2010 (11) TMI 585 - AT - Central Excise

Demand - Whether additive mixture is considered to be excisable - referring to the Board s Circular in relation to the clarification about excisablity of agarbathi mix during the course of manufacture of Agarbathi, it has been held that additive mixture by the respondents for their own use cannot be considered to be marketable in commercial parlance and therefore, is not excisable product Exemption in respect of NCCD - held that in the absence of inclusion of NCCD under the relevant notification, the question of grant of exemption in relation to the said duty during the relevant period does not arise - There is no dispute that under the Notification 121/94, no exemption in relation to NCCD was available. Payment of NCCD on captive consumption and benefit of cenvat credit of such NCCD - Revenue neutral position - each and every situation cannot be termed as a revenue neutral situation. It would depend upon the facts and circumstances of each case. - Demand confirmed.

Issues Involved:
1. Whether the additive mixtures prepared by the assessees are excisable products?
2. Whether the exemption under Notification No. 121/94-C.E., dated 11-8-04 is available to NCCD during the period 1-3-2001 to 16-10-2002?
3. Whether the revenue neutral situation comes in the instant case and consequently, the entire exercise is academic?

Detailed Analysis:

1. Excisability of Additive Mixtures:
The Commissioner (Appeals) held that the additive mixture prepared by the respondents for their own use cannot be considered marketable in commercial parlance and therefore is not an excisable product. This conclusion was based on the Board's Circular relating to the excisability of agarbathi mix during the manufacture of Agarbathi. However, the Tribunal noted that the law on marketability is well settled by the Apex Court, which has ruled that the possibility of a product being marketed is the key factor, not its actual marketing. The Tribunal cited several judgments, including T.N. State Transport Corpn. Ltd. v. C.C.E., Madurai and Dharampal Satyapal, emphasizing that a product with a shelf life of 8 to 10 hours is considered marketable. Consequently, the Tribunal found that the Commissioner (Appeals)'s reliance on the Board's Circular was misplaced and set aside the finding, confirming the adjudicating authority's decision that the additive mixture is excisable.

2. Exemption from NCCD:
The Commissioner (Appeals) acknowledged that the NCCD was not mentioned in the Central Excise Tariff Act, 1985, and was separately levied under the Finance Act, 2001, thus not covered under Notification No. 121/94-C.E. However, the Commissioner (Appeals) concluded that the government policy of exempting captively consumed goods from excise duty should also apply to NCCD. The Tribunal disagreed, noting that the Tribunal in Paras Petrofils Ltd. had held that, in the absence of inclusion of NCCD under the relevant notification, exemption could not be granted. The Tribunal emphasized that the scope of exemption under any notification cannot be extended or abridged by the Tribunal or any authority. Therefore, the Tribunal found that the Commissioner (Appeals)'s finding on the availability of NCCD exemption could not be sustained.

3. Revenue Neutral Situation:
The Commissioner (Appeals) opined that if NCCD was required to be paid on the additive mixture captively consumed in the manufacture of branded chewing tobacco, the NCCD paid would be available as cenvat credit, making the situation revenue neutral. The Tribunal countered this by stating that not every situation can be termed revenue neutral. It depends on the specific facts and circumstances of each case. The Tribunal noted that failure to pay duty on time results in a loss of both the principal amount of duty and the interest that would have accrued. Therefore, the Tribunal concluded that the Commissioner (Appeals)'s finding of a revenue neutral situation was incorrect.

Conclusion:
The Tribunal set aside the impugned order of the Commissioner (Appeals) and confirmed the order of the adjudicating authority, which had confirmed the demand of duty and imposed a penalty on the respondents. The Tribunal concluded that the additive mixture is an excisable product, exemption from NCCD was not available during the relevant period, and the situation was not revenue neutral. The appeal was allowed, and the order passed by the adjudicating authority was confirmed with consequential relief.

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