2016 (10) TMI 739 - AT - Central Excise

Manufacture - intermediate product - job work - marketability - sugar syrup prepared within the factory in further manufacturing of biscuits for their principal - manufacture of biscuits on job work basis - whether Revenue was justified in holding that w.e.f. 1.3.2007 biscuits were exempted by the Notification No.3/2006-CE dated 1.3.2006 since final products (biscuits) are exempted the intermediate product sugar syrup arising in the appellant s unit is liable to central excise duty as the exemption under Notification No.67/1995-CE dated 16.3.95 will not be available to them? - Held that - decision in the case of Rishi Bakers Pvt. Ltd. vs. C.C.E. & S.T. Kanpur 2015 (4) TMI 893 - CESTAT NEW DELHI relied upon where it was held that 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. The impugned order is not sustainable. The same is set aside and case decided in favor of assesees. In the present case no efforts have been made by the Department to test the product for the correct composition and nature. Instead the percentage of sugar in syrup was arrived at by the calculation of quantity used. Further the whole allegation of marketability is based on one invoice of another manufacturer for the product sugar invert syrup . We find that the marketability of the product now in question cannot be established derivatively without ascertaining the actual nature of the impugned product and also its marketability in reality. Intermediate product not taxable - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Duty liability of sugar syrup prepared during the manufacture of biscuits for a principal company, applicability of central excise duty on sugar syrup, marketability of sugar syrup, interpretation of relevant notifications, reliance on previous tribunal decisions.

Analysis:

1. Duty liability of sugar syrup: The case involved the duty liability of the appellants for sugar syrup prepared during the manufacturing of biscuits for their principal company. The Revenue contended that since the final product (biscuits) was exempted from duty, the intermediate product, sugar syrup, was liable to central excise duty. The original authority and the first appellate authority confirmed this view.

2. Marketable nature of sugar syrup: The appellants argued that the sugar syrup they prepared was not a marketable product as it lacked a shelf life and was not sold in the market in its current form. They emphasized that the fructose content was less than 50% as certified by a reputed laboratory. They relied on tribunal decisions and past cases supporting the non-leviability of central excise duty on sugar syrup used in biscuit manufacturing.

3. Interpretation of tribunal decisions: The Tribunal referred to a previous case involving a different job worker of the same principal company, where it was held that for goods to attract central excise duty, they must be proven to be marketable in the condition in which they emerge. The Tribunal emphasized the importance of establishing marketability based on the specific characteristics of the product and not on assumptions of similarity to other products.

4. Department's lack of testing: The Tribunal noted that the Department did not conduct any tests to determine the composition and nature of the sugar syrup in question. The calculation of sugar percentage was based on quantity used, and the allegation of marketability relied on an invoice from another manufacturer. The Tribunal emphasized the need for direct testing to establish the actual nature and marketability of the product.

5. Decision and findings: After considering the arguments and evidence presented, the Tribunal held that the impugned orders were not sustainable. It set aside the orders and allowed the appeals, emphasizing the importance of establishing marketability based on direct evidence and testing rather than derivative assumptions.

In conclusion, the judgment focused on the duty liability of sugar syrup in biscuit manufacturing, the marketability of the product, and the need for direct testing to determine the nature of the product in question. The decision highlighted the importance of establishing marketability based on specific characteristics and direct evidence, rather than assumptions or derivative reasoning.