Custom, Excise & Service Tax Tribunal
Bhagwati Foods Pvt. Ltd vs C.C.E. & S.T., Kanpur on 30 June, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
REGIONAL BENCH: ALLAHABAD
DIVISION BENCH
E/51610/2015, E/51611/2015, E/51612, E/51613, E/51614,
E/51615, E/51616, E/51617, E/51618/2015-EX(DB)
Dated of Hearing/decision: 30/6/2016
[Arising out of Order-in-Appeal No. 1,2,3,4,5,6,8,9,& 7/CE/ALLD-2015 dated 20/01/2015 passed by Commissioner (Appeals), Central Excise, Allahabad, (U.P.)]
For approval and signature:
Honble Shri Anil Choudhary, Judicial Member
Honble Shri Anil G. Shakkarwar, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether their Lordships wish to see the fair copy of the order?
Seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
Bhagwati Foods Pvt. Ltd,
Sudhir Kumar Gupta, Authorized Signatory Appellant
Vs.
C.C.E. & S.T., Kanpur Respondent
Appearance:
Present for the Appellant: Shri R. Krishnan, Advocate Present for the Respondent: Shri S.J. Sahu (Assistant Commissioner) A.R. Coram: Honble Shri Anil Choudhary, Member (Judicial) Honble Shri Anil G. Shakkarwar, Member (Technical) Final Order No.70409-70417/2016 Per: Anil Choudhary These nine appeals have been filed by Bhagwati Foods Pvt. Ltd.
Sl.
No. Appeal No. OIO No. Period Involved Amount Confirmed U/s 11A Penalty U/s 11 AC r/w Rule 25 Penalty U/Rule 26
1. 38-C.EX/ACK-II/13 Dt. 30.04.2013 1.4.2009 to 31.10.2009 376938
2.
39-C.EX/ACK-II/13 Dt. 30.04.2013 April, 2008 to Sep. 2008 459579
3. 40-C.EX/ACK-II/13 Dt. 30.04.2013 March 2008 to Nov. 2008 8396 8396 0
4. 41-C.EX/ACK-II/13 Dt. 30.04.2013 Oct. 2008 to March 2009 480308
5. 51-C.EX/ACK-II/13 Dt. 06.6.2013 3 May, 2007 to 27 Feb., 2008 34345 234345 0
6. 11-12-C.EX/OFF/ACK-II/13 Dt. 31.01.2013 Nov., 2009 to May 2010 & June 2010 to Nov. 2010 935636
7. 49-C.EX/Off/ACK-II/12 Dt. 31.12.2012 Dec.2009 to July, 2010 2533 2533 0
8. 41/APAR AAYUKTA/KENDRIYA UTPTHYA,2012 dt. 09.11.2012 Dec. 2010 to Sept., 2022 1647050 1647050
9. 41/APAR AAYUKTA/KENDRIYA UTPTHYA,2012 dt. 09.11.2013 Appeal Ofsri Sudhir Kumar Gupta Authorised Signatory of M/s Bhagwati DO 0 200000
2. The brief facts of case are:-
M/s Bhagwati Foods Pvt. Ltd, Kanpur (here-in-after referred to as the appellant), holder of Central Excise registration No. AABCB33680PXM003 are engaged in the manufacture of Biscuits of Tiger Brand and others for Britania Biscuits (here-in-after referred to as finished goods) ranging from Rs. 44/- per kgs. to Rs.100/- per Kgs., falling under Chapter Sub Heading No. 19053120 of the Schedule to the Central Excise Tariff Act, 1985.
3. On the basis of scrutiny of E.R.-1 returns submitted by the appelant, it has come to the notice that the appellant is not showing the production of Sugar Syrup which is being manufactured and captively consumed. The Sugar Syrup appeared classifiable under chapter sub-heading No. 17029090 is being consumed in the manufacture of exempted finished goods i.e. Biscuits of MRP below Rs. 100/- per kgs and they are not paying Central Excise Duty on Sugar Syrup (Intermediate Product).
4. Prior to 03.05.07, the finished goods i.e. biscuits being manufactured by the appellant were attracting Central Excise duty @ 8% advalorem and, therefore, the intermediate goods i.e. Sugar Syrup, was exempted from payment of Central Excise Duty in terms of Notification No. 67/1995-CE dated 16.03.1995 as amended. But w.e.f. o3.05.07, appellants finished goods i.e. Biscuits of MRP below Rs.100/- per kgs has been exempted vide Notification No. 22/2007-CE dated 03.05.2007 and therefore, the Notification No. 67/95-CE becomes inapplicable on their intermediate product i.e. Sugar Syrup.
