Custom, Excise & Service Tax Tribunal
Belgaum vs Vijaynagar Foods Pvt Ltd on 25 October, 2024
E/2876/2012
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Central Excise Appeal No. 2876 of 2012
(Arising out of Order-in-Appeal No. 316/2012 dated 24.07.2012
passed by the Commissioner of Central Excise (Appeals),
Mangalore.)
Commissioner of Central Excise
No.71, Club Road, Appellant(s)
Belgaum - 590 001.
VERSUS
M/s. Vijaynagar Food Products
Pvt. Ltd.
Site No. 15A, Respondent(s)
Sanklapur Industrial Area, Bellary Road, Hospet - 583 231.
APPEARANCE:
Mr. Sanjay Venkat, Superintendent (AR) for the Appellant.
None for the Respondent.
CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS R BHAGYA DEVI, MEMBER (TECHNICAL) Final Order No. 21113 /2024 DATE OF HEARING: 25.10.2024.
DATE OF DECISION: 25.10.2024.
PER : D.M. MISRA Heard learned Authorized Representative for the Revenue. Since the matter had been listed on 01.07.2024, 31.07.2024, 26.08.2024, 22.10.2014 and today i.e., 25.10.2024. No one appeared for the respondent; hence, the appeal is taken up for disposal on the basis of the records.Page 1 of 8
E/2876/2012
2. This appeal is filed against Order-in-Appeal No.316/2012 passed by the Commissioner of Central Excise (Appeals), Mangalore.
3. Briefly stated the facts of the case are that the respondents are engaged in the manufacture of Biscuits falling under Chapter Heading 1905 9020 of Central Excise Tariff Act (CETA), 1985. During the course of manufacture of Biscuits, an intermediary product viz., sugar syrup/solution falling under Chapter Subheading 1702 1990 emerges which are captively consumed within the factory of production. It is alleged that the benefit of captive consumption Notification No.67/1995 dated 16.03.1995 being not admissible to respondent as the final product viz., Biscuit is chargeable to 'Nil' rate of duty by virtue of Notification No.22/2007 dated 03.05.2007, a show-cause notices dated 03.09.2009, 25.09.2009, 25.05.2010 were issued from time-to-time demanding duty for the period from May 2007 to August 2008; September 2008 to May 2009 and June 2009 to January 2010 along with interest and penalty. On adjudication, the demands were confirmed along with interest and penalty. Aggrieved by the said order, the respondent filed appeal before the learned Commissioner (Appeals), who in turn allowed their appeal. Hence, Revenue is in appeal.
4. At the outset, the learned Authorized Representative for the Revenue reiterating the findings of the adjudicating authority has submitted that in the present case, the question involved is excisability of sugar syrup produced during the course of manufacture of Biscuits falling under Heading 1905 9020 exempted on the basis of retail sale price of biscuits. The sugar syrup was exempted prior to issuance of Notification No.39/2011 dated 12.9.2011 amending the earlier Notification No.10/1996- CE dated 23.07.1996. He submits that the disputed periods is prior to 12.09.2011. He submits that the learned Commissioner (A) erroneously observed that the Department had not proved Page 2 of 8 E/2876/2012 that sugar syrup manufactured by the assessee was marketable as there is no evidence placed on record. He has submitted that the original authority in the order at para 9, 10, 11 and 12 had given a detailed finding and recorded reasons as to why sugar syrup manufactured by the assessee is dutiable as the same is stable product and capable of being marketable. It is submitted that in terms of Explanation to Section 2(d) of Central Excise Act, 1944, capability of being bought and sold was sufficient to render a product excisable and the original authority has categorically held that the sugar syrup manufactured by the respondent satisfied the said condition and capable of being bought and sold in the market. In support, he has referred to the judgment of this Tribunal in the case of Homemade Bakers (India) Ltd. vs. CCE, Rotak: 2012 (280) E.L.T. 429 (Tri.- Del.). Further, he has referred to the judgment of this Tribunal in the case of Pomsy Food Products (P) Ltd. vs. CCE: 2024 (4) TMI 4 (CESTAT-Bang.) wherein it is held that sugar syrup when stable it is marketable. In the present case, since the original authority had already recorded his findings to hold that it is stable and having the sugar content of 78.2% by weight, hence, it is marketable. Therefore, Revenue's appeal deserves to be allowed.
