2010 (11) TMI 180 - AT - Central Excise

Marketability - Demand - CBEC circular 495/61/99-CX-3 dated 22-11-1999 - Held that - the odoriferous compound or Agarbathi dough mixed with odoriferous substances not being capable of being bought or sold in the market in the normal course of trade is not an excisable product and no duty is therefore leviable on such compound arising during the course of manufacture of Agarbathi - Accordingly decided in the favour of the assessee

Issues Involved:
1. Excisability and marketability of odoriferous compounds (agarbathi perfumery compounds).
2. Applicability of Board Circular No. 495/61/99-CX., dated 22-11-1999.
3. Validity of evidence and reliance on post-show cause notice documents.
4. Imposition of duty, interest, and penalties.

Detailed Analysis:

1. Excisability and Marketability of Odoriferous Compounds:
The primary issue revolves around whether the odoriferous compounds (agarbathi perfumery compounds) manufactured by the appellant are excisable and marketable. The appellant argued that these compounds are not marketable as they are specific to each brand of agarbathis and are not sold in the market to keep trade secrets. The department, however, contended that these compounds are marketable, citing invoices from the appellant's Mysore unit showing sales of the "Venkateshwara" brand perfumery compound to Tibetan Handicrafts Centre.

2. Applicability of Board Circular No. 495/61/99-CX., dated 22-11-1999:
The appellant ceased paying duty based on the Board Circular, which clarified that odoriferous compounds specific to agarbathi brands are not marketable and hence not excisable. The department argued that the circular was not applicable as it pertained to intermediate products in a continuous manufacturing process, not to the compounds in liquid form stored in barrels/drums. The Tribunal, however, found the circular applicable, emphasizing that it covers odoriferous compounds regardless of their form, as long as they are specific to agarbathi brands and not sold in the market.

3. Validity of Evidence and Reliance on Post-Show Cause Notice Documents:
The Tribunal noted that the first appellate authority relied on evidence (representation from Karnataka Perfumery and Flavours Manufacturers Association and monthly returns from other manufacturers) that was not presented in the show cause notice. This reliance was deemed incorrect as it deprived the appellant of the opportunity to defend against this evidence. The Tribunal emphasized that any evidence used must be disclosed in the show cause notice.

4. Imposition of Duty, Interest, and Penalties:
The Tribunal upheld the duty, interest, and penalties on the "Venkateshwara" brand perfumery compound, as there was clear evidence of its sale, proving its marketability. However, for other brands of agarbathi perfumery compounds, where no evidence of marketability was provided, the Tribunal set aside the duty, interest, and penalties. The Tribunal also noted that the Board Circular should be fully applicable, protecting the appellant from duty on non-marketable compounds.

Conclusion:
The Tribunal concluded by setting aside the impugned orders to the extent they upheld the demand of duty, interest, and penalties on various agarbathi perfumery compounds without evidence of sale. However, it upheld the duty, interest, and equivalent penalties on the "Venkateshwara" brand perfumery compound due to proven marketability. The appeals were disposed of accordingly, with no findings recorded on other submissions due to the factual matrix's resolution.

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