Custom, Excise & Service Tax Tribunal
Amalgamated Bean Coffee Trading ... vs Commissioner Of Central Excise, ... on 18 January, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/572/2004-DB [Arising out of Order-in-Appeal No. 50/2004 dated 27/02/2004 passed by the Commissioner of Central Excise, Bangalore-I ( Appeals) ] For approval and signature: HON'BLE SHRI M.V. RAVINDRAN, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Amalgamated Bean Coffee Trading Company Ltd. Beverage Division, No. 33/1, Lalbagh Road, Bangalore 560 027 Karnataka Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax Bangalore-I Post Box No. 5400, CR Buildings, Bangalore 560 001 Karnataka Respondent(s)
Appearance:
Shri V. Raghuraman, Advocate No.32, 1st Floor, Patalamma Temple Street, Near South End Circle, Basavanagudi, Bangalore - 560 004 Karnataka For the Appellant Shri Ajay Saxena, AR For the Respondent Date of Hearing: 18/01/2016 Date of Decision: 18/01/2016 CORAM:
HON'BLE SHRI M.V. RAVINDRAN, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No. 20064 / 2016 Per : M.V.RAVINDRAN This appeal is directed against the Order-in-Appeal No. 50/2004 dated 27/02/2004.
2. The issue involved in this appeal is regarding the demand of duty on the clearance of coffee decoction for testing and destruction in the appellants factory premises. It is the case of the Revenue that the appellant while manufacturing coffee decoction, withdraws some quantity for testing the quality of the product and as there is no sale involved and there being clearance of finished goods, appellant is required to discharge the central excise duty on such decoction which is withdrawn from the shop floor for testing. The lower authorities relied upon the judgment of the Apex Court in the case of ITC Ltd. to hold against the appellant.
3. While arguing the appeal, learned counsel submits that the coffee decoction which is withdrawn is for the purpose of testing and it gets destroyed during the testing is not disputed; samples are taken for in-house quality test is also not disputed. He would submit that the Apex Court in the case of ITC Ltd. [2003 (151) E.L.T. 246] on an identical issue has held that the items which get destroyed during quality control test is not liable to excise duty. It is his further submission that the goods have been cleared only to in-house quality control testing; without which, the products i.e. coffee decoction is not marketable; the valuation of the products is also incorrect; question of remission of duty on the goods tested and getting destroyed during the testing purpose will not arise.
4. Learned DR on the other hand would submit that the Tribunal in the case of Positive Packaging Industries Ltd. Vs. CCE, New Panvel [2010 (249) E.L.T. 57 (Tri.-Mumbai)] has held that the samples drawn for testing quality and preserved for investigation of complaints are liable to duty as duty is payable as per the Boards Circular or the supplementary instructions.
5. We have considered the submissions made at length by both sides and perused the records.
5.1. The issue to be decided in this case is regarding the duty liability on the samples which are collected from the shop floor and tested in the in-house laboratory.
5.2. Undisputed facts are the products i.e. coffee decoction are excisable and appellant discharges the appropriate duty on home clearances. In order to ascertain whether the final goods are of the standards set, samples are drawn from the shop floor and tested in the in-house laboratory during the course of which the said samples get destroyed.
5.3. In our considered view, the demand of the duty raised by the Revenue, is unsustainable, incorrect for more than one reason.
5.4. Collection of the samples of finished goods and testing the same for ascertaining the quality is part of the manufacturing process. The assessee, has to ascertain that the final products manufactured by them are conforming to the standards laid down by themselves or as per requirement of the law, which requires, testing of the samples which do get destroyed during such testing. It is common sense, manufacturing of a final product is not complete without the testing of the final products in the in-house laboratory or any agency; as the marketing of final products can be done only if the final products are up to a standard. This cannot be said or equated with the clearances of the goods and duty liability can be fastened. We find from the show-cause notice as well as the adjudication order and the order of the first appellate authority, that there is no dispute that the testing of the coffee decoction is in the appellants own in-house laboratory and there is no remanents. On the face of such factual matrix, we have to hold that both the lower authorities have misdirected their findings in coming to a conclusion that the testing of the samples of coffee decoction are liable to duty.
5.5. We also find that Apex Court in the case of ITC Ltd. laid down a law that duty liability does not arise on testing of samples. In that case, the appellant therein had taken up the issue before the Apex Court wherein the Apex Court in paragraph No. 8 framed the following questions:
1. Whether cigarettes removed for the purposes of tests in the quality control laboratory situated within the factory premises could be treated to be excisable goods manufactured and consequently liable to payment of excise duty under the provisions of the Act.
2. Whether excise duty is leviable on the cigarettes that are destroyed during the process of testing in the laboratory. 5.6. We are not concerned with the findings recorded by the Apex Court as regards the first issue. On the second issue, Apex Court in paragraph No. 18 held as under:
Coming now to the second question, it may be stated that learned counsel appearing on behalf of the Revenue could not dispute the proposition that the quantity of cigarette sticks that is destroyed in the course of quality control test is not liable to excise duty.
6. Learned DR has also relied upon the very same judgment. In our considered view Apex Court in the said judgment has laid down the law, which states that any sample which is collected for ascertaining the quality of the product and gets destroyed during the test is not liable to excise duty, however, Apex Court has also recorded that the assessee has to show that the goods were destroyed in the process during the quality control test. In the case in hand, there is no dispute that the goods i.e. coffee decoction gets destroyed during the quality control test done by the appellant in their own in-house laboratory. In the case in hand before us, there is no such allegation that there is no destruction or non-maintenance of accounts. Hence, the ratio as has been laid down by the Apex Court in ITC case would apply in favour of the appellant herein.
7. In view of the foregoing and in the facts and circumstances of this case, we hold that the impugned orders are not sustainable and liable to be set aside and we do so. The impugned order is set aside and the appeal is allowed.
(Operative part of this order was pronounced in court on 18/01/2016) (ASHOK K. ARYA) TECHNICAL MEMBER (M.V. RAVINDRAN) JUDICIAL MEMBER iss