that is to say a name or a mark, such as symbol,
monogram, label, signature or invented word or writing
which is used in relation to such specified goods for the
H
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 403
HEALTH CARE LTD. [A.K. SIKRI, J.]

purpose of indicating, or so as to indicate a connection A
in the course of trade between such specified goods and
some person suing such name or mar with or without
any indication of the identity of that person.

Explanation X.- For the purpose of this notification, where B
the specified goods manufactured by a manufacturer,
bear a brand name or trade name (registered or not) of
another manufacturer or trader, such specified goods
shall not, merely by reason of that fact, be deemed to
have been manufactured by such other manufacturer or C
trader."

9.The aforesaid Notification was replaced by Notification
No. 8/1999-Central Excise, dated February 28, 1999 which
provided the exemption from excise duty or clearance of D
goods on concessional rate of duty as per the table reproduced
below:

S.No. Value of clearances Rate of duty
(1) (2) (3) E
1. ,First dearances upto an aggregate Nil
·value not exceeding fifty lakh rupees
. made on or after the 1st day of April in
,any financial year
2. Clearances upto an aggregate value not Five per cent F
exceeding fifty lakh rupees· irrmediately adva/orem
follO\t\ling the dearances specified
,against SI. No. 1 above during the
financial year
3. •All dearances of the specified goods Nil G
·which are used as inputs for further
manufacture of any specified goods
within the factory of production of the.
specified goods.
H
404 SUPREMECOURTRL,ORTS [2015) 12S.C.R.

A 10. In paragraph 2 of this Notificatirm, certain conditions
were stipulated subject to fulfillmenl r,, which the benefit of
exemption Notification could be made available. Some of the
conditions with which we are concerned in these appeals are
noted below:
B
"2. The exemption contained in this notification shall apply
subject to the following conditions, namely:-

(i) a manufacturer who intends to avail the exemption
c under this notification shall exercise his-option in writing
for availing the exemption under this notification before
effecting the first clearances under this notification and
such option shall be effective from the date of exercise
of the option. Such option shall not be withdrawn during
o the remaining part of the financial year except when an
option is exercised with respect to Notification No. 9/99-
C.E., dated 281h February, 1999.

(ii) a manufacturer also has the option not to avail the
E exemption contained in this notification and instead pay
the normal rate of duty on the goods cleared by him. Such
option shall be exercised before effecting his first
clearances at the normal rate of duty. Such option shall
not be withdrawn during the remaining part of the financial
F year.

(iii) while exerCising the option under condition (i), the
manufacturer shall inform in writing to the Assistant
Commissioner of Central Excise or the Deputy
G Commissioner of Central Excise with a copy to the
Superintendent of Central Excise giving the following
particulars, namely:-

(a) name and address of the manufacturer;

H (b) location/locations of factory/factories;
CMMNR. OF CENTRAL EXCISE. CHENNAI v. NEBULAE 405
HEALTH CARE LTD. [A.K. SIKRI, J.]

(c) description of inputs used in manufacture of specified A
goods;

(d) description of specified goods produced;

(e) date from which option under this notification has
8
been exercised;

(f) aggregate value of clearances of specified goods
(excluding the value of clearances referred to in
paragraph 3 of this notification) till the date of exercising
the option; C

(iv) the manufacturer shall not avail the credit of duty on
inputs under rule 3 or rule 11 of the CENVAT Credit
Rules, 2002 (herein after referred to as the said rules),
paid on inputs used in the manufacture of the specified D
goods cleared for home consumption, the aggregate
value of first clearances of which, as calculated in the
manner specified in the said Table does not exceed
rupees one hundred lakhs;
E
(v) the manufacturer also does not utilise the credit of
duty on capital goods under rule 3 or rule 11 of the said
rules, paid on capital goods, for payment of duty, if any,
on the aforesaid clearances, the aggregate value of first
clearances of which does not exceed rupees one hundred F
lakhs, as calculated in the manner specified in the said
Table.

