2019 (2) TMI 1170 - AT - Central Excise

Excisability/marketability - waste - waste of base cream cleared without consideration - Held that - It is not the case of the Revenue that the said waste is cleared for a consideration, therefore, no sale is involved. Base cream is not packed in tubes, as in the case of normal toothpaste tubes sold, it cannot be held that they are marketable as in respect of such products packing is am essential requirement to make it marketable. The waste cleared by the appellants does not even satisfy the test of saleability. Therefore, even when the goods are held to be excisable for the reason that they have been manufactured in the factory, they do not assume the character of being goods which can be marketable and saleable. Dumping of waste cannot be equated to clearance of excisable goods. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Revenue seeking duty on waste of base cream cleared by the appellant.

Analysis:
The appellant, engaged in toothpaste manufacturing, used a small amount of base cream for R&D purposes, which was later removed as waste with due permission. The Revenue imposed duty on the waste, confirmed by the Deputy Commissioner and upheld by the Commissioner (Appeals). The appellant argued that the waste was unfit for consumption, hence not marketable, citing legal precedents. They also raised issues regarding the applicability of Section 4A and admissibility of Cenvat Credit. The Revenue reiterated its findings from the original order and the order-in-appeal.

Upon review, the Tribunal found that the appellants had informed the department about their waste disposal process in 2005. The Commissioner (Appeals) assumed the appellants accepted the department's contention due to lack of contestation in a previous order, which the Tribunal deemed incorrect. The Tribunal emphasized that there is no estoppel in taxation matters and clarified that the waste disposal did not involve a sale. The waste did not meet the marketability criteria, as it was not packed for sale like regular toothpaste tubes. The Tribunal concluded that the waste disposal did not equate to clearance of excisable goods, aligning with legal precedents cited by the appellant.

The Tribunal held that the Revenue's stance was not acceptable, given the waste's characteristics. The Tribunal also noted the appellant's proactive communication with the department and regular filing of returns since 2005. Consequently, the imposition of penalty under Section 11AC was deemed unsustainable. As the case lacked merit, discussions on penalty applicability were deemed irrelevant. Therefore, the appeal was allowed, with the judgment pronounced on 08/02/2019.