5. The short issue involved in the present appeal for determination is whether sugar syrup having sugar content of 78.2% by weight emerged as an intermediary product, during the course of manufacture of final product viz., Biscuits which is exempted, is excisable and leviable to duty as the benefit of Notification No.67/1995 dated 16.03.1995 would not be available to inputs used in the exempted final product.
6. Undisputedly, the samples of Sugar Syrup was drawn by the Range Officer on 24.12.2008 for chemical analysis. The report submitted by the Chemical Examiner, Chennai Lab indicated that the sugar content in the sugar syrup is 78.2% by Page 3 of 8 E/2876/2012 weight. The Revenue mainly challenged the impugned order on the ground that the learned Commissioner (Appeals) has not appreciated that the goods are marketable by misinterpreting the concept of 'marketability' relevant in ascertaining the scope of 'manufacture' and 'excisable goods' as defined under Rule 2(d) and 2(f) of the Central Excise Act, 1944. The learned Authorized Representative (AR) for the Revenue placed the judgment of the Hon'ble Supreme Court in the case of Commissioner of Central Excise and Service Tax, Bangalore vs. Karnataka Soaps & Detergents Ltd.: 2017 (355) ELT 161 (S.C.) and M/s. Escorts Ltd. vs. Commissioner of Central Excise, Faridabad: 2015 (319) ELT 406 (SC).
7. In Karnataka Soaps & Detergents Ltd. case explaining the scope of marketability their Lordships observed as follows:
"11. The next question for consideration is whether actual marketing of the perfumery compound manufactured by the respondent is necessary for the levy of excise duty. It is settled that to hold the product as excisable/dutiable, actual marketing/sale of goods is not necessary. What is required to be proved is that the capability of marketing the product. Marketability is decisive test for dutiability. Whether the goods are, in fact, marketed or not is of no relevance. It is also not necessary that goods in question should be generally available in the market. Even if the goods are available from only one source or from a specified market, makes no difference so long as they are available for purchasers. [See A.P. State Electricity Board v. Collector of Central Excise, Hyderabad, (1994) 2 SCC 428 = 1994 (70) E.L.T. 3 (S.C.)].
12. In Escorts Limited v. Commissioner of Central Excise, Faridabad, (2015) 9 SCC 109 = 2015 (319) E.L.T. 406 (S.C.), this Court has held that for excise duty to be chargeable under the constitutional entry read with Section 3 of the Central Excise Act, two pre-requisites are necessary.
First, there must be "manufacture" which is understood to mean the bringing into existence of a new substance. And secondly, the word "goods" necessarily means that such manufacture must bring into Page 4 of 8 E/2876/2012 existence a new substance known to the market as such which brings in the concept of marketability in addition to manufacture. 'Marketability' is thus essentially a question of fact to be decided on the facts of each case. There can be no generalisation. The fact that goods are not in fact marketed is of no relevance. So long as the goods are marketable, they are goods for the purposes of Section 3 of the Act. It is also not necessary that the goods in question should be generally available in the market. The marketability of articles does not depend neither upon the number of purchasers nor is the market confined to the territorial limits of this country."
8. Also in Escorts Ltd. (supra) case, their Lordship observed as follows:
"14. From this judgment, Shri Lakshmikumaran wished to emphasise that, as in the said judgment, Transmission Assemblies were not available in the market for being bought and sold, they were not excisable goods not being marketable. As has correctly been pointed out by Mr. Gupta, learned Senior Counsel appearing on behalf of the Revenue, what was held in this judgment is that the product should not be known in the market with any commercial name. The moment a product is commercially known in the sense of fulfilling the practical test of being known to persons in the market who buy and sell, the test is satisfied. The fact that the product is generally not bought or sold or has no demand in the market is irrelevant. It was held in the said judgment that the plastic body is not known as a commercially distinct product in the market and, therefore, if a manufacturer is asked to replace such body, it would not be replaceable not being a commercially known product.
15. The facts in the present case show that Transmission Assemblies of tractors are commercially known products as has been pointed out above. The fact that not a single sale of such Assembly has been made by the appellants is irrelevant. This being the case, we are of the view that the Transmission Assembly of the tractor on the facts before us is clearly an intermediate product which is a distinct product commercially known to the market as such. On this ground therefore, the appellants are not liable to succeed."
9. A plain reading of the aforesaid judgments reveals that to satisfy the test of marketability, the product need not be bought Page 5 of 8 E/2876/2012 and sold in the market. If it is capable of being bought and sold, then the test of marketability is satisfied. In similar circumstances, this Tribunal in the case of Mysore Sugar Company Ltd. vs. Commissioner of Central Excise, Mangalore: 2008 (231) ELT 624 (Tri.-Bang.) considering the excisability of sugar syrup endorsed the view that if the sugar syrup having sugar content of more than 65% by weight, it is marketable, hence, excisable.
