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2016 (10) TMI 610 - AT - Central ExciseManufacture - Intermediate products - captive consumption - marketability - nature of preparation of Additive mixture for manufacturing of branded chewing tobacco - notification No. 52/02-C.E. issued on 17-10-02 - Demand of duty and NCCD - Held that - By going through the entire process of manufacture at no stage the goods can be called captively consumed. Moreover, there is no allegation in the show cause notices that additive mixture is marketed or has been transferred or sold by the respondents, in that circumstance, the test of excisability fails in the light of decision of the Apex Court in the case of Ambalal Sarabhai Enterprises 1989 (8) TMI 72 - SUPREME Court - as the alleged additive mixture is not capable of marketing, the additive mixture is not excisable to duty. The Revenue has sought to demand duty on additive mixture without alleging additive mixture is preparation containing chewing tobacco. Therefore, the demand sought to be demanded only on the basis of assumption and presumption. The additive mixture arose only as an intermediate product in the course of manufacture of finished chewing tobacco. As chewing tobacco has not been manufactured till the stage of final manufactured chewing tobacco, therefore, additive mixture cannot be called as chewing tobacco or preparation of chewing tobacco. As it is not chewing tobacco therefore, the respondents are not liable to pay duty thereon. Whether the exemption under Notification No.121/94-CE dated is available to NCCD during the period 1.3.2001 to 16.10.2002? - Held that - no basic excise duty and AED & GIS was payable on intermediate product and if NCCD is paid on intermediate product on which the duty is paid, the same is available as credit e to the respondent at subsequent stage. - the respondents are not liable to pay NCCD. Exemption on NCCD was granted vide Notification No. 52/02 dated 17.10.2002. The policy intention was that as in the case the basic excise duty and AED after the imposition of NCCD also, there would be no additional burden of NCCD for captive use of compound. Otherwise it would be anomalous that if the use is outside the factory, the impact is nil by virtue of Cenvat Credit being admissible from 1.3.2001 but for use within the factory, NCCD is payable. - no NCCD payable on the additive mixture for the earlier period even though notification no. 52/02 has been issued only on 17/10/2002. Whether the revenue neutral situation comes in the instant case and consequently, the entire exercise is academic? - Held that - if the respondents paid duty on additive mixtures, the same is available as credit to them immediately - revenue neutral situation arises - entire exercise is of academic in nature. Whether the show cause notices were issued to the respondents are sustainable or not having patent error and when no specific value and quantity of the goods have mentioned? - Held that - in the show cause notice, the value/qunatity of the goods has been taken as approximate basis which is patent error in the show cause notice and on the basis of assumption and presumption, the duty cannot be demanded from the assesssee. - the show cause notices issued to the respondents are defective. Appeal dismissed - decided against Revenue.
Issues:
1. Whether the additive mixtures prepared by the assessee are excisable products? 2. Whether the exemption under Notification No.121/94-CE 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? 4. Whether the show cause notices were issued to the respondents are sustainable or not having patent error and when no specific value and quantity of the goods have mentioned? Issue No. (I) - Additive Mixture Excisability: The Tribunal examined the manufacturing process of the additive mixture and concluded that since the alleged additive mixture was not capable of marketing and was not transferred or sold, it did not qualify as an excisable product. The Tribunal highlighted the lack of evidence confirming marketability and referenced a Supreme Court case to support its decision. Issue No. (II) - NCCD Exemption and Cenvat Credit: The Tribunal considered the credit scheme and the absence of basic excise duty and AED on the intermediate product. It held that if NCCD was paid on the intermediate product, the credit would be available to the respondent at a subsequent stage, leading to no liability to pay NCCD. The Tribunal also noted the exemption on NCCD granted later and the policy intention behind it. Issue No. (III) - Revenue Neutral Situation: The Tribunal determined that if duty was paid on the additive mixtures, the same would be available as credit to the respondents immediately, resulting in a revenue neutral situation. It referred to a previous decision by the Larger Bench of the Tribunal to support this conclusion. Issue No. (IV) - Validity of Show Cause Notices: The Tribunal found the show cause notices defective due to the approximate basis of value/quantity mentioned in them. It emphasized that demanding duty based on assumptions and presumptions without specific details was not permissible, leading to the conclusion that the notices were unsustainable. In the final decision pronounced on 23.08.2016, the Tribunal upheld the impugned orders, dismissing the appeals filed by the Revenue. The detailed analysis of each issue highlighted the Tribunal's reasoning and legal interpretation, ultimately leading to the dismissal of the appeals.
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