3. For the purposes of determining the aggregate value
of clearances for home consumption, the following G
clearances shall not be taken into account, namely:-

(a) clearances, which are exempt from the whole of the
excise duty leviable thereon (other than an exemption
based on quantity or value of clearances) under any other H
406 SUPREME COURT REPORTS [2015] 12 S.C.R.

·A notification or on which no excise duty is payable for any
other reason;

(b) clearances bearing the brand name or trade name
of another person, which are ineligible for the grant of
B this exemption in terms of paragraph 4 below;

(c) clearances of the specified goods which are used as
inputs for further manufacture of any specified goods
within the factory of production of the specified goods;
c (c) clearance of strips of plastics used within the factory
of production for weaving of fabrics or for manufacture
of sacks or bags made of polymers or ethylene or
propylene.
D 4. The exemption contained in this notification shall not
apply to specified goods bearing a brand name or trade
name, whether registered or not, of another person,
except in the following cases:-

E (a) where the specified goods, being in the nature of
components or parts of any machinery or equipment or
appliances, are cleared for use as original equipmeAt in
the manufacture of the said machinery or equipment or
appliances by following the procedure laid down in
F Chapter X of the Central Excise Rules, 1994. Provided
that manufacturers, whose aggregate value of clearances
for home consumption of such specified goods for use
as original equipment does not exceed rupees fifty lakhs
in a financial year as calculated in the manner specified
G in the said Table, may submit a declaration regarding
such use instead of following the procedure laid down in
Chapter X of the said rules;

(b) where the specified goods bear a brand name or
H trade name of-
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 407
HEALTH CARE LTD. [A.K. SIKRI, J.]

(i) the Khadi and Village Industries Commission; or A

(ii) a State Khadi and Village Industry Board; or

(iii) the National Small Industries Corporation; or

(iv) a State Small Industries Development Corporation; B
or

(v) a State Small Industries Corporation."

11. This Notification also provided the definition of 'brand C
name' or 'trade name', as under'.

"Explanation. - For the purposes of this notification, -

(A) "brand name" or "trade name" shall mean a brand
name or trade name, whether registered or not, that is to D
say a name or a mark, such as symbol, monogram, label,
signature or invented word or writing which is used in
relation to such specified goods for the purpose of
indicating, or so as to indicate a connection in the course
of trade between such specified goods and some person E
using such name or mark with or without any indication
of the identity of that person;

(B) where t~e specified goods manufactured by a
manufacturer bear a brand name or trade name, whether F
registered or not, of another manufacturer or trader, such
specified goods shall not, merely by reason of that fact,
be deemed to have been manufactured by such other
manufacturer or trader"
G
12. In other Notifications, namely, Notification Nos. 9/
1999-C.E., 8/2000-C.E., 9/2000-C.E., 8/2001-C.E., 9/2001-
C.E., 8/2002-C.E., 9/2002-C.E., 8/2003-C.E. and 9/2003-C.E.,
there is no significant amendment which has bearing on the
present case as the conditions which are necessary for our H
408 SUPREME COURT REPORTS [2015] 12 S.C.R.

A purposes remained almost the same. However, it would still
be apt to reproduce paras 2, 3 and 4 of Notification No. 8/
2003 dated March 01, 2003.

"2. The exemption contained in this notification shall apply
B subject to the following conditions, namely:-

(i) a manufacturer has the option not to avail the
exemption contained in this notification and instead pay
the normal rate of duty on the goods cleared by him. Such
C option shall be exercised before effecting his first
clearances at the normal rate of duty. Such option shall
not be withdrawn during the remaining part of the financial
year;

(ii) while exercising the option under condition (i), the
D
manufacturer shall inform in writing to the Assistant
Commissioner of Central Excise or the Deputy
Commissioner of Central .Excise with a copy to the
Superintendent of Central Excise giving the following
E particulars, namely:-

(a) name and address of the manufacturer;

(b) location/locations of factory/factories;

F (c) description of inputs used in manufacture of specified
goods;

(d) description of specified goods produced;

(e) date from which option under this notification has
G been exercised;

(f) aggregate value of clearances of specified goods
(excluding the value of clearances referred to in
paragraph 3 of this notification) till the date of exercising
H the option;
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 409
HEALTH CARE LTD. [A.K. SIKRI, J.]

