1998 (8) TMI 423 - AT - Central Excise

Summary

Issues:
Liability to duty of "sugar syrup" manufactured for cough syrup, marketability of the product, applicability of extended period for duty demand, levy of interest and penalty.

Liability to Duty:
The appeal considered the liability to duty of "sugar syrup" manufactured by the appellant for use in cough syrup production. The product, consisting of various ingredients, was classified by the Commissioner under Heading 17.02 of the Central Excise Tariff Act. The Commissioner invoked the extended period under the proviso to Section 11A of the Act to demand duty on the quantity produced between December 1991 and September 1996. Additionally, penalty under Section 11AC and interest under Section 11AD were imposed.

Marketable Product:
The order was challenged on the grounds that the product was not marketable due to the absence of buyers and the violation of Rule 47 of the Prevention of Food Adulteration Rules, which prohibits the sale of food articles containing sodium saccharin. The department argued for marketability citing an unrelated instance of a biscuit manufacturer paying duty on syrup and rose syrup sold by another firm. However, the Tribunal found that these instances did not establish the marketability of the product in question, as the ingredients and circumstances differed significantly.

Applicability of Extended Period and Levy of Interest and Penalty:
The Tribunal concluded that since the product was deemed not marketable due to regulatory violations, it was not liable for duty. Therefore, it was unnecessary to address the arguments regarding the applicability of the extended period for duty demand, as well as the imposition of interest and penalty. Consequently, the appeal was allowed, and the impugned order was set aside.

This judgment highlights the importance of marketability in determining the liability to duty, emphasizing compliance with regulatory standards and the absence of buyers as crucial factors. The decision underscores the significance of legal requirements in assessing the marketability of a product and its consequent duty obligations.