2015 (4) TMI 893 - AT - Central Excise

Classification of goods - Marketability of product - Whether sugar syrup made by the appellant for captive use in the manufacture of exempted biscuits is chargeable to Central Excise duty under sub-heading 17029090 of the Central Excise Tariff - Held that - Since the sugar syrup is used in the manufacture of the exempted biscuits, the benefit of Notification No. 67/95-CE would not be available. In this regard, the contention of the appellant is that in terms of the proviso to Notification No. 67/95-CE, the full duty exemption to intermediate products being used for captive consumption is available if a manufacturer discharges the obligation under Rule 6 of the Cenvat Credit Rules. - In this case, it is now known as to whether the appellant throughout during the period of dispute, were manufacturing only exempted final product or alongwith the exempted final product were also manufacturing dutiable final product. The proviso to notification is applicable only in a situation where by using common Cenvat credit availed inputs, a manufacturer manufactures dutiable as well as exempted final product and in respect of the exempted final product, the obligation under Rule 6 of the Cenvat Credit Rules has been discharged. For classification as sugar syrup blend in this sub-heading the product must contain 50% by weight of fructose sugar in dry state There is no evidence to show that before seeking classification of the goods, in question, under sub-heading 17029090, the samples drawn from the goods had been got tested by the CRCL to confirm as to whether the fructose content of the goods, in question, in dry stage is 50% by weight. Just because the appellant during period till June 2008 were paying duty on the goods by classifying the same under sub-heading 17029090, it cannot be presumed that they had accepted that the goods, in question, conform to the description of sugar syrup blends of sub-heading 170290 for which the sugar syrup in dry stage must contain 50% by weight of fructose. Marketability of the goods produced by a particular manufacturer cannot be presumed on the basis of the marketability of the similar goods in different condition being produced by another manufacturer, unless it shown that the two products are identical. In these cases, the Commissioner (Appeals) has held that the goods, in question, to be marketable only on the basis that the invert sugar syrup being manufactured by M/s Dhampur Speciality Sugars Ltd. is being sold to M/s Britannia Industries, M/s J.B. Mangaram Food Industries and M/s ITC Ltd. In our view this basis of holding that the goods, in question, are marketable is absolutely wrong, as it has been presumed that the sugar syrup being made by the appellants is identical to the invert sugar syrup being made by M/s Dhampur Speciality Sugars Ltd. for which there is no basis. Neither there is any evidence to prove that the goods, in question, are classifiable under 17029090 nor there is any evidence to prove that the goods, in question, in form in which they come into existence in the appellant s factories, are marketable. We, therefore, hold that the impugned order is not sustainable. The same is set aside. - Decided in favour of assesees.

Issues Involved:

1. Classification of sugar syrup under sub-heading 17029090.
2. Marketability of the sugar syrup.
3. Applicability of exemption Notification No. 67/95-CE.
4. Imposition of penalties under Section 11AC and Rule 26 of the Central Excise Rules, 2002.
5. Compliance with Rule 6 of the Cenvat Credit Rules, 2001.

Issue-wise Detailed Analysis:

1. Classification of Sugar Syrup under Sub-heading 17029090:

The appellants contended that the sugar syrup they produced did not meet the criteria for classification under sub-heading 17029090 because its fructose content was less than 50%. This was supported by a test report from Shri Ram Institute of Industrial Research. The Department, however, classified the product under sub-heading 17029090 without testing the fructose content. The Tribunal held that for classification under this sub-heading, the product must contain 50% by weight of fructose in the dry state. The Department failed to provide evidence to confirm the fructose content, thus the classification under sub-heading 17029090 was deemed unsustainable.

2. Marketability of the Sugar Syrup:

The Tribunal had previously remanded the matter to ascertain the marketability of the sugar syrup produced by the appellants. The Commissioner (Appeals) concluded that the sugar syrup was marketable based on the sale of similar products by Dhampur Speciality Sugars Ltd. to other companies. However, the Tribunal emphasized that marketability must be established for the specific product in the condition it emerges from the appellants' factories. The assumption that the sugar syrup was identical to the invert sugar syrup sold by Dhampur Speciality Sugars Ltd. was incorrect without chemical testing. Therefore, the Department failed to prove the marketability of the sugar syrup in its existing form.

3. Applicability of Exemption Notification No. 67/95-CE:

The appellants argued that the sugar syrup was exempt from duty under Notification No. 67/95-CE, as they did not take Cenvat credit for inputs used in the manufacture of exempted biscuits. The Tribunal clarified that the exemption applies if the manufacturer produces both dutiable and exempted final products using common Cenvat credit availed inputs and discharges obligations under Rule 6 of the Cenvat Credit Rules. Since it was unclear whether the appellants manufactured only exempted products or both dutiable and exempted products, the Tribunal did not accept the plea for exemption under Notification No. 67/95-CE.

4. Imposition of Penalties under Section 11AC and Rule 26 of the Central Excise Rules, 2002:

The appellants contended that penalties were unwarranted as the dispute involved interpretation of classification and marketability. They cited that they had previously paid duty on the sugar syrup until June 2008 and stopped after informing the Department. The Tribunal did not specifically address the penalty issue in the final judgment, focusing instead on the classification and marketability aspects.

5. Compliance with Rule 6 of the Cenvat Credit Rules, 2001:

The appellants claimed they complied with Rule 6 by not taking Cenvat credit for inputs used in exempted biscuits. The Tribunal noted that the exemption under Notification No. 67/95-CE requires compliance with Rule 6 when using common inputs for both dutiable and exempted products. The Tribunal did not find sufficient evidence to confirm continuous compliance with Rule 6 throughout the disputed period.

Conclusion:

The Tribunal concluded that the Department failed to provide evidence for the classification of the sugar syrup under sub-heading 17029090 and its marketability. Consequently, the impugned order was set aside, and the appeals were allowed with consequential relief. The Tribunal's decision emphasized the necessity of concrete evidence for classification and marketability to impose duty and penalties.

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