(iii) the manufacturer shall not avail the credit of duty on A
inputs under rule- 3 or rule 11 of the CENVAT Credit
Rules, 2002 (herein after referred to as the said rules),
paid on inputs used in the manufacture of the specified
goods cleared for home consumption, the aggregate
value of first clearances of which, as calculated in the B
manner specified in the said Table does not exceed
rupees one hundred lakhs;
(iv) the manufacturer also does not utilise the credit of
duty on capital goods under rule 3 or rule 11 of the said c
rules, paid on capital goods, for payment of duty, if any,
on the aforesaid clearances, the aggregate value offirst
clearances of which does not exceed rupees one hundred
lakhs, as calculated in the manner specified in the said
Tub~; D
(v) where a manufacturer clears the specified goods
from one or more factories, the exemption in his case
shall apply to the aggregate value of clearances
mentioned against each of the serial numbers in the said
Table and not separately for each factory; E

(vi) where the specified goods are cleared by one or
more manufacturers from a factory, the exemption shall
apply to the aggregate value of clearances mentioned
against each of the serial numbers in the said Table and F
not separately for each manufacturer;

(vii) the aggregate value of clearances of all excisable
goods for home consumption by a manufacturer from one
or more factories, or from a factory by one or more G
manufacturers, does not exceed rupees three hundred
lakhs in the preceding financial year.

3. For the purposes of determining the aggregate value
of clearances for home consumption, the following H
410 SUPREME COURT REPORTS (2015] 12 S.C.R.

A clearances shall not be taken into account, namely:-

(a) clearances bearing the brand name or trade name
of another person, which are ineligible for the grant of
this exemption in terms of paragraph 4;
B
(b) clearances of the specified goods which are used
as inputs for further manufacture of any specified goods
within the factory of production of the specified goods;

(c) clearance of strips of plastics used within the factory
c of production for weaving of fabrics or for manufacture
of sacks or bags made of polymers or ethylene or
propylene.

4. The exemption contained in this notification shall not
D apply to specified goods bearing a brand name or trade
name, whether registered or not, of another person,
except in the following cases:-

(a) where the specified goods, being in the nature of
E components or parts of any machinery or equipment or
appliances, are cleared for use as original equipment in
the manufacture of the said machinery or equipment or
appliances by following the procedure laid down in the
Central Excise (Removal of Goods at Concessional Rate
F of Duty of Manufacture or Excisable Goods) Rules, 2001:

Provided that manufacturers, whose aggregate value of
clearances of the specified goods for use as original
equi9pment does not exceed rupees one hundred lakhs
G in the financial year 2002-2003 as calculated in the
. manner specified in paragraph 1, may submit c.
declaration regarding such use instead of following the
procedure laid down in the said Central Excise (Removal
of Goods at Concessional Rate of Duty for Manufacture
H of Excisable Goods) Rules, 2001:
CMMNR OF CENTRAL EXCISE, CHENNAI v. NEBULAE 411
HEALTH C~RE LTD. [A.K. SIKRI, J.]

(b) where the specified goods bear a brand name or A
trade name of-

(i) the Khadi and Village Industries Commission; or

(ii) a State Khadi and Village Industry Board; or
B
(iii) the National Small Industries Corporation; or

(iv) a State Small Industries Development Corporation;
or
c
(v) a State Small Industries Corporation;

(c) where the specified goods are manufactured in a
factory located in a rural area."

13. Having taken note of the relevant provisions of the D
aforesaid exemption Notifications and without commenting
upon the same at this juncture, we would like to discuss few
judgments of this Court which have considered and interpreted
these Notifications in the context of the issue that arises for
determination in these appeals. In Commissioner of Central E
Excise, Ahmedabad v. Ramesh Food Products 1, the
assessee therein was engaged in the manufacture of biscuits
under the brand name 'Ramesh' on hfs own account. It was
also manufacturing, on job work basis, biscuits under the brand F
name of 'Cadbury' on behalf of Mis. Hindustan Coco Products,
Bombay. It availed MODVAT benefit on the inputs used for
manufacture of Cadbury branded biscuits. The Department
issued the show cause notice taking the position that as the
assessee had availed MODVAT benefit it had no right to avail G
the benefit of Notification No. 175/86 in respect of its own
goods bearing 'Ramesh' brand either. Though, the Assistant
Collector dropped the demand holding that assessee could

' 2004 (174) E.L.T. 310 (S.C) H
412 SUPREME COURT REPORTS [2015] 12 S.C.R.

