2004 (5) TMI 108 - AT - Central Excise

Issues Involved:
1. Dutiability of inter-mixture of vitamins.
2. Applicability of Note 11 to Chapter 29 of the Central Excise Tariff Act.
3. Marketability of the inter-mixture of vitamins.
4. Invocation of extended period of limitation.
5. Eligibility for Modvat credit.

Detailed Analysis:

1. Dutiability of Inter-mixture of Vitamins:
The primary issue in this appeal is whether the process of mixing various vitamins to produce an inter-mixture of vitamins amounts to "manufacture" under Note 11 to Chapter 29 of the Central Excise Tariff Act. The appellants argued that the inter-mixture of vitamins, used exclusively in the manufacture of infant foods, is not marketable and thus should not be subject to excise duty. They contended that the mixing process does not create a new product but merely combines existing vitamins in specific proportions.

2. Applicability of Note 11 to Chapter 29:
The adjudicating authority held that the process of mixing vitamins amounts to manufacture under Note 11, which includes "adoption of any other treatment to render the product marketable to the consumer." The appellants argued that Note 11 should not apply as the vitamins were already marketable before mixing, and the process did not render them marketable. They cited several cases, including Lakme Lever Ltd. and Pure Pharma Ltd., to support their claim that the process must confer marketability attributes that did not exist before.

3. Marketability of the Inter-mixture of Vitamins:
The department countered that the inter-mixture of vitamins is indeed marketable, as evidenced by the appellants' own import of vitamin pre-mix and the availability of such products in the market. The Tribunal noted that the essence of marketability is the commercial identity of the product, not its actual marketing. The Supreme Court's rulings in cases like Sonic Electrochem (P) Ltd. and A.P. State Electricity Board emphasized that goods need not be actually marketed to be considered marketable.

4. Invocation of Extended Period of Limitation:
The demand for duty covered the period from July 1996 to December 2000, with the show cause notice issued on 7-8-2001. The appellants claimed the demand was time-barred, arguing they had been mixing vitamins for 20 years under a bona fide belief that the activity did not amount to manufacture. However, the Tribunal found that the appellants had not filed any classification declaration for the inter-mixture of vitamins, constituting suppression of facts. The extended period of limitation was deemed invocable, except for the period after May 1999 when the appellants disclosed the mixing process to the department.

5. Eligibility for Modvat Credit:
The appellants sought Modvat credit for the duty paid on inputs used in the inter-mixture of vitamins. The Tribunal agreed, allowing the appellants to avail Modvat credit subject to the production of duty-paying documents within two months to the satisfaction of the jurisdictional adjudicating authority.

Conclusion:
The Tribunal concluded that the process of mixing vitamins to produce an inter-mixture amounts to manufacture under Note 11 to Chapter 29, rendering the product marketable as a new commercial entity. The extended period of limitation was applicable due to the appellants' failure to declare the manufacturing process, but not beyond May 1999. The appellants were allowed to claim Modvat credit for the duty paid on inputs, and the matter was remanded to the jurisdictional authority for redetermination of the duty payable and reconsideration of the penalty.

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