"7. We have carefully considered the submissions and perused the records. As seen from the citations referred to by the learned Counsel, sugar syrup should have sugar content of more than 65% of weight for considering it as a dutiable as held in the case of Himalyan Vegi Fruits Ltd. v. CCE, Chandigarh (supra), CCE, Indore v. Venkatesh Beverages (supra) and Shivambu International v. CCE, Chandigarh (supra), in both these cases, the matter was remanded for de novo to ascertain the percentage of sugar concentration in the syrup. In the present case, the Revenue has not taken samples to find out the percentage of sugar syrup. It was an important characteristic for determining the solution as sugar syrup or not."
10. Similar view has also been expressed by this Tribunal in Pomsy Food Products (P) Ltd. (supra) following the earlier precedents that test of marketability to be ascertained referring to the Board Circular, which clarifies it is to be on the basis of sugar content in the sample.
11. From the records, we find that the adjudicating authority referring to the Board's Circular No.780/13/2004-CX dated 12.03.2004 and the test report observed as follows:
"9. The letter from Central Revenues Control Laboratory (CRCL) has been enclosed along with the circular. This letter from the CRCL (C. No. 21 EX.0.195, dated the 15th May. 1996) to the Deputy Secretary (C.EX.I), unambiguously clarifies following in response to the query as to whether sugar syrup will have shelf life without adding citric acid in it, that in concentration of 65% by weight or more the solution of sugars such as sucrose in water or other aqueous liquids, will retard the growth of micro-Page 6 of 8
E/2876/2012 organisms. Thus it may have shelf life without addition of any preservative. As regards the quality of ingredients going to make such a sugar solution/syrup, the CRCL opines that the sucrose must be selected carefully and, purified water free from foreign substance and clean vessels and containers must be used, presumably in order to make a sugar solution/ syrup have the property of having a shelf life. A sample was drawn from the assessees Unit by the range officer and sent for chemical analysis. As per the Chemical Examiner, Chennai Lab report bearing reference Lab Cx No 89/08-09 dated 26.12.08 given on 01.10.2009, The sample is in the form of pale yellow soft solid mass containing Sugar and Water. The total sugar content in the sample as received is 78.2% by weight. Presence of any other additive could not be established'.
10. The Tribunal in the case of CCE v/s Venkatesh Bevarages - 2001(128) EL T 75 held sugar solution at intermediate stage containing less than 65% sugar by weight should not be considered as sugar solution. In the instant case, the sugar content is 78.2%. The sugar syrup/solution prepared by the party and used by them in the manufacture of biscuits, on a reasonable presumption would have been made with due care by selecting sucrose carefully and by use of water clean from foreign substances and in clean vessels. Such sugar syrup solution made by mixing of sugar sucrose to water and fit enough to be used in biscuits of the kind and brand that have been referred to, also does not appear to suffer from being rendered not marketable on account of it failing to meet the requirements of law regulating its use and exchange. The Ingredients of Parle-G biscuits as listed by the manufacturer are Wheat Flour, Sugar, Partially Hydrogenated Edible Vegetable Oils, Invert Syrup (d Glucose, Laevulose), Leavening Agents [503 (ii), 500 (ii)), Salt, Milk Solids, Emulsifiers [322 or 471 & 481 (i)) and Dough Conditioners [223 land added Flavors (Artificial)."
Thus, the original authority had sufficiently established the test of marketability.
12. In view of the above, we are of the view that the sugar syrup manufactured by the appellant, during the course of manufacture of exempted product namely, biscuits, is stable and marketable; hence, liable to duty being an excisable goods.
Page 7 of 8E/2876/2012 However, we find that the issue relates to interpretation of law, therefore, invoking of extended period of limitation cannot be sustained and the demand be restricted to the normal period of limitation.
13. In the result, Revenue's appeal is partly allowed to the extent of confirming excisability of sugar syrup manufactured at the intermediate stage of manufacture of biscuits, an exempted product, and the demand be limited to the normal period of limitation. No penalty is imposable on the appellant. Appeal is disposed of.
(Operative portion of the order was pronounced in open court on conclusion of hearing.) (D.M. MISRA) MEMBER (JUDICIAL) (R BHAGYA DEVI) MEMBER (TECHNICAL) rv Page 8 of 8