5. The appellant was asked by revenue dated 29.08.2008 and another letter dated 21.11.2008 to submit the manufacturing process of their final products and all ingredients and also the production and clearance value of Sugar Syrup. In reply, the appellant vide their letter dated 04.12.2008 and 12.12.2008 submitted the list of raw material/ingredients and flow chart of manufacturing process.
6. To verify the facts, the officers of range visited on 27.03.2009 the factory premises and studied the manufacturing process involved in the factory and found that the Sugar Syrup (Sugar solution) is being manufactured. In this regard a panchnama dated 27.03.2009 was also drawn on the spot in the presence of Shri Sudhir Kumar Gupta, Authorized Signatory of the appellant and Shri Vipul Singh Chauhan, Production Incharge of the unit.
7. A statement dated 22.01.10 of Shri Vipul Singh Chauhan, Production in charge of the unit under Section 14 of the Central Excise Act, 1944 was recorded wherein he interalia stated that:
(i) The unit is engaged in the manufacturing of biscuits of M/s Britania under brand names Tiger Glucose, Tiger Coconut, Good Day Butter etc. For the manufacture of the Biscuits, all the raw material and packing materials are supplied by M/s Britania Industries Ltd.
(ii) For the manufacture of Tiger brands and WFP (World Food Programe) biscuits, they prepare Sugar solution. He stated, further, that in 35 Kg of hot water at 100 degree C, 100 degree C, 100 kgs. Sugar is added and stirred until it is completely dissolved. Thereafter 200 gm citric acid, an anti oxidant is mixed to it and then the solution is cooled and filtered and finally 102-104 Kg of Sugar Syrup is recovered. He further added that for the manufacture of 100 kgs, Biscuits, approx. 2.5 kgs. Sugar Syrup is used.
8. On perusal of ER-1 returns submitted by the party for the period Dec10 to Sep11, it was found that no details of Sugar Syrup i.e. quantity of production, and captive consumption etc. were being given in the said monthly returns. Also the appellant is not paying Central Excise duty on the Sugar Syrup consumed captively in the manufacture of exempted finished goods. All the ER-1s contain the details of Biscuits manufactured and cleared by them without payment of duty as per Notification No. 22/2007-CE dated 03.05.07, but they have not mentioned the production and captive consumption of the intermediate goods (i.e. Sugar Syrup) in any of the ER-1.
9. Accordingly a show cause notice issued to the pray requiring them to show cause as to why:-
(i) Central Excise duty amounting to Rs.16,47,050/- (Cenvat duty Rs.15,99,077.63/- + Edu. Cess Rs.31,981.55/- + S & H Edu. Cess Rs.15,990.77/-) should not be demanded and recovered from them under Section 11A(1) of Central Excise Act, 1944 on 612338.09 Kgs of Sugar Syrup consumed capitvely from Dec10 to 11th Sep11.
(ii) Interest should not be demanded and recovered from them under Section 11AB (upto 07.04.2011) and Section 11AA (w.e.f. 08.04.2011), till the actual date of payment of such duty, till the payment of the duty.
(iii) Penalty should not be imposed upon them under Section 11AC of central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002 for the reasons discussed above.
(iv) Penalty should not be imposed upon them under Rule 27 of Central Excise Rules, 2002 for the reasons discussed above.
10. The appellant contested the show cause notice and stated that they are engaged in the manufacture of biscuits and the process of manufacture involves preparation of sugar syrup. The syrup is captively consumed and used in the integrated process of manufacture and is not packed and removed from the production process line. At no point of time they had ever sold nor even intended to sell the sugar syrup. The sugar syrup by itself is not complete and finished product, so that it can be subject to duty of excise. It is settled law by the Honble Supreme Court that merely because an item is specified in the Central Excise Tariff, it cannot be held that the product attracts excise duty unless it is shown that it is actually being marketed or is being bought and sold in the market, or capable of being marketed.
11. The appellant further added that it is settled law by the Honble Supreme Court in CCE Vs. MARKFED VANASPATI & ALLIED INDUS. 2002-153-ELT-491 (SC) wherein it has been held that onus of proving marketability of the products is on the revenue and merely because an item is attracted to a tariff entry it cannot be taken that there was manufacture of excisable goods unless its marketability is also established. Reliance was placed upon the following Rulings also:-
(a) UNION OF INDIA V. DELHI CLOTH & GENERALMILLS CO. LTD 1997-92-ELT-315 (SC) The commodity which is sought to be subjected to excise duty must be a commodity which is marketable as it is.
(b) DHARAMPAL SATYAPAL V. CCE 2005-183-ELT-241 (SC) The test of marketability is that the product which is made liable to duty must be marketable in the condition in which it emerges.