A avail both the benefits, the Collector (Appeals) took a contrary
view holding that it was not permissible for the assessee to
simultaneously opt for goods of one heading and MODVAT
facility in respect of another heading. Assessee's appeal
before the CEGAT was decided in favour of the assessee,
B which decision of CEGAT was upset by this Court in the
judgment. This Court noted that the CEGAT had relied upon
another judgment of Tribunal in Faridabad Tools Pvt. Ltd. v.
Collector of Central Excise2which was specifically overruled
by a larger Bench of CEGAT in Kamani Foodv. Collector of
C Central Excise3

14. After extensively quoting from the discussion of the
Tribunal in Kamani Food case (supra), this Court observed
as follows:
D
"10. Notification 175/86 have to be read as a whole and
as noted rightly, in Kharia Cement Works case (supra)
Sub-clauses (i) and (ii) have to be construed
harmoniously. Exemption envisaged for the specified
E goods accrues to them through instrumentality of the
manufacturer. The notification clearly demarcated the two
categories of manufacturers. A clear cut distinction is
explicit between a manufacturer availing Modvat credit
under Rule 57A and another not opting for the Modvat
F Scheme. As is statutorily provided, input duty relief is
given under the scheme to the manufacturers who opt to
operate under the scheme by applying for it in the
prescribed manner. Ultimately the manufacturers have
the choice of choosing one of the two concessions, i.e.
G either The Modvat Scheme or Notification 175/86.
Further, there is no one to one correlation between the

2
1993 (63) E.L.T. 759
H 3 1995 (75) E.L.T. 202
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 413
HEALTH CARE LTD. [A.K. SIKRI, J.]

inputs and final products under Modvat Scheme. It would A
therefore not possible to allow the manufacturer to
simultaneously avail Modvat for some products and avail
full exemption for others under small-scale exemption
scheme."
B
15. Some of the salient features of the decision of this
Court in Ramesh Food Products which need to be
emphasised are the following:
(a) The decision of the Tribunal in that case was of the
year 1998 and it had relied upon its ear.lier judgment in C
Faridabad Tools case, which was decided in the year
1993, without realising thatthe said judgment had been
overruled by a larger Bench of the Tribunal in Kamani
Foods case, decided in the year 1995.
D
(b) In view of the above, this Court was influenced by the
fact that smaller Bench of the Tribunal, while giving the
decision which was impugned before it, was bound to
follow the judgment of the larger Bench as per the
demands of judicial propriety. ·E

. (c) In Kamani Foods case, the larger Bench of the
Tribunal ha:I noted its earlier Special Bench ruling in the
case of Kharia Cement Works v. Collector of Central
Excise4 wherein it was held that Notification No. 175 of F
1986 had to be read as a whole and sub-:,clauses (i) and
(ii) had to be construed harmoniously. The case was,
thus, confined to interplay between sub-clauses (i) and
(ii) of clause (a) of para 1 of the Notification, which reads
asunder: G
"In exercise of the powers conferred by sub-rule (1) of
Rule 8 of the Central Excise· Rules, 1944, in

4 1989 (42) ELT 696 (Tribunal) H
414 SUPREME COURT REPORTS [2015] 12 S.C.R.

