Customs, Excise and Gold Tribunal - Mumbai
Pepsico India Holding Ltd. vs Commissioner Of C. Ex. on 4 July, 2000
Equivalent citations: 2000(122)ELT490(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The order impugned in this appeal confirms the proposal made in the notice to show cause that the appellant was required to pay duty on quantities of aerated beverages, which it manufactured and cleared without payment of duty.
2. The basis for the conclusion that goods were so manufactured and cleared without payment of duty is the view of the department that the norms of production existed, showing the quantity of beverage, which could be manufactured out of the concentrate for the beverage, which is the principal raw material. The notice to show cause alleges for example, the norms indicate that one unit of Mirinda concentrate would yield 567.8 cases of 250 ml bottles of the beverage Mirinda. The notice to show cause does not indicate the origin of these norms of production and the Commissioner's observation in this order that these were not disclosed to the department by the appellant is not supported by any evidence.
3. This is however incidental. The advocate for the appellant does not dispute that it does keep in mind norms between the principal raw material, the concentrate, and the final product, the beverage. His argument is that these norms are theoretical indicating the maximum of beverage that could be obtained and they did not take into account the shortfall in achieving these ideal norms that could be caused by various factors. Some of these factors he says, could be starting problem, loss due to break down of operation, variation in filling bottle levels, leakage in pipelines, samples drawn for test etc. He cites the handbook, drawn up by Pepsico USA, the appellant's brand name owner, which is being made use of by the appellant. He says that it will be clear from this booklet to specifically discuss each area where there could be loss of production. The portions relating to yield unit in this booklet themselves indicate that the yield quantity stated is theoretical and indicates loss that could take place due to process variation and time losses. He cites the decision of this Tribunal in Parle Beverages and Ors. v. CCE in appeal E/1730-R/97 and Ors. [1998 (99) E.L.T. 468 (Tribunal) in which the Tribunal had declined to accept to confirm that clearance of goods notionally arrived at only by applying the formula. He says that this decision has been followed by two other decisions of the Tribunal [Pepsico India in appeals E/758 - 2000 (117) E.L.T. 659 (Tribunal) and E/3842-3841/91].
4. The departmental representative contends that it is a matter of industrial practice that norms are established between the raw material and the finished products and these norms are often applied in matters such as exemption from duty in the case of advanced licence. He says that the appellant had not disclosed to the department any line or other losses. He cites the rules 173D and 173E.
5. In its decision in the Parle Beverages and Ors. the Tribunal had noted that none of the persons concerned in the production of such beverage, who were questioned had accepted that it was possible to produce in reality the theoretical yield from a specified concentrate. All of them had said that while they attempted to arrive to the formula it was in actual practice not possible. The Tribunal had noted that there would be wastage of either the finished product, or the raw material or intermediate product in the course of the various manufacturing operations. It cited the example where there is switch over of one kind of beverage to another. In such a case, the quantity of the beverage earlier manufactured remaining in the tanks has to be drained and flushed for the beverage to be manufactured. It considered shut down losses or losses which occur when production had to shut down for various occasions, the fact that the bottles are not filled to the precise level, spillage and breakage. It is noted that in the case of Parle and Thums Up, such losses were recorded in a statement. This view has been applied by two other decisions of the Tribunal.
6. The departmental representative's contention with regard to norms for export is not relevant to these facts. The norms for export which he refers to are those norms that specify fully the quantity of finished product which could be obtained out of a specified quantity of raw material. In matter such as advance licence where there is an exemption granted to raw material on condition that it is utilised for manufacture of goods, such norms are inevitable. These norms are to be applied to a large number of manufactures each of whom would not have the same degree of efficiency. These norms would be in the nature of average. We are here concerned not with such a situation but with a claim for duty on a specific ground that goods have been manufactured and cleared without payment of such duty.
7. It is now settled that such manufacture without payment of duty has to be established by reasonable evidence. We do not find any evidence at all but theoretical calculation The provisions of rule 173E do not help the department's case either. The order of the Tribunal referred to above had declined to accept this contention for the reason that for this rule to be applied normal production has to be determined and communicated to the assessee. It is only the shortfall from the normal production that would be liable to duty. In the case before us normal production has not been fixed. It has not been shown the period for which duty was demanded was normal production throughout. The inputs other than one concentrate alone has also not been taken into account. We do not see how the provision of 173D helps the department's case either. It is only allegation that it was not followed and the appellant did not declare the principal raw material which it used.
8. The conclusion that has to be drawn therefore is that there is total insufficient material to conclude either manufacture or clearance of beverage in question and duty was not payable, penalty not imposable.
9. Appeal accordingly allowed. Impugned order set aside.