(c) CCE V. UNITED PHOSPHORUS LTD. -2000-117-ELT-529 (SC)
(d) GUJRAT NARMADA VALLEY FERTILIZER CO. LTD. V. CCE 2005 184 ELT 128 (SC).
(e) CCE V. JAGAJIT INDUSTRIES LTD 2002 141- ELT 306 (SC)
(f) CCE V. AMBALAL SARABHI ENTERPRISES 1989 43 ELT 214 In the present case admittedly none of these judicially laid down guidelines are shown to be satisfied and therefore the duty demand is wholly unjustified in law.
12. They also stated that the Department has not even tested the sugar syrup, captively manufactured, in the Chemical Laboratory so as to hold that it satisfied the technical characteristics of sugar syrup falling under Chapter heading 1702. This was essential and statutorily required before alleging that the sugar syrup is dutiable. Therefore, the onus cast on the department has not been discharged. The reliance on HSN by the adjudication authority is of no help for the reason that unless the test of marketability is satisfied, the question of fitting in the commodity in an entry in the tariff is simply superfluous. That mere mention of a particular commodity in the tariff does not mean ipso facto the commodity is marketable, especially when no evidence is brought in to this effect by the Revenue. Unless any such evidence is on record, the duty demand as proposed is clearly bad in law. It is further submitted that in CCE V. Raptokos Brett & Co. Ltd., this Tribunal has clearly held that sugar syrup which comes into existence during the intermediate stage is not dutiable.
13. The ld. Commissioner confirmed the demand with equal amount of penalty and also interest.
14. Being aggrieved the appellant is before the Tribunal on among others the following grounds.
(1) No. allegation/finding regarding contents of fructose as per tariff requirement.
(2) There can be no assumption that marketablility was not questioned for prior period.
(3) Subsequent exemption notification cannot lead to inference of dutiability of goods for prior period.
(4) Different legal stand can be taken by assessee if he was working under an error of law.
(5) Reliance on an order of another Commissioner (Appeals), not to be applied blindly.
(6) Marketability test as per Supreme Courts ruling not established by the department.
(7) HSN interpretation notes not relevant as entry in the excise tariff, not pari material with HSN.
(8) SSI exemption not considered (9) Levy of penalty under Rule 27 is unjustified
15. Heard the parties, I find that the issue in this appeal is squarely covered by the earlier order of Division Bench of this Tribunal, Final Order No.50759-50764/2015 dated 03.3.2015 where in under similar circumstances this Tribunal is held as follows:-
7. The dispute in the present case is as to whether sugar syrup made by the appellant for captive use in the manufacture of exempted biscuits is chargeable to Central Excise duty under sub-heading 17029090 of the Central Excise Tariff. The Departments contention is that since the sugar syrup is used in the manufacture of the exempted biscuits, the benefit of Notification No. 67/95-CE would not be available. In this regard, the contention of the appellant is that in terms of the proviso to Notification No. 67/95-CE, the full duty exemption to intermediate products being used for captive consumption is available if a manufacturer discharges the obligation under Rule 6 of the Cenvat Credit Rules. We do not accept this plea, as in terms of proviso to Notification No. 67/95-CE, the full duty exemption to intermediate product is available under this notification, even if the manufacturer has manufactured, in addition to exempted final product, a dutiable final product also by using common Cenvat credit availed inputs and in respect of exempted final product, he has discharged the obligation prescribed under Rule 6 of the Cenvat Credit Rules. In this case, it is now known as to whether the appellant throughout during the period of dispute, were manufacturing only exempted final product or alongwith the exempted final product were also manufacturing dutiable final product. The proviso to notification is applicable only in a situation where by using common Cenvat credit availed inputs, a manufacturer manufactures dutiable as well as exempted final product and in respect of the exempted final product, the obligation under Rule 6 of the Cenvat Credit Rules has been discharged. Shri Patil in this regard has cited the judgment of the Tribunal in the case of Sakthi Sugars Ltd. vs. CCE, Salem reported in 2008 (230) E.L.T. 676 (Tri. Chennai). We have gone through this judgment. In our view ratio of this judgment is not applicable to the facts of this case.