A supersession of the notification of the Government of
India in the Ministry of Finance (Department of
Revenue) No. 85/85-Central Excises, dated the 17th
March, 1985, the Central Government hereby exempts
the excisable goods of the description specified in
B theAnnexure below and falling under the Schedule to
the Central Excise Tariff Act, 1985 (5 of 1986),
(hereinafter referred to as the "specified goods"), and
cleared for home consumption on or after the 1st day
of April in any financial year, by a manufacturer from
c one or more factories, -
(a) in the case of the first clearances of the specified
goods upto an aggregate value not exceeding rupees
thirty lakhs, -
D
(i) in a case where a manufacturer avails of the credit
of the duty paid on inputs used in the manufacture
of the specified goods cleared for home
consumption under Rule 57A of the said Rules, from
so much of the duty of excise leviable thereon which
E
is specified in the said Schedule [read with any
relevant notification issued under sub-rule (1) of Rule
8 of the said Rules or sub-section (1) of section 5A
of the Central Excises and Salt Act, 1944 (1 of
F 1944) and in force for the time being] as is
equivalent to an amount calculated at the rate of
10% ad valorem :
(ii) in any other case from the whole of the duty of
excise leviable thereon :
G
Provided that the aggregate value of clearances of
the specified goods under sub-clause (ii) of this
clci.use in respect of any one chapter of the s.aid
Schedule, shall not exceed rupees twenty lakhs;
H xx xx x:X'
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 415
HEALTH CARE LTD. [A.K. SIKRI, J.]

(d) Interpreting the aforesaid two sub-clauses A
harmoniously, this Court, while giving its imprimatur to
Kamani Foods case, held that if the MODVAT credit
under Rule 57A is ·availed by the assessee, it would not
be entitled to exemption from excise duty under the said
Notification. Significantly, these two sub-clauses deal B
with the goods manufactured by the assessee with its
own brand and do not deal with the situation where, in
addition, the assessee/manufacturer also manufactures
the goods of third parties on job work basis. It goes
without saying, and does not need much elaboration, that C
in respect of its own goods manufactured by the SSI Unit,
it can either claim exemption from the excise duty or
CENVAT credit, and not both. That is the clear message
of sub-clauses (i) and (ii) of clause (a) of para 1 of the D
Notification.

(e) Distinction between the goods cleared for home
consumption and those manufactured on job work basis
for third parties and the fact that CENVAT credit was
availed of only in respect of goods manufactured for third E
parties and not with respect to home brand was not
brought to the notice of the Court. Other provisions of
the notifications which have bearing on this issue were
also not brought to the notice of the Court. In fact, as F
noted above, the Court was primarily influenced by the
fact that Tribunal had relied upon its earlier decision in
Faridabad Tools case witllout realising that same had
already been overruled by a larger Bench of the Tribunal
in Kamani Foods case. It would be pertinent to point G
out that the appeal was decided ex parte, i.e., in the
absence of assessee who chose not to appear. As would
be noted hereafter on this issue, it is the other clauses of
the Notifications which provide a correct answer.
H
416 SUPREME COURT REPORTS [2015] 12 S.C.R.

A 16. The question posed in these appeals, however, is
different where the assessees have not claimed any CENVAT/
MODVAT credit in respect of inputs used in the manufacture
of their own products. This CENVAT credit is availed by them
in respect of goods manufactured for third parties on job work
B basis for which the assessees had admittedly paid the excise
duty. In such circumstances, whether such an assessee loses
the benefit of exemption notification even in respect of goods
for home consumption? Answer to this question is not available
in sub-clauses (i) and (ii) of clause (a) of para 1. For this,
C other paragraphs of the Notifications i.n question have to be
looked into. We have already extracted those relevant
paragraphs from these Notifications. We reproduce, in the
form of a comparative chart, extract of those paragraphs:
D , Notification No. 8199-CE and 9199-
Notification No. 175186
CE
I
i
Proviso to Para 3 iPara 3
1-·-
"Provided that for the purpose of For the purposes of determining the
E 1

computing the aggregate value of! aggregate value of clearances for
clearances under this paragraph, thel' home consumption, the following
clearances of any excisable goods clearances shall not be taken into,
where a manufacturer affixes the Iaccount, namely: '.
specified goods with a brand name; ·
or trade name (registered or not) of (a) clearances, which are exempt
F another person who is not eligible for from the whole of the excise duty
the grant of exemptim under this leviable thereon (other than an,
notification, shall not be taken into.exemption based on quantity or!
account;" value of clearances) under any other!
notification or on which no excise i
'duty is payable for any other reason; .
I
G
(b) clearances being the brand I
name or trade name of another•
person, which are ineligible for the!
grant of this exemption in terms ofj
.I paragraph 4 below; '
H
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 417
HEALTH CARE LTD. [A.K. SIKRI, J.]

