2019 (7) TMI 1790 - AT - Central Excise

Non-payment of service tax - by-product/captive consumption - cream paste - marketable goods or not - HELD THAT - It is apparent from appellant s contention that each biscuit manufacturer while manufacturing a cream biscuit has to prepare a cream to be sandwitched between two shells of the biscuit. This cream is prepared from few ingredient, as already mentioned above, and can be prepared by simply mixing those ingredients. No doubt since a different product then those ingredients is coming into existence, the process of mixing herein amounts to manufacture. But it is also simultaneous truth with this cream is specific to each manufacturer who customises it to maintain a particular taste of his brand of biscuit. Hence the cream as such has no marketability as no other manufacturer in the given circumstances would like to purchase the cream of other manufacturer. That cream/flavoured cream, intermediately, manufactured and captively used for manufacture of biscuits have now been exempted from 12.9.2011, in view of insertion of entry No. 19 in Notification No. 10/96-CE dated 23.7.96 vide Notification No. 39/2011-CE dated 12.9.2011. The cream which is produced captively is having unique flavour, colour and taste and the cream biscuits manufactured by different manufacturers have different flavours and taste. The Department has not been able to bring any evidence of marketability of creams so manufactured by the appellant. In the present case also the appellant is the job worker of M/s Parle Biscuits. The reliance placed on some cream sold in bakeries without reference to their ingredients like colour, flavour and taste cannot be relied on to fasten duty liability on the appellant. Hon ble Supreme Court in UNION OF INDIA VERSUS SONIC ELECTROCHEM (P) LTD. 2002 (9) TMI 104 - SUPREME COURT , has laid down the test that the product which is specially manufactured and captively consumed in the factory should be shown to be available in the market so as to fasten any duty on the same. By following the ratio of the law laid down by the Apex Court, it is held that the cream captively produced and consumed in the factory is not marketable as there is no evidence to that effect. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Central Excise duty liability on cream biscuits manufacturing
- Marketability of the cream produced by the appellant

Central Excise Duty Liability on Cream Biscuits Manufacturing:
The appellants, engaged in biscuit manufacturing, were found to have cleared cream biscuits without paying Central Excise duty on the sugar-based cream used in the production. A Show Cause Notice was issued, and subsequent orders confirmed the duty payment. The appellant contended that the cream, made as per their specifications for use in cream biscuits, was not marketable and hence not subject to duty. They argued that each manufacturer customizes the cream for their brand, making it unsuitable for sale in the market. The Tribunal observed that the cream was specifically tailored for the appellant's biscuits, exempted from duty post a notification. Relying on previous case law, the Tribunal held that the cream, being captively consumed and unique to each manufacturer, lacked marketability, thus setting aside the duty liability.

Marketability of the Cream Produced by the Appellant:
The Department argued that the cream, being sugar-based, was marketable and hence subject to duty. However, the Tribunal noted that the cream was custom-made for the appellant's biscuits, not for general sale. The appellant provided certificates from traders stating the cream was not sold in the market. Referring to past decisions, the Tribunal emphasized the requirement for a product to be available in the market to attract duty liability. It was established that the cream, with unique characteristics and consumed internally, did not meet the marketability criterion. Following the Supreme Court's precedent, the Tribunal ruled in favor of the appellant, highlighting the absence of evidence supporting the cream's marketability and overturning the duty imposition.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the cream used in manufacturing cream biscuits was not marketable and therefore not liable for Central Excise duty. The decision was based on the specific customization of the cream for the appellant's products, its captive consumption, and the lack of evidence proving its marketability. The judgment emphasized the importance of marketability in determining duty liability and cited previous cases to support the decision.