8. Next comes the question of classification. The Department has classified the product, in question, under sub-heading 17029090. Sub-heading 17029090 comes under the 6 digit sub-heading 170290 which covers other sugars including invert sugar and sugar syrup blends containing in the dry stage 50% by weight of fructose. The goods, in question, are sought to be classified under 17029090 as sugar syrup blends containing in dry stage, 50% by weight of fructose. In our view for classification as sugar syrup blend in this sub-heading the product must contain 50% by weight of fructose sugar in dry state. In these cases, the appellants plea from the very beginning has been that the fructose sugar content is less than 50% and in this regard they have produced the test report of Shriram Institute of Industrial Research. It is seen that the Commissioner (Appeals) has not given any finding on this plea. Not only this, there is no evidence to show that before seeking classification of the goods, in question, under sub-heading 17029090, the samples drawn from the goods had been got tested by the CRCL to confirm as to whether the fructose content of the goods, in question, in dry stage is 50% by weight. Just because the appellant during period till June 2008 were paying duty on the goods by classifying the same under sub-heading 17029090, it cannot be presumed that they had accepted that the goods, in question, conform to the description of sugar syrup blends of sub-heading 170290 for which the sugar syrup in dry stage must contain 50% by weight of fructose. The Apex court in the case of Metlex (I) Pvt. Ltd. vs. CCE, New Delhi reported in 2004 (165) E.L.T. 129 (S.C.) has held that filing of classification list mistakenly does not mean that party has to pay duty, if in law, he is not bound to pay duty. Same view has been taken by the Apex Court in its judgment in the case of Bonanzo Engg. & Chemical P. Ltd. vs. CCE reported in 2012 (277) E.L.T. 145 (S.C.). In view of this, we hold that the classification of the goods under sub-heading 17029090 is not sustainable, as absolutely no evidence has been produced by the Department to show that the fructose content of the goods, in question, in dry state was 50%.
9. Even if it is assumed that the goods, in question, are covered by sub-heading 17029090, for attracting Central Excise duty the goods must be proved to be marketable. The Tribunal had remanded this matter to Commissioner (Appeals) for examining the question of marketability of the goods, in question. In this regard it is settled law that the marketability of a product has to be established in the condition in which it emerges. In this regard the Apex court in the case of Bata India Ltd. vs. CCE, New Delhi (supra) has held that the test of marketability is whether product is marketable in condition in which it emerges. In this regard the marketability of the goods produced by a particular manufacturer cannot be presumed on the basis of the marketability of the similar goods in different condition being produced by another manufacturer, unless it shown that the two products are identical. In these cases, the Commissioner (Appeals) has held that the goods, in question, to be marketable only on the basis that the invert sugar syrup being manufactured by M/s Dhampur Speciality Sugars Ltd. is being sold to M/s Britannia Industries, M/s J.B. Mangaram Food Industries and M/s ITC Ltd. In our view this basis of holding that the goods, in question, are marketable is absolutely wrong, as it has been presumed that the sugar syrup being made by the appellants is identical to the invert sugar syrup being made by M/s Dhampur Speciality Sugars Ltd. for which there is no basis. Chemically, invert sugar is obtained by Hydrolysis of cane sugar (sucrose, a disaccharide with specific rotation of + 66.5?) and the same is a mixture of glucose (with specific rotation of +52.7?) and fructose (with specific rotation of - 92?), with net specific rotation of 19.7?. The process of hydrolysis of cane sugar (which is dextrorotatory i.e. with rotation of + 66.5?) is also called inversion, as the mixture of glucose and fructose formed by this process is levorotatory with sp. Rotation of -19.7? and for this reason the mixture of glucose and fructose formed by hydrolysis of cane sugar is called invert sugar. The invert sugar has longer shelf life. Whether a sugar syrup is ordinary cane sugar syrup or is invert sugar syrup has to be ascertained by chemical test which has not been done. It is, therefore, totally wrong to presume a given sugar syrup as invert sugar syrup without test. The judgments of the Apex court in the cases of Gujarat Nermada Valley Fert. Co. Ltd. vs. CCE & CUS (supra), Nicholaas Piramal India Ltd. vs. CCE, Mumbai (supra) and Medley Pharmaceuticals Ltd. vs. CCE & CUS, Daman (supra) cited by the learned DR are not applicable to the facts of this case.
10. In view of the above discussion, we hold that neither there is any evidence to prove that the goods, in question, are classifiable under 17029090 nor there is any evidence to prove that the goods, in question, in form in which they come into existence in the appellants factories, are marketable. We, therefore, hold that the impugned order is not sustainable. The same is set aside. The appeals are allowed with consequential relief.
16. Accordingly we find that the facts in this case are squarely covered by the aforementioned order of the Tribunal in M/s Rishi Bakers Pvt. Ltd, Kanpur and others.
17. Accordingly we allow the appeal and set aside the impugned order. The appellant is entitled to the consequential relief.
(Dictated and pronounced in the open Court)
(ANIL G. SHAKKARWAR) (ANIL CHOUDHARY)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
(K. Gupta)
1
E/51610/2015, E/51611/2015, E/51612, E/51613, E/51614,
E/51615, E/51616, E/51617, E/51618/2015-EX(DB)