A
(c) d~ of the sperified gcxxJs
Viklidl are used as inputs for further
1113fl.Jfa'.iure of ary sp00fied gcxxJs
wthin the fa::tory of prcxludion of the
sp00fied gcxxJs;

(d) deararres of strip:; of plastics used B
wthn the fa::tory of p-cx:k.idion for
v.eavirg of fatxics or for rranufa::ture
of scd<s or tags rm:le d ~yrrers of
ethylene or propylene.

c
1re exerrption CXJlltained in this 1re exerrption CXJlltained • in this
notification shall not ai:Py to the notification shall not al'.PY to the
sp00fied gcxxJs W1ere a rranufa::turer sp00fied gcxxJs bearirg a brard rare
allixes the sp00fied gcxxJs wth a l:ra1d or tra:le narre, W1ether rajstered or
narre or tra:le rare (rajstered or not) not, of another person, exrei:t in the D
of another person W1o is not eligitie for fdl<Jlvirg cases:-
the grant of exerrption urm this
notification. (a) Wiere sud1 sperified g:x:xJs, b8irg
in the nature of CXllT(:xll8l1ts or p:rts of
Provided that nothirg oon!Einirg in this ary ITErllinery or a:iuiprrent or
notification shall be al'.Picatie to the appliances, are dexred for use as
E
sperified g:x:xJs Viklidl are cx:rri:xirent aiginal a:iuiprrent in the rranufa::ture
r;arts cJ aT'f rra::hinery or a:iuiprrent or of the said ITEdlinery or equiprrent or
applicno:s and deared from a fa::tory appliances by fdloorg the pro:a:!ure
for use as aiginal a:iuiprrent in the laid doM1 in Oiapter X of the Central
rranufocture of the said ITErllinery or Excise Rules, 1944.
a:iuiprrent or al'.Picno:s aid the
pro:a:!ure set rut in Oiaper X of the Provided that rranufa::turers, W1ose F
, said rules is follCMed... cqregate value cJ decrax::es for
rare consurrption cJ sud1 sperified
gcxxJs for use as aiginal equiprrent
does not exceed rupee; fifty lakhs in a
finardal year as raculated in the
rramer sp00fied in the said Tctile, rray G
subllit a dedaration regardirg sud1
use instea:l of fdloorg the pro:a:!ure
laid doM1 in 01apter X of the said
rules;

H
418 SUPREME COURT REPORTS [2015] 12 S.C.R.

1--··---- -- .- --· - --- - - --------,
A 1
--

I
I Provided further that nothing contained ' (b) Wiere the specified goods bear a !
' in this paragraph shall be applicable to . brand name or trade name of - ·1

: the speafied goods .Wiere a
! manufacturer affixes the specified (i) the Khadi and Village Industries
I goods wth a brand name or trade , Conmission; or ;
~ name (registered or rot) of the Khadi I (ii) a State Khadi and Village Industry
8 i and Village Industries Cormission, the Board; or
[ State Khadi and Village Industries, (iii) the National Small Industries
' Board, the National Small Industries' Corporation; or ·
Corporation or the State Small (iv) a State Small Industries
Industries Development Corporation. Development Corporation; or

. -... 1 =~to;,..s - --1
I (v) a State Small Industries :
c
1~:~001v
i For the purposes of this notification, For the purposes of this notification, I
1 Wiere the specified goods · Wiere the specified goods j
· manufactured by a manufacturer, are manufactured by a manufacturer bear .
D affixed wth a brand name or trade a brand name or trade name, Wle!her I
name (registered or not) of another registered or not, of another
manufacturer or trader, such specified mar,ufacturer or trader, such specified
I
goods shall not, merely by reason of ·. goods shall not, merely by reason of
that fact, be deemed to have been that fact, be deemed to have been

