2013 (3) TMI 211 - AT - Central Excise

Exemption Notification No. 67/95-C.E., dated 16-3-1995 benefit denied - as per dept. certain quantity of the corrugation gum made in the factory is used within the factory in the manufacture of corrugated boxes, cartons and other articles cleared at nil rate of duty - whether the corrugation gum in question has shelf-life? - Held that - The corrugation gum is made by mixing starch and borex with caustic soda in certain proportion and the same is used captively in the manufacture of corrugated packing material and trays. The department simply relies upon the statements of Shri V.S. Gupta of M/s. Sankla Chemicals and Shri Sushil Garodia of M/s. Progressive Packaging Industries, according to whom, the corrugation gum made in those factories has shelf-life 3 to 4 days. As found that no chemical test of the corrugation gum has been done by the department to establish that the same was containing any preservatives or not. In absence of such chemical test report, merely on the basis of statements of employees of some other factories, it cannot be concluded that the corrugation gum manufactured in the appellant s factory also has shelf-life of 3 to 4 days and on this basis marketable. The burden of proving that a particular product produced by a manufacturer is marketable is on the Department and the Department has not produced any evidence in support of this contention. Thus the corrugation gum made by the appellant in their factory is not marketable and hence not excisable. The impugned order confirming the duty demand against the Appellant is, therefore, not sustainable - in favour of assessee.

Summary

Issues:
Central excise duty on corrugation gum used in manufacturing exempted products.

Analysis:
The appellant, engaged in manufacturing corrugated products chargeable to central excise duty, faced a demand for duty on corrugation gum used in the production of exempted items. The department argued that the corrugation gum, being excisable, was not eligible for exemption under a specific notification. A show cause notice was issued for duty recovery, interest, and penalty. The Commissioner upheld the duty demand, interest, and penalty in the original order. The appeal challenged this decision.

The appellant contended that the corrugation gum made for captive use was not marketable and hence not excisable. They highlighted the absence of chemical additives to increase shelf-life, making the product non-marketable. They argued that the burden of proving marketability rested with the department, citing relevant circulars and challenging the extended limitation period invoked. The department defended the duty demand, emphasizing the shelf-life of the gum and marketability based on statements from other entities.

Upon review, the Tribunal examined whether the corrugation gum was marketable and excisable. The appellant's position that the gum was not marketable due to the lack of preservatives was upheld. The Tribunal noted the absence of chemical tests by the department to prove marketability. Relying solely on statements from other factories was deemed insufficient to establish marketability. As the burden of proof lay with the department, the Tribunal ruled in favor of the appellant, holding the gum non-marketable and non-excisable. Consequently, the duty demand against the appellant was set aside, and the appeal was allowed.

In conclusion, the Tribunal's decision centered on the crucial aspect of marketability in determining the excisability of the corrugation gum. The lack of concrete evidence and chemical tests led to the dismissal of the duty demand, emphasizing the importance of meeting the burden of proof in excise matters.