2006 (7) TMI 383 - AT - Central Excise

Summary

Issues:
1. Duty demand on drained aerated water.
2. Applicability of remission of duty.
3. Marketability of goods.
4. Bar on limitation for show cause notice.

Analysis:

1. Duty demand on drained aerated water:
The appellants were engaged in manufacturing aerated water and were draining the aerated water on the production floor before bottling, leading to a demand of duty amounting to Rs. 25,53,801.00. The authorities contended that drained goods were finished products, hence liable for duty under Section 11A of the Act. The appellants argued that since the goods had not reached the RG-I stage, no duty could be demanded. The Tribunal found that drainage occurred before bottling or in over-filled/under-filled bottles, and since the goods were not marketable or entered in the RG-I Register, no duty liability arose. The impugned order confirming the demand was set aside, and the appeal was allowed.

2. Applicability of remission of duty:
The appellants claimed that since the goods were not marketable and had not completed the manufacturing process, no duty remission was required. They argued that remission formalities were not applicable as the goods were not yet marketable finished products. The Tribunal agreed that remission of duty was only applicable to completely manufactured goods entered in RG-I, and since the goods in question had not reached the marketable stage, no duty remission was warranted.

3. Marketability of goods:
The authorities contended that the drained aerated water was still saleable and suitable for sale, making it excisable goods subject to duty. However, the appellants argued that over-filled/under-filled bottles and non-filled aerated waters were not marketable as they did not meet statutory requirements. The Tribunal held that goods must attain marketable stage to be considered excisable, and since the goods had not reached RG-I stage, no duty could be levied.

4. Bar on limitation for show cause notice:
The appellants claimed that the show cause notice was time-barred as they believed the goods were not excisable and the department was aware of the drainage since December 2002. They argued that the extended period could not be invoked. The Tribunal did not address this issue explicitly in the judgment but ruled in favor of the appellants based on other grounds.

In conclusion, the Tribunal found in favor of the appellants, setting aside the demand for duty on drained aerated water based on the grounds that the goods had not reached the marketable stage and were not entered in the RG-I Register. The judgment emphasized the importance of marketability and completion of the manufacturing process for the imposition of excise duty.