E
~~~:~~~~or tr!ier~_such.- - ot~r: :~~:~~~~ortr:~~~uch-- ._ot~J
17. A holistic reading of the Notification, in the light of the
other paragraphs, brings into focus the overall scheme. It, inter
alia, provides that the clearances bearing the brand name or
F trade name of third parties which are ineligible for grant of this
exemption, for the purposes of determining aggregate value
of clearances for home consumption, are not to be included.
These Notifications also make it clear that the exemption
G contained therein is not to apply to the specified goods bearing
a brand name or trade n;:ime, whether registered or not, of any
person, except under certain circumstances specifically
stipulated therein. The Notifications also clarify that for the
purpose of these Notifications, where the goods manufactured
H by a manufacturer bear brand name or trade name (whether
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 419
HEALTH CARE LTD. [A.K. SIKRI, J.]

registered or not) of any manufacturer of trade, they shall not A
be deemed to have been manufactured by such other
manufacturer or trade. Reading of the aforesaid provisions in
the Notifications unambiguously points out that forthe purposes
of availing the benefit of Notification by an SSI Unit, the
clearances for home consumption only are to be taken into B
consideration, except in those cases where it is clearly
provided otherwise. For this purpose, clearances bearing the
brand name or trade name of third parties are concerned, they
are kept outside the scheme inasmuch as: (a) they are not to
be included for the purposes of determining the aggregate C
value of the clearances for home consumption; and (b) such
products bearing brand names or trade names of third parties,
even if manufactured by the SSI Unit, are not eligible for any
exemption and excise duty thereupon has to be paid. Once
0
we understand the scheme of the Notifications in the aforesaid
perspective, which according to us is the only manner in which
it has to be understood, it becomes apparent that so far as
manufacture of branded goods of third party on job work basis
by the SSI Unit is concerned, they are to be dealt with differently E
in the sense that they do not come within the ambit of
exemption on which normally excise duty, as per the provisions
of the Act, is payable. As a sequitur, it also follows that once
excise duty is paid by the manufacturer on such branded goods
manufactured, the brand name whereof belongs to another F
person, on job work basis, the SSI Unit would be entitled to
CENVAT/MODVAT credit on the inputs which were used for
manufacture of such goods as on those inputs also excise duty
was paid. To put it otherwise, these branded goods
manufactured by the SSI Units meant for third parties are G
regulated by the normal provisions of excise law and will have
no bearing or relevance insofar as availing the benefit of those
exemption notifications in respect of its own products
manufactured by the SSI Units is concerned.
H
420 SUPREME COURT REPORTS [2015] 12 S.C.R.

A 18. We, thus, find that the Tribunal in the impugned
decisions in both these appeals has decided the issue
correctly. Admittedly, in respect of home production, the
assessee had not availed the benefit of two options
simultaneously as no CENVAT credit is claimed in respect of
B those goods. While doing so, the Tribunal has taken note of
the judgment of this Court in Ramesh Food Products case
and rightly analysed the same. We reproduce following
discussion in the impugned judgment dated 22.08.2006 of the
Tribunal (which is the subject matter of Civil Appeal No. 2789
C of2007):

"7. The provisions in the relevant Notifications to compute
aggregate value of clearances mandate that the
clearances of goods bearing brand name or trade name
0 of another persons which are ineligible for the grant of
exemption shall not be taken into account in determining
the aggregate value of clearances. Therefore, value of
clearances of goods bearing brand name of third parties
without availing the benefit of Notification No. 8/2003 is
E not reckoned for computing clearance value of rup~es
one hundred lakhs in any year for exemption benefit.
From these clauses contained in the relevant
Notifications, it is clear that goods bearing brand name
of third parties were not eligible for exemption contained
F
in Notification No. 8/2003. Identical provision existed in
Notifn No. 9/2003 where the option of availment of
Modvat benefit and payment of a concessional rate of
duty was prescribed. Goods bearing brand name of third
parties are therefore excluded from the exemption in
G
Notification No. 9/2003 as well. The assessee has not
availed the benefit contained in either of the Notifications
