2011 (9) TMI 435 - AT - Central Excise

Marketability - Final product Biscuit exempted under Notification 3/2007 - Intermediate good Sugar Syrup dutiable in terms of Notification 67/95 - Party in their defence gave reference of Ambaji Foods (India) P. Ltd (2010 -TMI - 208671 - CESTAT, NEW DELHI) - DR relied upon the invoices for sugar invert syrup issued by Rahul Sugar Product, who is selling bakery grade - Held that - The product is still in its shelf life - Case remand back to original authority to decide the issue of marketability.

Issues Involved:
1. Marketability of 'Sugar Invert Syrup' as an intermediate product.
2. Applicability of Notification No. 67/95-CE regarding excisability of intermediate products used in the manufacture of exempted final products.
3. Adequacy of the Chief Chemist's opinion in establishing marketability.
4. Relevance of invoices and product literature in determining marketability.
5. Requirement of actual sale versus capability of being sold in the market.

Detailed Analysis:

1. Marketability of 'Sugar Invert Syrup' as an Intermediate Product:
The appellants are manufacturers of biscuits, using 'Sugar Invert Syrup' as an intermediate product. The authorities below had rejected the appellants' plea that the syrup is not marketable or capable of being bought and sold in the market. The authorities based their finding on the opinion of the Chief Chemist, CRCL, New Delhi, who stated that syrups are concentrated solutions of sugars and can have a shelf life without preservatives. However, the Tribunal found that the Chief Chemist's opinion alone was insufficient to establish marketability as the item in dispute was not tested and there was no analysis of material on record to determine its marketability.

2. Applicability of Notification No. 67/95-CE:
The intermediate product 'Sugar Invert Syrup' is chargeable to duty as per Notification No. 67/95-CE dated 16.3.95 because it is used in the manufacture of exempted final products (biscuits). The Tribunal noted that the authorities below had failed to consider the requirement of marketability before qualifying the product as excisable. The Tribunal emphasized that the marketability of the intermediate product should be established independently of the final product.

3. Adequacy of the Chief Chemist's Opinion:
The Tribunal found that the Chief Chemist's opinion was not sufficient to hold that the sugar syrup in question satisfies the test of marketability. The Tribunal highlighted the absence of any analysis of material on record to arrive at a finding regarding the capability of the product being sold in the market or being known in the market as goods.

4. Relevance of Invoices and Product Literature:
The learned DR relied on invoices for 'sugar invert syrup' issued by Rahul Sugar Product and product literature from Rahul Sugar Product and Sun Agro Foods to support the contention that the syrup is marketable. However, the Tribunal noted that such material was not relied upon in the impugned orders and there was no literature of sugar syrup prepared by the assessees herein.

5. Requirement of Actual Sale Versus Capability of Being Sold:
The Tribunal referred to the decision in the case of M/s Ambaji Foods (India) Pvt. Ltd., where it was held that the marketability of an intermediate product must be established independently. The Tribunal emphasized that merely because the final product (biscuits) is marketable, it cannot be assumed that the intermediate product (sugar syrup) is also marketable. The Tribunal also cited the Supreme Court's decision in Gujarat Narmada Valley Fertilizer Co. Ltd., which held that actual sale is not necessary, but the product must be capable of being sold in the market or known in the market as goods.

Conclusion:
The Tribunal set aside the impugned orders and remitted the cases for fresh decision to the adjudicating authority. The adjudicating authority is directed to decide afresh on the marketability of the product in dispute, after extending a reasonable opportunity to the assessees of being heard in their defense. The appeals were thus allowed by way of remand.

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