8/99 and 9/99, 8/2000 and 9/2000 etc. in respect of
goods bearing brand name of third parties.
H
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 421
HEALTH CARE LTD. [A.K. SIKRI, J.]

8. We find that the impugned order also seeks support A
of the ratio of Ramesh Food Products case decided by
the Hon'ble Supreme Court. In that case, the Honourable
Supreme Court considered the options available to the
SSI units clearing specified goods and decided that both
the options provided substantive concessions viz; B
modvat and exemption under Notfn. 175/86 to the
manufacturer and the manufacturer had to decide on one
option. Once an option was made, there was no liberty
to the assessee to avail benefits of both the pptions
simultaneously. Therefore an SSI unit availing full C
exemption as per the Notfn. No. 175/86 in respect of
certain specified goods could not also avail the modvat
benefit in respect of certain other specified goods.

8.1 Notfn No. 175/86 dated 01.03.1986 extended D
concessional rate of duty on first clearances of specified
goods of value of rupees seven and half lakhs while
availing modvat crediton inputs or full exemptions benefit
for such goods without the benefit of modvat credit. The
Notfn also provided lesser benefit for further clearances E
in excess of the above aggregate value ':lnder both the
options for higher slabs/aggregate value of clearances.
In computing the aggregate value of clearances for the
purposes of exemption under both the options, the F
notification did not require that the goods bearing brand
name of third parties should be excluded. The following
explanations, inter-alia, governed computation of the
above aggregate value for the Notfn.

Explanation IV - For the purposes of this notification, G
where the specified goods manufactured by a
manufacturer, are affixed with a brand name or trade
name (registered or not) of another manufacturer or
traders, such specified goods shall not, merely by reason H
422 SUPREME COURT REPORTS [2015] 12 S.C.R.

A of that fact, be deemed to have been manufactured by
such other manufacturer or trader.

8.2 The above condition though present in the
Notifications that replaced the scheme of duty benefit
B for SSI units contained in Notfn. 175/86, value of such
goods are specifically excluded from the computati_on of
aggregate value in these Notfns. Clearances of goods
bearing brand name of third parties is thus not governed
by the Notfns issued for the benefit of SSI units.
c
xx xx xx
9.1 All the twin Notifications contain the following identical
conditions excluding the goods bearing brand name of
third parties from the purview of both the Notifications:
D
"3. For the purpose of determining the aggregate value
of clearances for home consumptions, the following
clearances shall not be taken into account, namely:

E (a) xx xx xx
(b) clearances bearing the brand name or trade name
of another person, which are ineligible for the grant of
this exemption in terms of paragraph 4 below.
F
4. The exemption contained in the Notification shall not
apply to the specified goods bearing a brand name or
trade name, whether registered or not, of another person,
except in the following cases .... "
G The exclusions mentioned are components manufactured
for OE manufacturers, goods manufactured in rural area,
goods bearing brand names of KVIC etc. The conditions
contained in para 2(iii) of the relevant Notifications
seminal to the dispute was not present in the Notification
H
CMMNR. OF CENTRAL EXCISE, CHENNAI v. NEBULAE 423
HEALTH CARE LTD. [AK. SIKRI, J.]

No. 175/86. The relevant notifications are different from A
Notification No. 175/86 in view of the other new conditions
since added.

10. Therefore, the ratio laid down by the Apex Court
interpreting Notification No. 175/86 in Ramesh Food s
Products cannot apply in reading the scope of pairs of
Notifications issued in various years after its (Notification
No. 175/86) rescission for the benefit of SSI Units. It is
well settled that each Notification has to be construed
strictly on its own terms. The issue involved in the subject C
case is interpretation of the scope of relevant Notfns
extending exemption without the benefit of modvat credit.
In the view we hav~ taken of the relevant Notifications,
the assessee had correctly availed the exemption under
the relevant Notfns. and the impugned order is passed D
on incorrect reasoning. We therefore set aside the
impugned order and allow the appeal."

19. We, accordingly, uphold the view of the Tribunal in
both the decisions, result whereof is to dismiss these appeals. E
Ordered accordingly. There shall, however, be no order as to
costs.

Devika Gujral Appeals dismissed.